<PAGE>
This Prospectus concisely sets forth information about the Fund a prospective
investor should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated August 1, 1995 (which is
incorporated by reference herein) has been filed with the Securities and
Exchange Commission. The Statement of Additional Information can be obtained
without charge and further inquiries can be made, by contacting the Fund, your
PaineWebber investment executive or PaineWebber's correspondent firms or by
calling toll-free 1-800-647-1568.
------------------------------------------------------
PROSPECTIVE WISCONSIN INVESTORS SHOULD NOTE THAT THE FUND MAY INVEST UP TO 10%
OF ITS NET ASSETS IN RESTRICTED SECURITIES (OTHER THAN RULE 144A SECURITIES
DETERMINED TO BE LIQUID BY THE FUND'S BOARD OF DIRECTORS). INVESTMENT IN
RESTRICTED SECURITIES (OTHER THAN SUCH RULE 144A SECURITIES) IN EXCESS OF 5% OF
THE FUND'S TOTAL ASSETS MAY BE CONSIDERED A SPECULATIVE ACTIVITY AND MAY RESULT
IN GREATER RISK AND INCREASED FUND EXPENSES.
------------------------------------------------------
August 1, 1995
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PAINEWEBBER
REGIONAL FINANCIAL
GROWTH FUND INC.
1285 Avenue of the Americas
New York, New York 10019
------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................ 2
Financial Highlights.......................... 6
Flexible Pricing System....................... 8
Investment Objective and Policies............. 9
Purchases..................................... 14
Exchanges..................................... 18
Redemptions................................... 19
Conversion of Class B Shares.................. 20
Other Services and Information................ 20
Dividends and Taxes........................... 21
Valuation of Shares........................... 23
Management.................................... 23
Performance Information....................... 25
General Information........................... 25
Appendix A.................................... A-1
</TABLE>
------------------------------------------------------
A PaineWebber Mutual Fund
A professionally managed mutual fund seeking long-term capital appreciation. The
Fund invests primarily in equity securities of regional commercial banks, thrift
institutions and their holding companies.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING BY THE FUND OR ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
------------------------
PAINEWEBBER REGIONAL FINANCIAL GROWTH FUND INC.
PROSPECTUS SUMMARY
See the body of the Prospectus for more information on the topics discussed in
this summary.
<TABLE>
<S> <C>
The Fund: PaineWebber Regional Financial Growth Fund Inc.
('Fund') is an open-end, diversified management
investment company.
Investment Objective and
Policies: Long-term capital appreciation; invests primarily
in equity securities of regional commercial banks,
thrift institutions and their holding companies.
Total Net Assets: Over $78.6 million at June 30, 1995.
Investment Adviser: Mitchell Hutchins Asset Management Inc. ('Mitchell
Hutchins'), an asset management subsidiary of
PaineWebber Incorporated ('PaineWebber' or 'PW'),
manages over $43.5 billion in assets. See
'Management.'
Purchases: Shares of common stock are available exclusively
through PaineWebber and its correspondent firms
for investors who are clients of PaineWebber or
those firms ('PaineWebber clients') and, for other
investors, through PFPC Inc., the Fund's transfer
agent ('Transfer Agent').
Flexible Pricing System: Investors may select Class A, Class B or Class D
shares, each with a public offering price that
reflects different sales charges and expense
levels. See 'Flexible Pricing System,'
'Purchases,' 'Redemptions' and 'Conversion of
Class B Shares.'
Class A Shares Offered at net asset value plus any applicable
sales charge (maximum is 4.5% of public offering
price).
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Class B Shares Offered at net asset value (a maximum contingent
deferred sales charge of 5% of redemption proceeds
is imposed on certain redemptions made within six
years of date of purchase). Class B shares
automatically convert into Class A shares (which
pay lower ongoing expenses) approximately six
years after purchase.
Class D Shares Offered at net asset value without an initial or
contingent deferred sales charge. Class D shares
pay higher ongoing expenses than Class A shares
and do not convert into another Class.
Exchanges: Shares may be exchanged for shares of the
corresponding Class of most PaineWebber and
Mitchell Hutchins/Kidder, Peabody ('MH/KP') mutual
funds.
Redemptions: PaineWebber clients may redeem through
PaineWebber; other shareholders must redeem
through the Transfer Agent.
Dividends: Declared and paid annually; net capital gain also
is distributed annually. See 'Dividends and
Taxes.'
Reinvestment: All dividends and capital gain distributions are
paid in Fund shares of the same Class at net asset
value unless the shareholder has requested cash.
Minimum Purchase: $1,000 for first purchase; $100 for subsequent
purchases.
</TABLE>
<TABLE>
<S> <C> <C>
Other Features:
Class A Shares Automatic investment plan Quantity discounts on
initial sales charge
Systematic withdrawal
plan 365-day reinstatement
privilege
Rights of accumulation
Class B Shares Automatic investment plan Systematic withdrawal
plan
Class D Shares Automatic investment plan Systematic withdrawal
plan
</TABLE>
WHO SHOULD INVEST. The Fund invests primarily in equity securities of
regional commercial banks, thrift institutions (sometimes referred to as
'thrifts') and their holding companies. Accordingly, the Fund is designed for
investors who are seeking capital appreciation potential for a portion of their
assets and who can assume the risks of greater fluctuation of market value
resulting from investment in a portfolio concentrated in the banking and thrift
industries. While the Fund is not intended to provide a complete or balanced
investment program, it can serve as one component of an investor's long-term
program to accumulate assets for retirement, college tuition or other major
goals.
RISK FACTORS. There can be no assurance that the Fund will achieve its
investment objective, and the Fund's net asset value will fluctuate based upon
changes in the value of its portfolio securities. The Fund's concentration in
the banking and thrift industries subjects its shares to greater risk than the
shares of a fund whose portfolio is not so concentrated and, in particular, its
shares will be affected by economic, legislative and regulatory developments
impacting those industries. Neither the federal
3
<PAGE>
insurance of bank and thrift deposits nor government regulation of the bank and
thrift industries ensures the solvency or profitability of commercial banks and
thrifts or their holding companies or insures against the risks of investing in
the equity securities issued by these institutions. The Fund's investments in
foreign securities and its use of options and futures contracts also entail
special risks.
EXPENSES OF INVESTING IN THE FUND. The following tables are intended to
assist investors in understanding the expenses associated with investing in the
Fund.
SHAREHOLDER TRANSACTION EXPENSES(1)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
Maximum sales charge on purchases of shares
(as a percentage of public offering
price)..................................... 4.5% None None
Sales charge on reinvested dividends......... None None None
Exchange fee................................. $5.00 $5.00 $5.00
Maximum contingent deferred sales charge (as
a percentage of redemption proceeds)....... None 5% None
</TABLE>
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
Management fees.............................. 0.70% 0.70% 0.70%
12b-1 fees (3)............................... 0.25 1.00 1.00
Other expenses............................... 0.50 0.52 0.53
------- ------- -------
Total operating expenses..................... 1.45% 2.22% 2.23%
------- ------- -------
------- ------- -------
</TABLE>
------------------
(1) Sales charge waivers are available for Class A and Class B shares,
reduced sales charge purchase plans are available for Class A shares and
exchange fee waivers are available for all three Classes. The maximum 5%
contingent deferred sales charge on Class B shares applies to redemptions during
the first year after purchase; the charge generally declines by 1% annually
thereafter, reaching zero after six years. See 'Purchases.'
(2) See 'Management' for additional information. All expenses are those
actually incurred for the fiscal year ended March 31, 1995.
4
<PAGE>
(3) 12b-1 fees have two components, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
12b-1 service fees............... 0.25% 0.25% 0.25%
12b-1 distribution fees.......... 0.00 0.75 0.75
</TABLE>
12b-1 distribution fees are asset-based sales charges. Long-term Class B
and Class D shareholders may pay more in direct and indirect sales charges
(including distribution fees) than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would directly or indirectly pay the following expenses on a
$1,000 investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class A Shares(1)........ $ 59 $ 89 $121 $ 211
Class B Shares:
Assuming a complete
redemption at end of
period(2)(3)........ $ 73 $ 99 $139 $ 218
Assuming no
redemption(3)....... $ 22 $ 69 $119 $ 218
Class D Shares........... $ 23 $ 70 $119 $ 256
</TABLE>
------------------
(1) Assumes deduction at the time of purchase of the maximum 4.5% initial
sales charge.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares
at end of sixth year.
The Example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund Operating
Expenses remain the same in the years shown. The above tables and the assumption
in the Example of a 5% annual return are required by regulations of the
Securities and Exchange Commission ('SEC') applicable to all mutual funds; the
assumed 5% annual return is not a prediction of, and does not represent, the
projected or actual performance of any Class of Fund shares.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The actual expenses attributable to each Class of Fund shares will depend upon,
among other things, the level of average net assets and the extent to which the
Fund incurs variable expenses, such as transfer agency costs.
<PAGE>
FINANCIAL HIGHLIGHTS
The table below provides selected per share data and ratios for one Class A
share, one Class B share and one Class D share of the Fund for each of the
periods shown. This information is supplemented by the financial statements and
accompanying notes appearing in the Fund's Annual Report to Shareholders for the
fiscal year ended March 31, 1995, which are incorporated by reference into the
Statement of Additional Information. The financial statements and notes, as well
as the information in the table appearing below insofar as it relates to the
five years ended March 31, 1995, have been audited by Ernst & Young LLP,
independent auditors, whose report thereon is also included in the Annual Report
to Shareholders. Further information about the performance of the Fund is also
included in the Annual Report to Shareholders, which may be obtained without
charge. The information appearing below for periods prior to the year ended
March 31, 1991 also have been audited by Ernst & Young LLP, whose reports
thereon were unqualified.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------------------
FOR THE
PERIOD MAY 22,
FOR THE YEARS ENDED MARCH 31, 1986+ TO
----------------------------------------------------------------------------- MARCH 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 16.92 $ 19.45 $ 13.36 $ 9.50 $ 8.63 $ 8.31 $ 7.53 $ 9.36 $ 9.25
------- ------- ------- ------- ------- ------- ------- ------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..... 0.25 0.15 0.10 0.15 0.25 0.24 0.25 0.21 0.22
Net realized and unrealized gains
(losses) from investment
transactions................... 1.34 (0.76) 6.01 3.92 0.86 0.37 0.77 (1.45) (0.09)
------- ------- ------- ------- ------- ------- ------- ------- --------------
Total income (loss) from investment
operations........................ 1.59 (0.61) 6.11 4.07 1.11 0.61 1.02 (1.24) 0.11
------- ------- ------- ------- ------- ------- ------- ------- --------------
LESS DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income............ (0.13) (0.08) (0.02) (0.21) (0.24) (0.29) (0.24) (0.39) --
Net realized gains on
investments.................... (1.27) (1.84) -- -- -- -- -- (0.20) --
------- ------- ------- ------- ------- ------- ------- ------- --------------
Total dividends and distributions... (1.40) (1.92) (0.02) (0.21) (0.24) (0.29) (0.24) (0.59) --
------- ------- ------- ------- ------- ------- ------- ------- --------------
Offering costs charged to
capital........................ -- -- -- -- -- -- -- -- (0.02)
------- ------- ------- ------- ------- ------- ------- ------- --------------
Net asset value, end of period...... $ 17.11 $ 16.92 $ 19.45 $ 13.36 $ 9.50 $ 8.63 $ 8.31 $ 7.53 $ 9.36
------- ------- ------- ------- ------- ------- ------- ------- --------------
------- ------- ------- ------- ------- ------- ------- ------- --------------
Total Return(1)..................... 10.22% (3.14)% 46.79% 42.23% 13.33% 7.16% 13.76% (13.57)% 1.19%
------- ------- ------- ------- ------- ------- ------- ------- --------------
------- ------- ------- ------- ------- ------- ------- ------- --------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)... $49,295 $48,032 $61,645 $44,867 $43,131 $95,081 $90,322 $85,130 $101,155
Ratio of expenses to average net
assets............................ 1.45% 1.44% 1.87% 1.72% 1.67% 1.33% 1.16% 1.04% 1.05%*
Ratio of net investment income
(loss) to average net assets...... 1.40% 0.76% 0.60% 1.32% 2.56% 2.60% 3.20% 2.64% 2.82%*
Portfolio turnover rate............. 14.00% 21.82% 27.97% 30.68% 19.12% 28.99% 55.47% 42.43% 24.74%
</TABLE>
------------------------
<TABLE>
<S> <C>
(1) Total return is calculated assuming a $1,000 investment on the first
day of each period reported, reinvestment of all dividends and other
distributions at net asset value on the payable dates, and a sale at
net asset value on the last day of each period reported. The figures
do not include sales charges; results for Class A and Class B would be
lower if sales charges were included. Total return information for
periods less than one year have not been annualized.
* Annualized.
+ Commencement of operations.
++ Commencement of offering of shares.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS D
-------------------------------------------- -------------------------------------
FOR THE FOR THE
FOR THE YEARS PERIOD JULY 1, FOR THE YEARS PERIOD JULY 2,
ENDED MARCH 31, 1991++ TO ENDED MARCH 31, 1992++ TO
--------------------------- MARCH 31, -------------------- MARCH 31,
1995 1994 1993 1992 1995 1994 1993
------- ------- ------- -------------- ------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 16.71 $ 19.34 $ 13.36 $10.24 $16.71 $ 19.34 $14.61
------- ------- ------- ------ ------ ----------- ------
0.11 0.02 (0.01) -- 0.11 0.01 --
1.33 (0.75) 5.99 3.18 1.33 (0.73) 4.77
------- ------- ------- ------ ------ ----------- ------
1.44 (0.73) 5.98 3.18 1.44 (0.72) 4.77
------- ------- ------- ------ ------ ----------- ------
(0.03) (0.06) -- (0.06) (0.02) (0.07) (0.04)
(1.27) (1.84) -- -- (1.27) (1.84) --
------- ------- ------- ------ ------ ----------- ------
(1.30) (1.90) -- (0.06) (1.29) (1.91) (0.04)
------- ------- ------- ------ ------ ----------- ------
-- -- -- -- -- -- --
------- ------- ------- ------ ------ ----------- ------
$ 16.85 $ 16.71 $ 19.34 $13.36 $16.86 $ 16.71 $19.34
------- ------- ------- ------ ------ ----------- ------
------- ------- ------- ------ ------ ----------- ------
9.37% (3.83)% 44.76% 31.16% 9.34% (3.76)% 32.66%
------- ------- ------- ------ ------ ----------- ------
------- ------- ------- ------ ------ ----------- ------
$16,368 $11,517 $10,364 $ 765 $4,160 $ 4,370 $4,636
2.22% 2.16% 2.45% 2.72%* 2.23% 2.17% 2.36%*
0.67% 0.05% (0.03)% 0.14%* 0.61% 0.03% 0.01%*
14.00% 21.82% 27.97% 30.68% 14.00% 21.82% 27.97%
<CAPTION>
<S> <C>
</TABLE>
7
<PAGE>
FLEXIBLE PRICING SYSTEM
DIFFERENCES AMONG THE CLASSES
The primary distinctions among the Classes of the Fund's shares lie in
their initial and contingent deferred sales charge structures and in their
ongoing expenses, including asset-based sales charges in the form of
distribution fees. These differences are summarized in the table below. Each
Class has distinct advantages and disadvantages for different investors, and
investors may choose the Class that best suits their circumstances and
objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
-------------------- ------------------------- --------------------
<S> <C> <C> <C>
CLASS A Maximum initial Service fee of 0.25% Initial sales charge
sales charge of 4.5% waived or reduced
of the public for certain
offering price purchases
CLASS B Maximum contingent Service fee of 0.25%; Shares convert to
deferred sales distribution fee of 0.75% Class A shares
charge of 5% of approximately six
redemption proceeds; years after issuance
declines to zero
after six years
CLASS D None Service fee of 0.25%; --
distribution fee of 0.75%
</TABLE>
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES
In deciding which Class of shares to purchase, investors should consider
the cost of sales charges together with the cost of the ongoing annual expenses
described below, as well as any other relevant facts and circumstances.
SALES CHARGES. Class A shares are sold at net asset value plus an initial
sales charge of up to 4.5% of the public offering price. Because of this initial
sales charge, not all of a Class A shareholder's purchase price is invested in
the Fund. Class B shares are sold with no initial sales charge, but a contingent
deferred sales charge of up to 5% of the redemption proceeds applies to
redemptions made within six years of purchase. Class D shareholders pay no
initial or contingent deferred sales charges. Thus, the entire amount of a Class
B or Class D shareholder's purchase price is immediately invested in the Fund.
WAIVERS AND REDUCTIONS OF CLASS A SALES CHARGES. Class A share purchases
over $50,000 and Class A share purchases made under the Fund's reduced sales
charge plan may be made at a reduced sales charge. In considering the combined
cost of sales charges and ongoing annual expenses, investors should take into
account any reduced sales charges on Class A shares for which they may be
eligible.
The entire initial sales charge on Class A shares is waived for certain
eligible purchasers. Because Class A shares bear lower ongoing annual expenses
than Class B shares or Class D shares, investors eligible for complete waivers
should purchase Class A shares.
ONGOING ANNUAL EXPENSES. All three Classes of Fund shares pay an annual
12b-1 service fee of 0.25% of average daily net assets. Class B and Class D
shares pay an annual 12b-1 distribution fee of 0.75% of average daily net
assets. Annual 12b-1 distribution fees are a form of
8
<PAGE>
asset-based sales charge. An investor should consider both ongoing annual
expenses and initial or contingent deferred sales charges in estimating the
costs of investing in the respective Classes of Fund shares over various time
periods.
For example, assuming a constant net asset value, the cumulative
distribution fees on the Fund's Class B or Class D shares and the 4.5% maximum
initial sales charge on the Fund's Class A shares would all be approximately
equal if the shares were held for six years. Because Class B shares convert to
Class A shares (which do not bear the expense of ongoing distribution fees)
approximately six years after purchase, an investor expecting to hold Fund
shares for longer than six years would generally pay lower cumulative expenses
by purchasing Class A or Class B shares than by purchasing Class D shares. An
investor expecting to hold Fund shares for less than six years would generally
pay lower cumulative expenses by purchasing Class D shares than by purchasing
Class A shares and, due to the contingent deferred sales charges that would
become payable on redemption of Class B shares, such an investor would generally
pay lower cumulative expenses by purchasing Class D shares than Class B shares.
The foregoing examples do not reflect, among other variables, the cost or
benefit of bearing sales charges or distribution fees at the time of purchase,
upon redemption or over time, nor can they reflect fluctuations in the net asset
value of Fund shares, which will affect the actual amount of expenses paid.
Expenses borne by Classes may differ slightly because of the allocation of other
Class-specific expenses. The 'Example of Effect of Fund Expenses' under
'Prospectus Summary' shows the cumulative expenses an investor would pay over
time on a hypothetical investment in each Class of Fund shares, assuming an
annual return of 5%.
OTHER INFORMATION
PaineWebber investment executives may receive different levels of
compensation for selling one particular Class of Fund shares rather than
another. Investors should understand that distribution fees and initial and
contingent deferred sales charges all are intended to compensate Mitchell
Hutchins for distribution services.
See 'Purchases,' 'Redemptions' and 'Management' for a more complete
description of the initial and contingent deferred sales charges, service fees
and distribution fees for the three Classes of shares. See also 'Conversion of
Class B Shares,' 'Dividends and Taxes,' 'Valuation of Shares' and 'General
Information' for other differences among the three Classes.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide long-term capital
appreciation. The Fund seeks to achieve this objective by investing, under
normal circumstances, at least 65% of its total assets in equity securities
(such as common stocks and securities convertible into common stock) of regional
commercial banks, thrifts and their holding companies. The Fund invests in the
equity securities of institutions that, in the opinion of Mitchell Hutchins,
represent strong fundamental investment value and are well-positioned to take
advantage of regulatory developments in the banking and thrift industries. In
selecting securities for investment, Mitchell Hutchins considers all those
factors it believes will affect the potential for capital appreciation,
including the issuer's current and anticipated revenues, earnings, cash flow and
assets, as well as general market conditions in the banking and thrift
industries.
The Fund may invest up to 35% of its total assets in equity securities of
money center banks, community banks, other financial services companies and
other issuers (whether or not involved
9
<PAGE>
in the financial services industries) judged by Mitchell Hutchins to have
potential for capital growth, and in debt securities, non-convertible preferred
stocks, warrants and money market instruments. The Fund will invest in
securities other than equity securities when, in the opinion of Mitchell
Hutchins, their potential for capital appreciation is equal to or greater than
that of equity securities or when such holdings might reduce the volatility of
the Fund's portfolio.
The debt securities in which the Fund may invest include securities that
are issued or guaranteed by the U.S. government, its agencies or
instrumentalities and non-convertible investment grade corporate debt
securities. Investment grade debt securities are those rated in the top four
rating categories by Standard & Poor's ('S&P') or Moody's Investors Service,
Inc. ('Moody's'), comparably rated by another nationally recognized statistical
rating organization ('NRSRO') or, if unrated, determined by Mitchell Hutchins to
be of comparable quality. Securities rated BBB by S&P, Baa by Moody's or
comparably rated by another NRSRO are investment grade, although Moody's
considers securities rated Baa to have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity for such securities to make principal and interest payments than is the
case for higher grade debt securities. See the Statement of Additional
Information for further information regarding Moody's and S&P's ratings.
The market value of debt securities generally varies inversely with
interest rate changes. Ratings of debt securities represent the NRSRO's opinions
regarding their quality, are not a guarantee of quality and may be reduced after
the Fund has acquired the security. Mitchell Hutchins will consider such an
event in determining whether the Fund should continue to hold the security, but
the Fund is not required to dispose of it. However, in the event that, due to a
downgrade of one or more debt securities, an amount in excess of 5% of the
Fund's net assets is held in securities rated below investment grade and
comparable unrated securities, Mitchell Hutchins will engage in an orderly
disposition of these securities to the extent necessary to ensure that the
Fund's holdings of these securities do not exceed 5% of its net assets. Credit
ratings attempt to evaluate the safety of principal and interest payments and do
not reflect an assessment of the volatility of the security's market value or
the liquidity of an investment in the security. Also, NRSROs may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than the rating
indicates.
The Fund categorizes financial institutions as follows. Regional banks are
domestic commercial banks (other than money center banks) with consolidated
assets of $250 million or more and typically conduct business in one state or
two or more states in the same geographic area. Money center banks are
commercial banks located in an international financial center deriving more than
25% of their revenues from international business and having more than 25% of
their consolidated assets outside the United States, and community banks are
commercial banks with assets of less than $250 million that generally operate in
a single, relatively small community. Thrifts include domestic savings
associations, savings banks, building and loan associations, cooperative banks,
homestead associations and similar institutions. The Fund may invest in the
holding companies of commercial banks and thrifts provided that such holding
companies are principally engaged in the operation of one or more commercial
banks or thrifts and related activities. A holding company is 'principally
engaged' in the operation of commercial banks or thrifts and related activities
if such operations comprise more than 50% of its assets on a consolidated basis.
The
10
<PAGE>
Fund invests only in banks and thrifts with deposits that are insured by the
Federal Deposit Insurance Corporation ('FDIC') and in holding companies of such
banks and thrifts. Neither the Fund's portfolio securities nor its shares are
insured by the FDIC.
In selecting securities of regional commercial banks, thrifts and their
holding companies for investment, Mitchell Hutchins considers whether the
institution is:
(1) located in a geographic region experiencing strong economic growth and
able to participate in such growth;
(2) well-managed and currently providing above-average returns on assets
and shareholders' equity;
(3) expanding its business into new financial services or geographic areas;
or
(4) an attractive candidate for acquisition or partner for a business
combination with another bank or thrift as a result of opportunities
created by the trend toward interstate banking. New federal legislation
has been enacted which will eliminate most of the remaining
restrictions on interstate banking over the next few years.
There can be no assurance that the Fund will achieve its investment
objective. The Fund's net asset value fluctuates based upon changes in the value
of its portfolio securities.
SPECIAL CONSIDERATIONS AND RISKS RELATING TO THE BANKING AND THRIFT
INDUSTRIES. Because the Fund's investments are concentrated in the banking and
thrift industries, its shares are subject to greater risk than the shares of a
fund whose portfolio is not so concentrated and, in particular, will be affected
by economic, legislative and regulatory developments impacting these industries.
Commercial banks, thrifts and their holding companies are especially subject to
the adverse effects of volatile interest rates, portfolio concentrations in
loans to particular businesses such as energy or real estate and competition
from new entrants in their fields of business. Economic conditions in the real
estate market can have a significant effect upon banks and thrifts that have a
substantial percentage of their assets invested in loans secured by real estate.
Commercial banks and thrifts and their holding companies are subject to
extensive federal regulation and, in some cases, to state regulation as well.
However, neither federal insurance of deposits nor governmental regulation of
the bank and thrift industries ensures the solvency or profitability of
commercial banks or thrifts or their holding companies, or insures against the
risks of investing in the equity securities issued by these institutions.
Legislation has been enacted which has altered the regulatory structure and
capital requirements of the banking and thrift industries. This legislation was
enacted as a response to financial problems experienced by a number of banks and
thrifts relating to inadequate capital, adverse economic conditions and alleged
fraud and mismanagement. This legislation also strengthened the civil sanctions
and criminal penalties for defrauding or otherwise damaging depository
institutions and their depositors and curtailed the authority of thrifts to
engage in real estate investment and certain other activities. In addition, the
legislation has given federal regulators substantial authority to use all of the
assets of a bank or thrift holding company to satisfy federal claims against an
insolvent thrift or bank owned by the holding company and mandated regulatory
action against institutions with inadequate capital levels. Legislative and
regulatory actions have also increased the capital requirements applicable to
commercial banks and thrifts. These changes have expanded the risk to holding
company shareholders in the event of the insolvency of any depository
institution owned by the holding company.
11
<PAGE>
There are currently pending legislative proposals that could expose bank
holding companies to well-established competitors, such as securities firms and
insurance companies, as well as companies engaged in other areas of business.
Increased competition may also result from the broadening of interstate banking
powers, which trend has already led to a reduction in the number of publicly
traded regional banks. Additionally, changes in the extent to which the FDIC
will insure deposits may result in a higher cost of funds for banks and thrifts
and the loss of deposits to competitors that are viewed as better capitalized.
SPECIALIZED RISK FACTORS OF FOREIGN SECURITIES. The Fund may invest up to
20% of its total assets in securities of foreign issuers. These investments may
involve special risks arising from political, economic and social developments
abroad, as well as those that may result from the differences between the
regulations to which U.S. and foreign issuers and markets are subject. These
risks may include expropriation, confiscatory taxation, withholding taxes on
dividends and interest, limitations on the use or transfer of Fund assets and
political or social instability or diplomatic developments. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Securities of many foreign companies may be less liquid and their prices more
volatile than securities of comparable U.S. companies.
While the Fund generally invests only in securities that are traded on
recognized exchanges or in over-the-counter ('OTC') markets, from time to time
foreign securities may be difficult to liquidate rapidly without significantly
depressing the price of such securities. There may be less publicly available
information concerning foreign issuers of securities held by the Fund than is
available concerning U.S. companies. Foreign securities trading practices,
including those involving securities settlement where the Fund's assets may be
released prior to receipt of payment, may expose the Fund to increased risk in
the event of a failed trade or the insolvency of a foreign broker-dealer.
Transactions in foreign securities may be subject to less efficient settlement
practices. Legal remedies for defaults and disputes may have to be pursued in
foreign courts, whose procedures may differ substantially from those of U.S.
courts.
Because foreign securities ordinarily are denominated in currencies other
than the U.S. dollar (as are some securities of U.S. issuers), changes in
foreign currency exchange rates will affect the Fund's net asset value, the
value of dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and capital gain, if any, to be distributed
to shareholders by the Fund. If the value of a foreign currency rises against
the U.S. dollar, the value of the Fund's assets denominated in that currency
will increase; correspondingly, if the value of a foreign currency declines
against the U.S. dollar, the value of the Fund's assets denominated in that
currency will decrease. The exchange rates between the U.S. dollar and other
currencies are determined by supply and demand in the currency exchange markets,
international balances of payments, speculation and other economic and political
conditions. In addition, some foreign currency values may be volatile and there
is the possibility of governmental intervention in the currency markets. Any of
these factors could adversely affect the Fund.
HEDGING STRATEGIES. The Fund may attempt to reduce the overall risk of its
investments (hedge) by using options (both exchange-traded and OTC) and futures
contracts. The Fund's ability to use these instruments may be limited by
12
<PAGE>
market conditions, regulatory limits and tax considerations. The Appendix to
this Prospectus describes the hedging instruments that the Fund may use. The
Statement of Additional Information contains further information on these
strategies.
The Fund may buy and write (sell) foreign currency futures contracts, stock
index futures contracts and interest rate futures contracts and buy put and call
options or write covered call options on such futures contracts, securities,
foreign currencies and stock indices. Because the Fund intends to use options
and futures for hedging purposes, the Fund may enter into options and futures
that hedge the full value of its portfolio, although, under normal
circumstances, a much smaller portion of the Fund's portfolio will be at risk
under such hedging instruments.
The Fund might not employ any of the strategies described above, and there
can be no assurance that any strategy used will succeed. If Mitchell Hutchins
incorrectly forecasts interest rates, market values or other economic factors in
utilizing a strategy for the Fund, the Fund would be in a better position if it
had not hedged at all. The use of these strategies involves certain special
risks, including (1) the fact that skills needed to use hedging instruments are
different from those needed to select the Fund's securities, (2) possible
imperfect correlation, or even no correlation, between price movements of
hedging instruments and price movements of the instruments being hedged, (3) the
fact that, while hedging strategies can reduce the risk of loss, they can also
reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in hedged investments and (4) the possible inability
of the Fund to purchase or sell a portfolio security at a time that otherwise
would be favorable for it to do so, or the possible need for the Fund to sell a
portfolio security at a disadvantageous time, due to the need for the Fund to
maintain 'cover' or to segregate securities in connection with hedging
transactions and the possible inability of the Fund to close out or to liquidate
its hedged position.
New financial products and risk management techniques continue to be
developed. The Fund may use these instruments and techniques to the extent
consistent with its investment objective and regulatory and federal tax
considerations.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in
illiquid securities, including certain cover for OTC options and securities
whose disposition is restricted under the federal securities laws (other than
'Rule 144A' securities Mitchell Hutchins has determined to be liquid under
procedures approved by the Fund's board of directors). Rule 144A establishes a
'safe harbor' from registration requirements of the Securities Act of 1933
('1933 Act') for resale of certain securities to qualified institutional buyers.
Institutional markets for restricted securities have developed as a result of
Rule 144A, providing both readily ascertainable values for restricted securities
and the ability to liquidate an investment to satisfy share redemption orders.
An insufficient number of qualified institutional buyers interested in
purchasing Rule 144A-eligible restricted securities held by the Fund, however,
could affect adversely the marketability of such portfolio securities and the
Fund might be unable to dispose of such securities promptly or at favorable
prices.
LENDING OF PORTFOLIO SECURITIES. The Fund is authorized to lend up to 10%
of the total value of its portfolio securities to broker-dealers or
institutional investors that Mitchell Hutchins deems qualified. Lending
securities enables the Fund to earn additional income, but could result in a
loss or delay in recovering the Fund's portfolio securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase debt
securities on a 'when-issued' basis or may purchase or
13
<PAGE>
sell securities for delayed delivery. In when-issued or delayed delivery
transactions, delivery of the securities occurs beyond normal settlement
periods, but the Fund generally would not pay for such securities or start
earning interest on them until they are delivered. However, when the Fund
purchases securities on a when-issued or delayed delivery basis, it immediately
assumes the risks of ownership, including the risk of price fluctuation. Failure
by a counter party to deliver a security purchased on a when-issued or delayed
delivery basis may result in a loss or missed opportunity to make an alternative
investment. Depending on market conditions, the Fund's when-issued and delayed
delivery purchase commitments could cause its net asset value per share to be
more volatile, because such securities may increase the amount by which the
Fund's total assets, including the value of when-issued and delayed delivery
securities held by the Fund, exceed its net assets.
OTHER INFORMATION. When Mitchell Hutchins believes unusual circumstances
warrant a defensive posture, the Fund temporarily may commit all or any portion
of its assets to cash or money market instruments, including repurchase
agreements. The Fund also may engage in short sales of securities 'against the
box' to defer realization of gains or losses for tax or other purposes. The Fund
may borrow money for temporary or emergency purposes, but not in excess of 10%
of its total assets and may engage in reverse repurchase agreements, but not in
excess of 5% of its total assets.
Over the past 69 years, the total return of equity investments, as measured
by the Standard & Poor's 500 Composite Stock Price Index ('S&P 500'), has
exceeded the inflation rate, as measured by the Consumer Price Index, as well as
total return on long-term U.S. Treasury bonds, long-term corporate bonds and
short-term U.S. Treasury bills. However, year-to-year fluctuations in each of
these indices and instruments have been significant, and total return for the
S&P 500 for some periods has been negative. Furthermore, there can be no
assurance that this trend will continue.
The Fund's investment objective of long-term capital appreciation, as well
as its policy of investing, under normal circumstances, at least 65% of its
total assets in equity securities of regional commercial banks, thrifts and
their holding companies and its policy of investing only in banks and thrifts
with deposits insured by the FDIC, may not be changed without the approval of
its shareholders. Certain other investment limitations, as described in the
Statement of Additional Information, are fundamental policies and also may not
be changed without shareholder approval. All other investment policies may be
changed by the Fund's board of directors without shareholder approval.
PURCHASES
GENERAL. Class A shares are sold to investors subject to an initial sales
charge. Class B shares are sold without an initial sales charge but are subject
to higher ongoing expenses than Class A shares and a contingent deferred sales
charge payable upon certain redemptions. Class B shares automatically convert to
Class A shares approximately six years after issuance. Class D shares are sold
without an initial or a contingent deferred sales charge but are subject to
higher ongoing expenses than Class A shares and do not convert into another
Class. See 'Flexible Pricing System' and 'Conversion of Class B Shares.'
Shares of the Fund are available through PaineWebber and its correspondent
firms or, for shareholders who are not PaineWebber clients, through the Transfer
Agent. Investors may contact a local PaineWebber office to open an account. The
minimum initial investment is $1,000, and the minimum for additional purchases
is
14
<PAGE>
$100. These minimums may be waived or reduced for investments by employees of
PaineWebber or its affiliates, certain pension plans and retirement accounts and
participants in the Fund's automatic investment plan. Purchase orders will be
priced at the net asset value per share next determined (see 'Valuation of
Shares') after the order is received by PaineWebber's New York City offices or
by the Transfer Agent, plus any applicable sales charge for Class A shares. The
Fund and Mitchell Hutchins reserve the right to reject any purchase order and to
suspend the offering of Fund shares for a period of time.
When placing purchase orders, investors should specify whether the order is
for Class A, Class B or Class D shares. All share purchase orders that fail to
specify a Class will automatically be invested in Class A shares.
PURCHASES THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS. Purchases through
PaineWebber investment executives or correspondent firms may be made in person
or by mail, telephone or wire; the minimum wire purchase is $1 million.
Investment executives and correspondent firms are responsible for transmitting
purchase orders to PaineWebber's New York City offices promptly. Investors may
pay for purchases with checks drawn on U.S. banks or with funds held in
brokerage accounts at PaineWebber or its correspondent firms. Payment is due on
the third Business Day after the order is received at PaineWebber's New York
City offices. A 'Business Day' is any day, Monday through Friday, on which the
New York Stock Exchange, Inc. ('NYSE') is open for business.
PURCHASES THROUGH THE TRANSFER AGENT. Investors who are not PaineWebber
clients may purchase shares of the Fund through the Transfer Agent. Shares of
the Fund may be purchased, and an account with the Fund established, by
completing and signing the purchase application at the end of this Prospectus
and mailing it, together with a check to cover the purchase, to the Transfer
Agent: PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington,
Delaware 19899. Subsequent investments need not be accompanied by an
application.
INITIAL SALES CHARGE--CLASS A SHARES. The public offering price of Class A
shares is the next determined net asset value, plus any applicable sales charge,
which will vary with the size of the purchase as shown in the following table:
INITIAL SALES CHARGE SCHEDULE--CLASS A SHARES
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF DISCOUNT TO SELECTED
---------------------------------- DEALERS AS A
OFFERING NET AMOUNT INVESTED PERCENTAGE OF
AMOUNT OF PURCHASE PRICE (NET ASSET VALUE) OFFERING PRICE
---------------------- ----------- --------------------- --------------------
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.25%
$50,000 to $99,999 4.00 4.17 3.75
$100,000 to $249,999 3.50 3.63 3.25
$250,000 to $499,999 2.50 2.56 2.25
$500,000 to $999,999 1.75 1.78 1.50
$1,000,000 and over(1) None None 1.00
</TABLE>
------------
(1) Mitchell Hutchins pays compensation to PaineWebber out of its own
resources.
15
<PAGE>
Mitchell Hutchins may at times agree to reallow a higher discount to
PaineWebber, as exclusive dealer for Fund shares, than those shown above. To the
extent PaineWebber or any dealer receives 90% or more of the sales charge, it
may be deemed an 'underwriter' under the 1933 Act.
SALES CHARGE WAIVERS--CLASS A SHARES. Class A shares are available without
a sales charge through exchanges for Class A shares of most other PaineWebber
and MH/KP mutual funds. See 'Exchanges.' In addition, Class A shares may be
purchased without a sales charge, and exchanges of any Class of shares made
without the $5.00 exchange fee, by employees, directors and officers of
PaineWebber or its affiliates, directors or trustees and officers of any
PaineWebber or MH/KP mutual funds, their spouses, parents and children and
advisory clients of Mitchell Hutchins.
Class A shares also may be purchased without a sales charge if the purchase
is made through a PaineWebber investment executive who formerly was employed as
a broker with another firm registered as a broker-dealer with the SEC, provided
(1) the purchaser was the investment executive's client at the competing
brokerage firm, (2) within 90 days of the purchase of Class A shares the
purchaser redeemed shares of one or more mutual funds for which that competing
firm or its affiliates was principal underwriter, provided the purchaser either
paid a sales charge to invest in those funds, paid a contingent deferred sales
charge upon redemption or held shares of those funds for the period required not
to pay the otherwise applicable contingent deferred sales charge and (3) the
total amount of shares of all PaineWebber and MH/KP mutual funds purchased under
this sales charge waiver does not exceed the amount of the purchaser's
redemption proceeds from the competing firm's funds. To take advantage of this
waiver, an investor must provide satisfactory evidence that all the above-noted
conditions are met. Qualifying investors should contact their PaineWebber
investment executives for more information.
Certificate holders of unit investment trusts ('UITs') sponsored by
PaineWebber may acquire Class A shares of the Fund without regard to minimum
investment requirements and without sales charges by electing to have dividends
and other distributions from their UIT investment automatically invested in
Class A shares.
REDUCED SALES CHARGE PLANS--CLASS A SHARES. If an investor or eligible
group of related Fund investors purchases Class A shares concurrently with Class
A shares of other PaineWebber or MH/KP mutual funds, the purchases may be
combined to take advantage of the reduced sales charge applicable to larger
purchases. In addition, the right of accumulation permits a Fund investor or
eligible group of related Fund investors to pay the lower sales charge
applicable to larger purchases by basing the sales charge on the dollar amount
of Class A shares currently being purchased, plus the net asset value of the
investor's or group's total existing Class A shareholdings in other PaineWebber
or MH/KP mutual funds.
An 'eligible group of related Fund investors' includes an individual, the
individual's spouse, parents and children, the individual's individual
retirement account ('IRA'), certain companies controlled by the individual and
employee benefit plans of those companies, and trusts or Uniform Gifts to Minors
Act/Uniform Transfers to Minors Act accounts created by the individual or
eligible group of individuals for the benefit of the individual and/or the
individual's spouse, parents or children. The term also includes a group of
related employers and one or more qualified retirement plans of such employers.
For more information, an investor should consult the Statement of Additional
Information or contact a PaineWebber investment executive or correspondent firm
or the Transfer Agent.
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<PAGE>
CONTINGENT DEFERRED SALES CHARGE-- CLASS B SHARES. The public offering
price of the Class B shares is the next determined net asset value, and no
initial sales charge is imposed. A contingent deferred sales charge, however, is
imposed upon certain redemptions of Class B shares.
Class B shares that are redeemed will not be subject to a contingent
deferred sales charge to the extent that the value of such shares represents (1)
capital appreciation of Fund assets, (2) reinvestment of dividends or capital
gain distributions or (3) shares redeemed more than six years after their
purchase. Otherwise, redemptions of Class B shares will be subject to a
contingent deferred sales charge. The amount of any applicable contingent
deferred sales charge will be calculated by multiplying the net asset value of
such shares at the time of redemption by the applicable percentage shown in the
table below.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED SALES
CHARGE AS A
PERCENTAGE OF NET
REDEMPTION ASSET VALUE AT
DURING REDEMPTION
----------------------------------- -----------------
<S> <C>
1st Year Since Purchase............ 5%
2nd Year Since Purchase............ 4
3rd Year Since Purchase............ 3
4th Year Since Purchase............ 2
5th Year Since Purchase............ 2
6th Year Since Purchase............ 1
7th Year Since Purchase............ None
</TABLE>
In determining the applicability and rate of any contingent deferred sales
charge, it will be assumed that a redemption is made first of Class B shares
representing capital appreciation, next of shares representing the reinvestment
of dividends and capital gain distributions and finally of other shares held by
the shareholder for the longest period of time. The holding period of Class B
shares acquired through an exchange with another PaineWebber mutual fund will be
calculated from the date that the Class B shares were initially acquired in one
of the other PaineWebber funds, and Class B shares being redeemed will be
considered to represent, as applicable, capital appreciation or dividend and
capital gain distribution reinvestments in such other funds. This will result in
any contingent deferred sales charge being imposed at the lowest possible rate.
For federal income tax purposes, the amount of the contingent deferred sales
charge will reduce the gain or increase the loss, as the case may be, on the
amount realized on redemption. The amount of any contingent deferred sales
charge will be paid to Mitchell Hutchins.
SALES CHARGE WAIVERS--CLASS B SHARES. The contingent deferred sales charge
will be waived for exchanges, as described below, and for redemptions in
connection with the Fund's systematic withdrawal plan. In addition, the
contingent deferred sales charge will be waived for: a total or partial
redemption made within one year of the death of the shareholder. The contingent
deferred sales charge waiver is available where the decedent is either the sole
shareholder or owns the shares with his or her spouse as a joint tenant with
right of survivorship. This waiver applies only to redemption of shares held at
the time of death. The contingent deferred sales charge will also be waived in
connection with a lump-sum or other distribution in the case of an IRA,
self-employed individual retirement plan (so-called 'Keogh Plan') or custodial
account under Section 403(b) of the Internal Revenue Code following attainment
of age 59 1/2; any total or partial redemption resulting from any distribution
following retirement in the case of a tax-qualified retirement plan; and a
redemption resulting from a tax-free return of an excess contribution to an IRA.
Contingent deferred sales charge waivers will be granted subject to
confirmation (by PaineWebber in the case of shareholders who
17
<PAGE>
are PaineWebber clients or by the Transfer Agent in the case of all other
shareholders) of the shareholder's status or holdings, as the case may be.
PURCHASE OF CLASS D SHARES. The public offering price of the Class D
shares of the Fund is the next determined net asset value. No initial or
contingent deferred sales charge is imposed.
EXCHANGES
Shares of the Fund may be exchanged for shares of the corresponding Class
of the PaineWebber and MH/KP mutual funds listed below, or may be acquired
through an exchange of shares of the corresponding Class of those funds. No
initial sales charge is imposed on the shares being acquired, and no contingent
deferred sales charge is imposed on the shares being disposed of, through an
exchange. However, contingent deferred sales charges may apply to redemptions of
Class B shares acquired through an exchange. Class B shares of MH/KP mutual
funds differ from those of PaineWebber mutual funds. Class B shares of MH/KP
mutual funds are equivalent to Class D shares of PaineWebber mutual funds. A
$5.00 exchange fee is charged for each exchange, and exchanges may be subject to
minimum investment requirements of the fund into which exchanges are made.
The other PaineWebber and MH/KP mutual funds with which Fund shares may be
exchanged include:
INCOME FUNDS
oMH/KP ADJUSTABLE RATE GOVERNMENT FUND
o MH/KP GLOBAL FIXED INCOME FUND
o MH/KP GOVERNMENT INCOME FUND
o MH/KP INTERMEDIATE FIXED INCOME
FUND
o PW GLOBAL INCOME FUND
o PW HIGH INCOME FUND
o PW INVESTMENT GRADE INCOME FUND
o PW SHORT-TERM U.S. GOVERNMENT
INCOME FUND
o PW STRATEGIC INCOME FUND
o PW U.S. GOVERNMENT INCOME FUND
TAX-FREE INCOME FUNDS
o MH/KP MUNICIPAL BOND FUND
o PW CALIFORNIA TAX-FREE INCOME FUND
o PW MUNICIPAL HIGH INCOME FUND
o PW NATIONAL TAX-FREE INCOME FUND
o PW NEW YORK TAX-FREE INCOME FUND
GROWTH FUNDS
o MH/KP EMERGING MARKETS EQUITY
FUND
o MH/KP GLOBAL EQUITY FUND
o MH/KP SMALL CAP GROWTH FUND
o PW ATLAS GLOBAL GROWTH FUND
o PW BLUE CHIP GROWTH FUND
o PW CAPITAL APPRECIATION FUND
o PW COMMUNICATIONS & TECHNOLOGY
GROWTH FUND
o PW EUROPE GROWTH FUND
o PW GROWTH FUND
o PW SMALL CAP VALUE FUND
GROWTH AND INCOME FUNDS
o MH/KP ASSET ALLOCATION FUND
o MH/KP EQUITY INCOME FUND
o PW BALANCED FUND
o PW GLOBAL ENERGY FUND
o PW GLOBAL GROWTH AND INCOME FUND
o PW GROWTH AND INCOME FUND
o PW UTILITY INCOME FUND
18
<PAGE>
PAINEWEBBER MONEY MARKET FUND
PaineWebber clients must place exchange orders through their PaineWebber
investment executives or correspondent firms unless the shares to be exchanged
are held in certificate form. Shareholders who are not PaineWebber clients or
who hold their shares in certificate form must place exchange orders in writing
with the Transfer Agent: PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box
8950, Wilmington, Delaware 19899. All exchanges will be effected based on the
relative net asset values per share next determined after the exchange order is
received at PaineWebber's New York City offices or by the Transfer Agent. See
'Valuation of Shares.' Fund shares purchased through PaineWebber or its
correspondent firms may be exchanged only after the settlement date has passed
and payment for such shares has been made.
OTHER EXCHANGE INFORMATION. This exchange privilege may be modified or
terminated at any time, upon at least 60 days' notice when such notice is
required by SEC rules. See the Statement of Additional Information for further
details. This exchange privilege is available only in those jurisdictions where
the sale of the PaineWebber and MH/KP mutual fund shares to be acquired may be
legally made. Before making any exchange, shareholders should contact their
PaineWebber investment executives or correspondent firms or the Transfer Agent
to obtain more information and prospectuses of the PaineWebber and MH/KP mutual
funds to be acquired through the exchange.
REDEMPTIONS
Fund shares may be redeemed at their net asset value (subject to any
applicable contingent deferred sales charge) and redemption proceeds will be
paid after receipt of a redemption request as described below. PaineWebber
clients may redeem non-certificated shares through PaineWebber or its
correspondent firms; all other shareholders must redeem through the Transfer
Agent. If a redeeming shareholder owns shares of more than one Class, the shares
will be redeemed in the following order unless the shareholder specifically
requests otherwise: Class D shares, then Class A shares, and finally Class B
shares.
REDEMPTION THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS. PaineWebber clients
may submit redemption requests to their investment executives or correspondent
firms in person or by telephone, mail or wire. As the Fund's agent, PaineWebber
may honor a redemption request by repurchasing Fund shares from a redeeming
shareholder at the shares' net asset value next determined after receipt of the
request by PaineWebber's New York City offices. Within three Business Days after
receipt of the request, repurchase proceeds (less any applicable contingent
deferred sales charge) will be paid by check or credited to the shareholder's
brokerage account at the election of the shareholder. PaineWebber investment
executives and correspondent firms are responsible for promptly forwarding
redemption requests to PaineWebber's New York City offices.
PaineWebber reserves the right not to honor any redemption request, in
which case PaineWebber promptly will forward the request to the Transfer Agent
for treatment as described below.
REDEMPTION THROUGH THE TRANSFER AGENT. Fund shareholders who are not
PaineWebber clients or who wish to redeem certificated shares must redeem their
shares through the Transfer Agent by mail; other shareholders also may redeem
Fund shares through the Transfer Agent. Shareholders should mail redemption
requests directly to the Transfer Agent: PFPC Inc., Attn: PaineWebber Mutual
Funds, P.O. Box 8950, Wilmington, Delaware 19899. A redemption request will be
executed at the net asset value next
19
<PAGE>
computed after it is received in 'good order' and redemption proceeds will be
paid within seven days of receipt of the request. 'Good order' means that the
request must be accompanied by the following: (1) a letter of instruction or a
stock assignment specifying the number of shares or amount of investment to be
redeemed (or that all shares credited to a Fund account be redeemed), signed by
all registered owners of the shares in the exact names in which they are
registered, (2) a guarantee of the signature of each registered owner by an
eligible institution acceptable to the Transfer Agent and in accordance with SEC
rules, such as a commercial bank, trust company or member of a recognized stock
exchange, (3) other supporting legal documents for estates, trusts,
guardianships, custodianships, partnerships and corporations and (4) duly
endorsed share certificates, if any. Shareholders are responsible for ensuring
that a request for redemption is received in 'good order.'
ADDITIONAL INFORMATION ON REDEMPTIONS. A shareholder who holds
non-certificated Fund shares may have redemption proceeds of $1 million
or more wired to the shareholder's PaineWebber brokerage account or a
commercial bank account designated by the shareholder. Questions about
this option, or redemption requirements generally, should be referred to
the shareholder's PaineWebber investment executive or correspondent
firm, or to the Transfer Agent if the shares are not held in a
PaineWebber brokerage account. If a shareholder requests redemption of
shares which were purchased recently, the Fund may delay payment until
it is assured that good payment has been received. In the case of
purchases by check, this can take up to 15 days.
Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, the Fund reserves the right to redeem all Fund shares in any
shareholder account of less than $500 net asset value. If the Fund elects to do
so, it will notify the shareholder and provide the shareholder the opportunity
to increase the amount invested to $500 or more within 60 days of the notice.
The Fund will not redeem accounts that fall below $500 solely as a result of a
reduction in net asset value per share.
Shareholders who have redeemed Class A shares may reinstate their Fund
account without a sales charge up to the dollar amount redeemed by purchasing
Class A shares within 365 days of the redemption. To take advantage of this
reinstatement privilege, shareholders must notify their PaineWebber investment
executive or correspondent firm at the time the privilege is exercised.
CONVERSION OF CLASS B SHARES
A shareholder's Class B shares will automatically convert to Class A shares
approximately six years after the date of issuance, together with a pro rata
portion of all Class B shares representing dividends and other distributions
paid in additional Class B shares. The Class B shares so converted will no
longer be subject to the higher expenses borne by Class B shares. The conversion
will be effected at the relative net asset values per share of the two Classes
on the first Business Day of the month in which the sixth anniversary of the
issuance of the Class B shares occurs. If a shareholder effects one or more
exchanges among Class B shares of the PaineWebber mutual funds during the
six-year period, the holding periods for the shares so exchanged will be counted
toward the six-year period. See 'Valuation of Shares.'
OTHER SERVICES AND INFORMATION
Investors interested in the services described below should consult their
PaineWebber investment executives or correspondent firms
or call the Transfer Agent toll-free at 1-800-647-1568.
AUTOMATIC INVESTMENT PLAN. Shareholders may purchase Fund shares through an
automatic investment plan, under which an amount specified by the shareholder of
$50 or more each
20
<PAGE>
month will be sent to the Transfer Agent from the shareholder's bank for
investment in the Fund. In addition to providing a convenient and disciplined
manner of investing, participation in the automatic investment plan enables the
investor to use the technique of 'dollar cost averaging.' When under the plan a
shareholder invests the same dollar amount each month, the shareholder will
purchase more shares when the Fund's net asset value per share is low and fewer
shares when the net asset value per share is high. Using this technique, a
shareholder's average purchase price per share over any given period will be
lower than if the shareholder purchased a fixed number of shares on a monthly
basis during the period. Of course, investing through the automatic investment
plan does not assure a profit or protect against loss in declining markets.
Additionally, since the automatic investment plan involves continuous investing
regardless of price levels, an investor should consider his or her financial
ability to continue purchases through periods of low price levels.
SYSTEMATIC WITHDRAWAL PLAN. Share-
holders who own non-certificated Class A or Class D shares with a value of
$5,000 or more or Class B shares with a value of $20,000 or more may have
PaineWebber redeem a portion of their shares monthly, quarterly or semi-annually
under the systematic withdrawal plan. No contingent deferred sales charge will
be imposed on such withdrawals for Class B shares. The minimum amount for all
withdrawals of Class A or Class D shares is $100, and minimum monthly, quarterly
and semi-annual withdrawal amounts for Class B shares are $200, $400 and $600,
respectively. Quarterly withdrawals are made in March, June, September and
December, and semi-annual withdrawals are made in June and December. A Class B
shareholder may not withdraw an amount exceeding 12% annually of his or her
'Initial Account Balance,' a term that means the value of the Fund account at
the time the shareholder elects to participate in the systematic withdrawal
plan. A Class B shareholder's participation in the systematic withdrawal plan
will terminate automatically if the Initial Account Balance (plus the net asset
value on the date of purchase of Fund shares acquired after the election to
participate in the systematic withdrawal plan), less aggregate redemptions made
other than pursuant to the systematic withdrawal plan, is less than $20,000.
Shareholders who receive dividends or other distributions in cash may not
participate in the systematic withdrawal plan. Purchases of additional Fund
shares concurrent with withdrawals are ordinarily disadvantageous to
shareholders because of tax liabilities and, for Class A shares, sales charges.
INDIVIDUAL RETIREMENT ACCOUNTS. Shares of the Fund may be purchased through
IRAs available through the Fund. In addition, a Self-Directed IRA is available
through PaineWebber. Under the Self-Directed IRA, investments may be made in the
Fund as well as in other investments available through PaineWebber. Investors
considering establishing an IRA should review applicable tax laws and should
consult their tax advisers.
TRANSFER OF ACCOUNTS. If a shareholder holding Fund shares in a
PaineWebber brokerage account transfers his brokerage account to another firm,
the Fund shares normally will be transferred to an account with the Transfer
Agent. However, if the other firm has entered into a selected dealer agreement
with Mitchell Hutchins relating to the Fund, the shareholder may be able to hold
Fund shares in an account with the other firm.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund pays an annual dividend from its net investment income
and net short-term capital gain, if any. The Fund also distributes substantially
all of its net capital gain (the excess of net long-term capital gain over net
short-term capital loss) and any net gains from foreign currency transactions
with the regular
21
<PAGE>
annual dividend. The Fund may make additional distributions if necessary to
avoid a 4% excise tax on certain undistributed income and capital gain.
Dividends and other distributions paid on all Classes of Fund shares are
calculated at the same time and in the same manner. Dividends on Class B and
Class D shares of the Fund are expected to be lower than those for its Class A
shares because of the higher expenses resulting from distribution fees borne by
the Class B and Class D shares. Dividends on each Class also might be affected
differently by the allocation of other Class-specific expenses. See 'Valuation
of Shares.'
Dividends and capital gain distributions on Fund shares are paid in
additional Fund shares of the same Class at net asset value unless the
shareholder has requested cash payments. Shareholders who wish to receive
dividends and/or other distributions in cash, either mailed to the shareholder
by check or credited to the shareholder's PaineWebber account, should contact
their PaineWebber investment executives or correspondent firms or complete the
appropriate section of the application form.
TAXES. The Fund intends to continue to qualify for treatment as a
regulated investment company under the Internal Revenue Code so that it will be
relieved of federal income tax on that part of its investment company taxable
income (consisting generally of net investment income and net short-term capital
gain) and net capital gain that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income (whether paid
in cash or in additional shares) generally are taxable to its shareholders as
ordinary income. Distributions of the Fund's net capital gain (whether paid in
cash or in additional shares) are taxable to its shareholders as long-term
capital gain, regardless of how long they have held their Fund shares.
Shareholders not subject to tax on their income generally will not be required
to pay taxes on amounts distributed to them.
The Fund notifies its shareholders following the end of each calendar year
of the amounts of dividends and capital gain distributions paid (or deemed paid)
that year and of any portion of those dividends that qualifies for the corporate
dividends-received deduction.
The Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Withholding at that rate also is required from
dividends and capital gain distributions for shareholders who otherwise are
subject to backup withholding.
A redemption of Fund shares may result in taxable gain or loss to the
redeeming shareholder, depending upon whether the redemption proceeds
payable to the shareholder are more or less than the shareholder's
adjusted basis for the redeemed shares (which normally includes any
initial sales charge paid on Class A shares). An exchange of Fund shares
for shares of another PaineWebber or MH/KP mutual fund generally will
have similar tax consequences. However, special tax rules apply when a
shareholder (1) disposes of Class A shares through a redemption or
exchange within 90 days of purchase and (2) subsequently acquires Class
A shares of a PaineWebber or MH/KP mutual fund without paying a sales
charge due to the 365-day reinstatement privilege or exchange privilege.
In these cases, any gain on the disposition of the original Class A
shares would be increased, or loss decreased, by the amount of the sales
charge paid when the shares were acquired, and that amount will increase
the basis of the PaineWebber or MH/KP mutual fund shares subsequently
acquired. In addition, if Fund shares are purchased within 30 days
before or after redeeming other Fund shares (regardless of
22
<PAGE>
Class) at a loss, all or a portion of that loss will not be deductible and will
increase the basis of the newly purchased shares.
No gain or loss will be recognized to a shareholder as a result of a
conversion of Class B shares into Class A shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. There may be other
federal, state or local tax considerations applicable to a particular investor.
Prospective shareholders are therefore urged to consult their tax advisers.
VALUATION OF SHARES
The net asset value of the Fund's shares fluctuates and is determined
separately for each Class as of the close of regular trading on the NYSE
(currently 4:00 p.m., eastern time) each Business Day. Net asset value per share
is determined by dividing the value of the securities held by the Fund plus any
cash or other assets minus all liabilities by the total number of Fund shares
outstanding.
The Fund values its assets based on their current market value when market
quotations are readily available. If such value cannot be established, assets
are valued at fair value as determined in good faith by or under the direction
of the Fund's board of directors. The amortized cost method of valuation
generally is used to value debt obligations with 60 days or less remaining to
maturity, unless the board of directors determines that this does not represent
fair value.
MANAGEMENT
The Fund's board of directors, as part of its overall management
responsibility, oversees various organizations responsible for the Fund's day-
to-day management. Mitchell Hutchins, the Fund's investment adviser and
administrator, makes and implements all investment decisions and supervises all
aspects of the Fund's operations. Mitchell Hutchins receives a monthly fee for
these services at the annual rate of 0.70% of the Fund's average daily net
assets. Brokerage transactions for the Fund may be conducted through PaineWebber
or its affiliates in accordance with procedures adopted by the Fund's board of
directors.
The Fund also pays PaineWebber an annual fee of $4.00 per active
shareholder account held at PaineWebber for certain services not provided by the
Transfer Agent. The Fund incurs other expenses and, for the fiscal year ended
March 31, 1995, total expenses for the Fund's Class A shares, Class B shares and
Class D shares, stated as a percentage of average net assets, were 1.45%, 2.22%
and 2.23%, respectively.
Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New
York 10019. It is a wholly owned subsidiary of PaineWebber, which is in turn
wholly owned by Paine Webber Group Inc., a publicly owned financial services
holding company. As of June 30, 1995, Mitchell Hutchins was adviser or
subadviser of 41 investment companies with 86 separate portfolios and aggregate
assets of over $27.9 billion.
Karen L. Finkel is primarily responsible for the day-to-day portfolio
management of the Fund. Mrs. Finkel is a vice president of the Fund and a first
vice president of Mitchell Hutchins. She has held her Fund responsibilities
since January 1988 and has been employed by Mitchell Hutchins as a portfolio
manager for the last five years.
Other members of Mitchell Hutchins' domestic equity and domestic fixed
income investments groups provide input on market outlook, interest rate
forecasts, investment research and other considerations pertaining to the Fund's
investments.
23
<PAGE>
Mitchell Hutchins investment personnel may engage in securities
transactions for their own accounts pursuant to a code of ethics that
establishes procedures for personal investing and restricts certain
transactions.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins is the distributor of Fund
shares and has appointed PaineWebber as the exclusive dealer for the sale of
Fund shares. Under separate plans of distribution pertaining to the Class A
shares, Class B shares and Class D shares ('Class A Plan,' 'Class B Plan' and
'Class D Plan,' collectively, 'Plans'), the Fund pays Mitchell Hutchins monthly
service fees at the annual rate of 0.25% of the average daily net assets of each
Class of shares and monthly distribution fees at the annual rate of 0.75% of the
average daily net assets of the Class B and Class D shares.
Under all three Plans, Mitchell Hutchins uses the service fees primarily to
pay PaineWebber for shareholder servicing, currently at the annual rate of 0.25%
of the aggregate investment amounts maintained in the Fund by PaineWebber
clients. PaineWebber passes on a portion of these fees to its investment
executives to compensate them for shareholder servicing that they perform and
retains the remainder to offset its own expenses in servicing and maintaining
shareholder accounts. These expenses may include costs of the PaineWebber branch
office in which the investment executive is based, such as rent, communications
equipment, employee salaries and other overhead costs.
Mitchell Hutchins uses the distribution fees under the Class B and Class D
Plans to offset the commissions it pays to PaineWebber for selling Class
B and Class D shares. PaineWebber passes on to its investment executives
a portion of these commissions and retains the remainder to offset its
expenses in selling Class B and Class D shares. These expenses may
include the branch office costs noted above. In addition, Mitchell
Hutchins uses the distribution fees under the Class B and Class D Plans
to offset the Fund's marketing costs attributable to such Classes, such
as preparation of sales literature, advertising and printing and
distributing prospectuses and other shareholder materials to prospective
investors. Mitchell Hutchins also may use the distribution fees to pay
additional compensation to PaineWebber and other costs allocated to
Mitchell Hutchins' and PaineWebber's distribution activities, including
employee salaries, bonuses and other overhead expenses.
Mitchell Hutchins expects that, from time to time, PaineWebber will pay
shareholder servicing fees and sales commissions to its investment executives at
the time of sale of Class D shares of the Fund. If PaineWebber makes such
payments, it will retain the service and distribution fees on Class D shares
until it has been reimbursed and thereafter will pass a portion of the service
and distribution fees on Class D shares on to its investment executives.
Mitchell Hutchins receives the proceeds of the initial sales charge paid
upon the purchase of Class A shares and the contingent deferred sales charge
paid upon certain redemptions of Class B shares, and may use these proceeds for
any of the distribution expenses described above. See 'Purchases.'
During the period they are in effect, the Plans and related distribution
contracts pertaining to each Class of shares ('Distribution Contracts') obligate
the Fund to pay service and distribution fees to Mitchell Hutchins as
compensation for its service and distribution activities, not as reimbursement
for specific expenses incurred. Thus, even if Mitchell Hutchins' expenses exceed
its service or distribution fees, the Fund will not be obligated to pay more
than those fees and, if Mitchell Hutchins' expenses are less than such fees, it
will retain its full fees and realize a profit. The Fund will pay the service
and distribution fees to Mitchell Hutchins until either the applicable
24
<PAGE>
Plan or Distribution Contract is terminated or not renewed. In that event,
Mitchell Hutchins' expenses in excess of service and distribution fees received
or accrued through the termination date will be Mitchell Hutchins' sole
responsibility and not obligations of the Fund. In their annual consideration of
the continuation of the Plans, the Fund's directors will review the Plan and
Mitchell Hutchins' corresponding expenses for each Class separately from the
Plans and corresponding expenses for the other two Classes.
PERFORMANCE INFORMATION
The Fund performs a standardized computation of annualized total return and
may show this return in advertisements or promotional materials. Standardized
return shows the change in value of an investment in the Fund as a steady
compound annual rate of return. Actual year-by-year returns fluctuate and may be
higher or lower than standardized return. Standardized return for the Class A
shares reflects deduction of the Fund's maximum initial sales charge at the time
of purchase, and standardized return for the Class B shares reflects deduction
of the applicable contingent deferred sales charge imposed on a redemption of
the shares held for the period. One-, five-and ten-year periods will be shown,
unless the Class has been in existence for a shorter period. Total return
calculations assume reinvestment of dividends and other distributions.
The Fund may use other total return presentations in conjunction with
standardized return. These may cover the same or different periods as those used
for standardized return and may include cumulative returns, average annual
rates, actual year-by-year rates or any combination thereof. Non-standardized
return does not reflect initial or contingent deferred sales charges and would
be lower if such charges were included.
The Fund will include performance data for all three Classes of Fund shares
in any advertisements or promotional materials including Fund performance data.
Total return information reflects past performance and does not necessarily
indicate future results. Investment return and principal values will fluctuate,
and proceeds upon redemption may be more or less than a shareholder's cost.
GENERAL INFORMATION
ORGANIZATION. PaineWebber Regional Financial Growth Fund Inc. is registered
with the SEC as an open-end management investment company and was incorporated
in Maryland on February 13, 1986. The Fund has authority to issue 300 million
shares of common stock of separate series, par value $.001 per share.
The shares of common stock of the Fund are divided into three Classes,
designated Class A shares, Class B shares and Class D shares. Each Class
represents interests in the same assets of the Fund. The Classes differ as
follows: (1) each Class of shares has exclusive voting rights on matters
pertaining to its respective plans of distribution, (2) Class A shares are
subject to an initial sales charge, (3) Class B shares bear ongoing distribution
fees, are subject to a contingent deferred sales charge upon certain redemptions
and will automatically convert to Class A shares approximately six years after
issuance, (4) Class D shares are subject to neither an initial nor a contingent
deferred sales charge, bear ongoing distribution fees and do not convert into
another Class and (5) each Class may bear differing amounts of certain
Class-specific expenses. The Fund's board of directors does not anticipate that
there will be any conflicts between the interests of the holders of each Class
of Fund shares. On an ongoing basis, the board of directors will consider
whether any such conflict exists and, if so, take appropriate action.
The Fund does not hold annual shareholder meetings. There normally will be
no meetings of shareholders to elect directors unless fewer than a majority of
the directors holding office have
25
<PAGE>
been elected by shareholders. Shareholders of record holding at least two-thirds
of the outstanding shares of the Fund may remove a director by votes cast in
person or by proxy at a meeting called for that purpose. The directors are
required to call a meeting of shareholders for the purpose of voting upon the
question of removal of any director when so requested in writing by the
shareholders of record holding at least 10% of the Fund's outstanding shares.
Each share of the Fund has equal voting rights, except as noted above. Each
share of the Fund is entitled to participate equally in dividends and other
distributions and the proceeds of any liquidation except that, due to the
differing expenses borne by the three Classes, dividends and liquidation
proceeds of Class B and Class D shares are likely to be lower than for the Class
A shares.
To avoid additional operating costs and for investor convenience, the Fund
no longer issues share certificates. Ownership of Fund shares is recorded on a
stock register by the Transfer Agent and shareholders have the same rights of
ownership with respect to such shares as if certificates had been issued.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, Massachusetts 02171, is custodian of the Fund's
assets. PFPC Inc., a subsidiary of PNC Bank, National Association, whose
principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809,
is the Fund's transfer and dividend disbursing agent.
CONFIRMATIONS AND STATEMENTS. Shareholders receive confirmations of
purchases and redemptions of Fund shares. PaineWebber clients receive statements
at least quarterly that report their Fund activity and consolidated year-end
statements that show all Fund transactions for that year. Shareholders who are
not PaineWebber clients receive quarterly statements from the Transfer Agent.
Shareholders also receive audited annual and unaudited semi-annual financial
statements of the Fund.
26
<PAGE>
APPENDIX A
The Fund may use the following hedging instruments:
OPTIONS ON EQUITY AND DEBT SECURITIES AND FOREIGN CURRENCIES--A call option
is a short-term contract pursuant to which the purchaser of the option, in
return for a premium, has the right to buy the security or currency underlying
the option at a specified price at any time during the term of the option. The
writer of the call option, who receives the premium, has the obligation, upon
exercise of the option during the option term, to deliver the underlying
security or currency against payment of the exercise price. A put option is a
similar contract that gives its purchaser, in return for a premium, the right to
sell the underlying security or currency at a specified price during the option
term. The writer of the put option, who receives the premium, has the
obligation, upon exercise of the option during the option term, to buy the
underlying security or currency at the exercise price.
OPTIONS ON STOCK INDEXES--A stock index assigns relative values to the
stocks included in the index and fluctuates with changes in the market values of
those stocks. A stock index option operates in the same way as a more
traditional stock option, except that exercise of a stock index option is
effected with cash payment and does not involve delivery of securities. Thus,
upon exercise of a stock index option, the purchaser will realize, and the
writer will pay, an amount based on the difference between the exercise price
and the closing price of the stock index.
STOCK INDEX FUTURES CONTRACTS--A stock index futures contract is a
bilateral agreement pursuant to which one party agrees to accept, and the other
party agrees to make, delivery of an amount of cash equal to a specified dollar
amount times the difference between the stock index value at the close of
trading of the contract and the price at which the futures contract is
originally struck. No physical delivery of the stocks comprising the index is
made. Generally, contracts are closed out prior to the expiration date of the
contracts.
INTEREST RATE AND FOREIGN CURRENCY FUTURES CONTRACTS--Interest rate and
foreign currency futures contracts are bilateral agreements pursuant to which
one party agrees to make, and the other party agrees to accept, delivery of a
specified type of debt security or currency at a specified future time and at a
specified price. Although such futures contracts by their terms call for actual
delivery or acceptance of debt securities or currencies, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery.
OPTIONS ON FUTURES CONTRACTS--Options on futures contracts are similar to
options on securities or currencies, except that an option on a futures contract
gives the purchaser the right, in return for the premium, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put), rather than to purchase or sell a security or
currency, at a specified price at any time during the option term. Upon exercise
of the option, the delivery of the futures position to the holder of the option
will be accompanied by delivery of the accumulated balance that represents the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the future. The writer of an option, upon exercise, will assume a short
position in the case of a call and a long position in the case of a put.
A-1
<PAGE>
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<PAGE>
Application Form
The Paine Webber / / / /-/ / / / / / / / / /-/ / / /
Mutual Funds
-------------------------------------------------------------------------------
INSTRUCTIONS DO NOT USE THIS FORM IF YOU WOULD LIKE YOUR ACCOUNT SERVICED
THROUGH PAINEWEBBER. INSTEAD, CALL YOUR PAINWEBBER INVESTMENT
EXECUTIVE (OR YOUR LOCAL PAINEWEBBER OFFICE TO OPEN AN ACCOUNT).
FOR ASSISTANCE IN COMPLETING THIS FORM CONTACT PFPC INC.
AT 1-800-647-1568
Return this completed form to:
PFPC Inc.
P.O. Box 8950
Wilmington, Delaware 19899
PLEASE PRINT ATTN: Paine Webber Mutual Funds
-------------------------------------------------------------------------------
/1/ INITIAL INVESTMENT ($1,000 MINIMUM)
ENCLOSED IS A CHECK FOR $ (payable to PaineWebber Regional
Financial Growth Fund Inc.) to purchase Class A / / Class B / /
or Class D / / shares.
(Check one; if no Class is specified Class A shares will be
purchased)
/2/ ACCOUNT REGISTRATION
Not valid without signature and Soc. Sec. or Tax ID # on
accompanying Form W-9
--As joint tenants, use Lines 1 and 2
--As custodian for a minor, use Lines 1 and 3
--in the name of a corporation, trust or other organization or any
fiduciary capacity, use Line 4
1. Individual / /
---------- ----------------------- ---------------
First Name Last Name MI Soc. Sec. No.
2. Joint Tenancy / /
---------- -------------------- ---------------
First Name Last Name MI Soc. Sec. No.
("Joint Tenants with Rights of Survivorship" unless otherwise
specified)
3. Gifts to Minors / /
-------------------------------- ---------------
Minor's Name Soc. Sec. No.
Under the Uniform Gifts / Uniform Transfers
----------------------to Minors Act / to Minors Act
State of Residence of Minor
4.Other Registrations
---------------- ---------------------------
Name Tax Ident. No.
5.If Trust, Date of Trust Instruments
-------------
/3/ ADDRESS
--------------------------------- U.S. Citizen / / Yes / / No*
Street
--------------------------------- -----------------------------
City State Zip Code *Country of Citizenship
/4/ DISTRIBUTION OPTIONS See Prospectus
Please select one of the following:
/ / Reinvest both dividends and capital gain distributions in
additional shares
/ / Pay dividends to my address above; reinvest capital gain
distributions
/ / Pay both dividends and capital gain distributions in cash to my
address above
/ / Reinvest dividends and pay capital gain distributions in cash
to my address above
NOTE: If a selection is not made, both dividends and capital
gain distributions will be paid in additional Fund shares of
the same Class.
/5/ SPECIAL OPTIONS (For More Information--Check Appropriate Box)
/ / Prototype IRA Application / /Automatic Investment Plan
/ /Systematic Withdrawal Plan
/6/ RIGHTS OF ACCUMULATION--CLASS A SHARES See Prospectus
Indicate here any other account(s) in the group of funds that would
qualify for the cumulative quantity discount as outlined in the
Prospectus.
----------------------- ---------------- ------------------------
Fund Name Account No. Registered Owner
----------------------- ---------------- ------------------------
Fund Name Account No. Registered Owner
----------------------- ---------------- ------------------------
Fund Name Account No. Registered Owner
/7/ PLEASE INDICATE BELOW IF YOU ARE AFFILIATED WITH PAINEWEBBER
"Affiliated" persons are defined as officers, directors/trustees
and employees of the PaineWebber funds, PaineWebber or its
affiliates, and their parents, spouses and children.
-----------------------------------------------------
Nature of Relationship
/8/ SIGNATURE(S) AND TAX CERTIFICATION
I warrant that I have full authority and am of legal age to
purchase shares of the Fund and have received and read a current
Prospectus of the Fund and agree to its terms. The Fund and its
Transfer Agent will not be liable for acting upon instructions or
inquiries believed genuine. Under penalties of perjury, I certify
that (1) my taxpayer identification number provided in this
application is correct and (2) I am not subject to backup
withholding because (i) I have not been notified that I am subject
to backup withholding as a result of failure to report interest or
dividends or (ii) the IRS has notified me that I am no longer
subject to backup withholding (strike out clause (2) if incorrect).
----------------------------- ---------------------------- -------
Individual (or Custodian) Joint Registrant (if any) Date
----------------------------- ---------------------------- -------
Corporate Officer, Partner, Title Date
Trustee, etc.
/9/ INVESTMENT EXECUTIVE IDENTIFICATION (To Be Completed by
Investment Executive Only)
------------------------------ -----------------------------
Broker No./Name Branch Wire Code
( )
------------------------------ -----------------------------
Branch Address Telephone
/10/ CORRESPONDENT FIRM IDENTIFICATION (To Be Completed By
Correspondent Firm Only)
------------------------------ -----------------------------
Name Address
------------------------------
MAIL COMPLETED FORM TO YOUR PAINEWEBBER INVESTMENT
EXECUTIVE OR CORRESPONDENT FIRM OR TO:
PFPC INC., P.O. BOX 8950, WILMINGTON, DELAWARE 19899.
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
Shares of the Fund can be exchanged for shares of the following PaineWebber
('PW') and Mitchell Hutchins/Kidder Peabody ('MH/KP') Mutual Funds:
INCOME FUNDS
o MH/KP Adjustable Rate Government Fund
o MH/KP Global Fixed Income Fund
o MH/KP Government Income Fund
o MH/KP Intermediate Fixed Income Fund
o PW Global Income Fund
o PW High Income Fund
o PW Investment Grade Income Fund
o PW Short-Term U.S. Government Income Fund
o PW Strategic Income Fund
o PW U.S. Government Income Fund
TAX-FREE INCOME FUNDS
o MH/KP Municipal Bond Fund
o PW California Tax-Free Income Fund
o PW Municipal High Income Fund
o PW National Tax-Free Income Fund
o PW New York Tax-Free Income Fund
GROWTH FUNDS
o MH/KP Emerging Markets Equity Fund
o MH/KP Global Equity Fund
o MH/KP Small Cap Growth Fund
o PW Atlas Global Growth Fund
o PW Blue Chip Growth Fund
o PW Capital Appreciation Fund
o PW Communications & Technology Growth Fund
o PW Europe Growth Fund
o PW Growth Fund
o PW Small Cap Value Fund
GROWTH AND INCOME FUNDS
o MH/KP Asset Allocation Fund
o MH/KP Equity Income Fund
o PW Balanced Fund
o PW Global Energy Fund
o PW Global Growth and Income Fund
o PW Growth and Income Fund
o PW Utility Income Fund
PAINEWEBBER MONEY MARKET FUND
------------------------
A prospectus containing more complete information for any of the above funds,
including charges and expenses, can be obtained from a PaineWebber investment
executive or correspondent firm. Read the prospectus carefully before
investing.
(Copyright) 1995 PaineWebber Incorporated
Recycled
Paper
------------------------------------------------------
PAINEWEBBER
REGIONAL
FINANCIAL
GROWTH FUND INC.
------------------------------------------------------
/ / LONG-TERM CAPITAL APPRECIATION
/ / PROFESSIONAL MANAGEMENT
/ / PORTFOLIO DIVERSIFICATION
/ / DIVIDEND AND CAPITAL GAIN REINVESTMENT
/ / FLEXIBLE PRICINGSM
/ / LOW MINIMUM INVESTMENT
/ / AUTOMATIC INVESTMENT PLAN
/ / SYSTEMATIC WITHDRAWAL PLAN
/ / EXCHANGE PRIVILEGES
/ / SUITABLE FOR RETIREMENT PLANS
------------------------------------------------------
PROSPECTUS
August 1, 1995
