PAINEWEBBER SERIES TRUST, 485APOS, 1995-03-02

PAINEWEBBER SERIES TRUST
485APOS, 1995-03-02

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<PAGE>

As filed with the Securities and Exchange Commission on March 2, 1995

1933 Act Registration No. 33-10438
1940 Act Registration No. 811-4919

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]

Pre-Effective Amendment No. [___]
----
Post-Effective Amendment No. 19 [ X ]
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 18
----
(Check appropriate box or boxes.)

PAINEWEBBER SERIES TRUST
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000

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

Copies to:
ELINOR W. GAMMON, Esq.
LINDA L. RITTENHOUSE, Esq.
Kirkpatrick & Lockhart
South Lobby - 9th Floor
1800 M Street, N.W.
Washington, D.C. 20036-5891
Telephone: (202) 778-9000

It is proposed that this filing will become effective:

[___] Immediately upon filing pursuant to Rule 485(b)
[___] On _________________ pursuant to Rule 485(b)
[___] 60 days after filing pursuant to Rule 485(a)(i)
[ X ] On May 1, 1995 pursuant to Rule 485(a)(i)
[___] 75 days after filing pursuant to Rule 485(a)(ii)
<PAGE>

[___] On _________________ pursuant to Rule 485(a)(ii)

If appropriate, check the following box:

[___] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment

Registrant has filed a declaration pursuant to Rule 24f-2 under the Investment
Company Act of 1940 and filed the notice required by such Rule for its most
recent fiscal year on February 27, 1995.

-2-
<PAGE>

PaineWebber Series Trust
Contents of Registration Statement

This registration statement consists of the following papers and documents:

Cover Sheet

Contents of Registration Statement

Cross Reference Sheet

Part A - Prospectuses

Part B - Statements of Additional Information

Part C - Other Information

Signature Page

Exhibits

-3-
<PAGE>

PaineWebber Series Trust
Form N-1A Cross Reference Sheet

Part A Item No.
and Caption Prospectus Caption
--------------- ------------------

1. Cover Page........................ Cover Page

2. Synopsis........................... Not Applicable

3. Condensed Financial Information.... Financial Highlights

4. General Description of Registrant.. The Fund, Its Investment Objectives
and Policies; Description of
Securities and Investment
Techniques; General Information

5. Management of the Fund............. Management; General Information

6. Capital Stock and Other Securities. Cover Page; Dividends, Other
Distributions and Federal Tax;
General Information

7. Purchase of Securities
Being Offered...................... Purchases, Redemptions and Exchanges;
Valuation of Shares

8. Redemption or Repurchase........... Purchases, Redemptions and Exchanges

9. Pending Legal Proceedings.......... Not Applicable

Part B Item No. Statement of Additional
and Caption Information Caption
--------------- -----------------------

10. Cover Page......................... Cover Page

11. Table of Contents.................. Table of Contents

12. General Information and History.... Not Applicable

-4-
<PAGE>

13. Investment Objective and Policies.. Investment Policies and
Restrictions; Hedging and Option
Income Strategies; Portfolio
Transactions

14. Management of the Fund............. Trustees and Officers

15. Control Persons and Principal
Holders of Securities.............. Trustees and Officers

16. Investment Advisory and Other
Services........................... Investment Advisory Services; Other
Information

17. Brokerage Allocation............... Portfolio Transactions

18. Capital Stock and Other Securities. Dividends and Other Distributions;
Other Information

19. Purchase, Redemption and Pricing
of Securities Being Offered........ Additional Purchase and Redemption
Information; Valuation of Shares

20. Tax Status......................... Taxes

21. Underwriters....................... Not Applicable

22. Calculation of Performance Data.... Not Applicable

23. Financial Statements............... Financial Statements

Part C
- ------

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.

-5-
<PAGE>

PAINEWEBBER SERIES TRUST
1285 Avenue of the Americas
New York, New York 10019

PaineWebber Series Trust ("Fund") is a professionally managed, open-end
investment company that offers the ten series of shares ("Portfolios") listed
below. All the Portfolios except the Global Income Portfolio are diversified,
and each has its own investment objective and policies. Shares of each
Portfolio are offered only to insurance company separate accounts that fund
certain variable contracts ("Contracts"). Advisory and administrative services
are provided to the Fund by Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly owned subsidiary of PaineWebber Incorporated
("PaineWebber"), and certain Portfolios, as indicated below, have sub-advisers.

* The MONEY MARKET PORTFOLIO seeks maximum current income consistent with
liquidity and conservation of capital. This Portfolio invests in high
grade money market instruments and repurchase agreements secured by such
instruments. An investment in the Portfolio is neither insured nor
guaranteed by the U.S. government. While the Portfolio seeks to maintain
a stable net asset value of $1.00 per share, there can be no assurance
that it will be able to do so.

* The GOVERNMENT PORTFOLIO primarily seeks high current income consistent
with the preservation of capital and secondarily seeks capital
appreciation. This Portfolio invests primarily in high quality debt
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities.

* The FIXED INCOME PORTFOLIO primarily seeks current income consistent
with the preservation of capital and secondarily seeks capital
appreciation. This Portfolio invests primarily in debt securities issued
or guaranteed by the U.S. government, its agencies or instrumentalities
and high quality corporate debt securities and mortgage-backed and
asset-backed securities of private issuers. Wolf, Webb, Burk & Campbell,
Inc. serves as sub-adviser to this Portfolio.

* The GLOBAL INCOME PORTFOLIO primarily seeks high current income and
secondarily seeks capital appreciation. This Portfolio invests
principally in high quality debt securities of foreign and U.S. issuers.

* The BALANCED PORTFOLIO seeks total return while preserving capital. This
Portfolio invests in growth equity securities but also invests no less
than 25% of its assets in fixed income securities. Provident Investment
Counsel, Inc. serves as sub-adviser to this Portfolio.

* The ASSET ALLOCATION PORTFOLIO seeks a high total return with low
volatility. This Portfolio invests primarily in a combination of equity
securities, bonds and money market instruments.

* The DIVIDEND GROWTH PORTFOLIO seeks current income and capital growth.
This Portfolio invests primarily in dividend-paying common stocks with
the potential for increasing dividends.

* The GROWTH PORTFOLIO seeks long-term capital appreciation. This
Portfolio invests primarily in common stocks of companies that, in the
judgment of Mitchell Hutchins, have substantial potential for capital
growth.

* The AGGRESSIVE GROWTH PORTFOLIO seeks to maximize long-term capital
appreciation. This Portfolio invests primarily in the common stocks of
U.S. companies. Nicholas-Applegate Capital Management serves as sub-
adviser to this Portfolio.

* The GLOBAL GROWTH PORTFOLIO seeks long-term capital appreciation. This
Portfolio invests primarily in common stocks of companies based in the
United States, Europe, Japan and the Pacific Basin.

This Prospectus concisely sets forth information about the Fund that a
prospective investor should know before investing. Investors are advised to
read this Prospectus and the applicable Contract prospectus and retain them for
future reference. A Statement of Additional Information dated May 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 or your PaineWebber investment executive or by calling toll free 1-800-
986-0088.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is May 1, 1995.

PW 1
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Financial Highlights...................................................... PW 3
The Fund, Its Investment Objectives and Policies.......................... PW 10
Description of Securities and Investment Techniques....................... PW 16
Purchases, Redemptions and Exchanges...................................... PW 23
Dividends, Other Distributions and Federal Income Tax..................... PW 23
Valuation of Shares....................................................... PW 24
Management................................................................ PW 25
General Information....................................................... PW 28
Appendix A................................................................ PW 29
Appendix B................................................................ PW 32
</TABLE>

PW 2
<PAGE>

FINANCIAL HIGHLIGHTS

The tables below provide selected per share data and ratios for one share of
each Portfolio during 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 December 31, 1993, which are
incorporated by reference into the Statement of Additional Information. The
financial statements and notes, as well as the information in the tables
appearing below insofar as it relates to the five years ended December 31,
1993, have been audited by Ernst & Young, independent auditors, whose report
thereon is also included in the Annual Report to Shareholders. Further
information about the performance of each Portfolio 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 December 31,
1989 also has been audited by Ernst & Young whose reports thereon were
unqualified.

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
----------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
--------------------------------------------------------- MAY 4, 1987+ TO
1994 1993 1992 1991 1990 1989 1988 DECEMBER 31, 1987
------- ------- ------- ------- ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.02 0.03 0.05 0.05 0.08 0.06 0.03
------- ------- ------- ------- ------ ------ ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. 0.02 0.03 0.05 0.05 0.08 0.06 0.03
------- ------- ------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... (0.02) (0.03) (0.05) (0.05) (0.08) (0.06) (0.03)
------- ------- ------- ------- ------ ------ ------ ------
TOTAL DISTRIBUTIONS..... (0.02) (0.03) (0.05) (0.05) (0.08) (0.06) (0.03)
------- ------- ------- ------- ------ ------ ------ ------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ====== ====== ====== ======
Total return(1)......... 2.45% 3.00% 5.00% 5.00% 8.00% 6.00% 3.40%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $15,468 $19,383 $20,249 $8,720 $4,367 $3,278 $2,974
Ratio of expenses to
average net assets**... 0.86% 0.81% 1.00% 2.02% 1.55% 1.56% 1.54%*
Ratio of net investment
income to average net
assets**............... 2.43% 3.13% 4.92% 6.13% 7.62% 5.74% 5.40%*
</TABLE>
- --------
* Annualized.
(1) Total return is calculated assuming a $1,000 investment on the first day
of each period reported, reinvestment of all dividends at net asset value
on the payable date, and a sale at net asset value on the last day of each
period reported. Total return information for periods less than one year
has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Portfolio for a portion of its operating expenses and waived
all or a portion of its advisory fee. If such reimbursements and waivers
had not been made, the annualized ratio of expenses to average net assets
and the annualized ratio of net investment income to average net assets
would have been 2.04% and 6.11%, 2.17% and 6.99%, 2.36% and 4.94%, and
4.60% and 2.34%, respectively, for the years ending December 31, 1990, 1989
and 1988 and for the period ended December 31, 1987.
+ Commencement of operations.

PW 3
<PAGE>

<TABLE>
<CAPTION>
GOVERNMENT PORTFOLIO
------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
----------------------------------------- JULY 5, 1989+ TO
1994 1993 1992 1991 1990 DECEMBER 31, 1989
------- ------- ------- ------- ------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.58 $ 11.61 $ 10.49 $10.17 $10.00
------- ------- ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.87 0.74 0.47 0.45 0.10
Net realized and
unrealized gains from
investment
transactions.......... 0.48 0.05 1.12 0.32 0.17
------- ------- ------- ------- ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. 1.35 0.79 1.59 0.77 0.27
------- ------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... (0.87) (0.74) (0.47) (0.45) (0.10)
Distributions from net
realized gains on
investments........... (0.13) (0.08) -- -- --
------- ------- ------- ------- ------ ------
TOTAL DISTRIBUTIONS..... (1.00) (0.82) (0.47) (0.45) (0.10)
------- ------- ------- ------- ------ ------
Net asset value, end of
period................. $ 11.93 $ 11.58 $ 11.61 $10.49 $10.17
======= ======= ======= ======= ====== ======
Total return (1)........ 11.66% 6.76% 15.17% 7.58% 2.70%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $22,354 $24,103 $15,690 $5,192 $1,294
Ratio of expenses to
average net assets**... 0.79% 0.76% 1.25% 1.55% 1.55%*
Ratio of net investment
income to average net
assets**............... 6.13% 6.59% 6.43% 6.80% 6.17%*
Portfolio turnover...... 7.93% 23.13% 1.39% 66.14% 0.37%
</TABLE>
- --------
* Annualized.
(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 date, and a sale at net
asset value on the last day of each period reported. Total return
information for periods less than one year has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Portfolio for a portion of its operating expenses and waived
all or a portion of its advisory fee. If such reimbursements and waivers
had not been made, the annualized ratio of expenses to average net assets
and the annualized ratio of net investment income (loss) to average net
assets would have been 1.28% and 6.40%, 3.14% and 5.20% and 13.87% and
(6.15)%, respectively, for the years ending December 31, 1991 and 1990, and
for the period ended December 31, 1989.
+ Commencement of operations.

PW 4
<PAGE>

<TABLE>
<CAPTION>
GLOBAL INCOME PORTFOLIO
--------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
------------------------------------------------- MAY 1, 1988+ TO
1994 1993 1992 1991 1990 1989 DECEMBER 31, 1988
------ ------- ------- ------- ------- ------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.17 $ 11.65 $ 11.16 $ 10.19 $10.67 $10.00
------ ------- ------- ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.96 0.80 0.75 0.52 0.94 0.28
Net realized and
unrealized gains
(losses) from
investment
transactions.......... 0.90 (0.65) 0.40 1.00 (0.22) 0.39
------ ------- ------- ------- ------- ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. 1.86 0.15 1.15 1.52 0.72 0.67
------ ------- ------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... (0.94) (0.56) (0.65) (0.52) (1.06) --
Distribution in excess
of current year net
investment income..... (0.16) -- -- -- -- --
Distributions from net
realized gains from
investments........... (0.21) (0.07) (0.01) (0.03) (0.14) --
------ ------- ------- ------- ------- ------ ------
TOTAL DISTRIBUTIONS..... (1.31) (0.63) (0.66) (0.55) (1.20) --
------ ------- ------- ------- ------- ------ ------
Net asset value, end of
period................. $ 11.72 $ 11.17 $ 11.65 $ 11.16 $10.19 $10.67
====== ======= ======= ======= ======= ====== ======
Total return(1)......... 16.65% 1.29% 10.30% 14.92% 6.80% 6.70%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $64,610 $63,172 $51,988 $30,778 $7,425 $7,298
Ratio of expenses to
average net assets**... 0.98% 1.07% 1.20% 1.72% 1.86% 1.86%*
Ratio of net investment
income to average net
assets**............... 7.47% 7.20% 7.59% 8.64% 9.00% 6.35%*
Portfolio turnover rate. 68.60% 75.44% 14.29% 110.23% 32.28% 136.21%
</TABLE>
- --------
* Annualized.
(1) Total return is calculated assuming a $1,000 investment on the first day
of each fiscal period reported, reinvestment of all dividends and other
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. Total return
information for periods less than one year has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Portfolio for a portion of its operating expenses and waived
all or a portion of its advisory fee. If such reimbursements and waivers
had not been made, the annualized ratio of expenses to average net assets
and the annualized ratio of net investment income to average net assets
would have been 1.75% and 8.61%, 2.59% and 8.27% and 3.30% and 4.91%,
respectively, for the years ended December 31, 1990 and 1989, and for the
period ended December 31, 1988.
+ Commencement of operations.

PW 5
<PAGE>

<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO DIVIDEND GROWTH PORTFOLIO
---------------------------------------------------------------- --------------------------------

FOR THE
PERIOD FOR THE YEARS FOR THE PERIOD
JUNE 1, ENDED JANUARY 2,
FOR THE YEARS ENDED DECEMBER 31, 1988+ TO DECEMBER 31, 1992+ TO
-------------------------------------------------- DECEMBER 31, --------------- DECEMBER 31,
1994 1993 1992 1991 1990 1989 1988 1994 1993 1992
------ ------- ------- ------- ------- ------- ------------ ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.63 $ 11.39 $ 9.99 $ 10.37 $ 10.54 $ 10.00 $ 10.26 $ 10.00
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.33 0.35 0.47 0.65 0.66 0.28 0.16 0.08
Net realized and
unrealized gains
(losses) from
investment
transactions.......... 1.48 0.24 1.40 (0.38) 0.52 0.26 (0.39) 0.26
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. 1.81 0.59 1.87 0.27 1.18 0.54 (0.23) 0.34
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... (0.33) (0.35) (0.47) (0.65) (0.94) -- (0.16) (0.08)
Distributions from net
realized gains on
investments........... (1.16) -- -- -- (0.41) -- -- --
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS..... (1.49) (0.35) (0.47) (0.65) (1.35) -- (0.16) (0.08)
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 11.95 $ 11.63 $ 11.39 $ 9.99 $ 10.37 $ 10.54 $ 9.87 $ 10.26
====== ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return(1)......... 15.76% 5.18% 18.73% 2.63% 11.10% 5.40% (2.26)% 3.40%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $33,367 $38,583 $33,327 $25,681 $26,851 $22,845 $16,281 $20,037
Ratio of expenses to
average net assets**... 0.95% 0.93% 0.94% 1.48% 1.25% 1.24%* 1.12% 1.29%*
Ratio of net investment
income to average net
assets**............... 2.27% 3.11% 4.64% 5.71% 6.54% 6.11%* 1.37% 1.21%*
Portfolio turnover...... 60.36% 30.74% 100.84% 168.87% 230.12% 69.86% 51.68% 13.74%
</TABLE>
- --------
* Annualized.
(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 date, and a sale at net
asset value on the last day of each period reported. Total return
information for periods less than one year has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Asset Allocation Portfolio for a portion of its operating
expenses and waived all or a portion of its advisory fee. If such
reimbursements and waivers had not been made, the annualized ratio of
expenses to average net assets and the annualized ratio of net investment
income to average net assets would have been 1.50% and 5.69%, 1.39% and
6.40% and 1.44% and 5.91%, respectively, for the years ending December 31,
1990 and 1989 and for the period ended December 31, 1988.
+ Commencement of operations.

PW 6
<PAGE>

<TABLE>
<CAPTION>
GROWTH PORTFOLIO
------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
----------------------------------------------------------- MAY 4, 1987+ TO
1994 1993 1992 1991 1990 1989 1988 DECEMBER 31, 1987
------- ------- ------- ------- ------- ------ ------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 15.68 $ 14.92 $ 10.57 $ 11.66 $10.38 $ 8.76 $10.00
------- ------- ------- ------- ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. -- 0.11 0.10 0.14 0.09 0.21 0.09
Net realized and
unrealized gains
(losses) from
investment
transactions.......... 3.08 0.76 4.35 (1.09) 3.90 1.41 (1.24)
------- ------- ------- ------- ------- ------ ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS.. 3.08 0.87 4.45 (0.95) 3.99 1.62 (1.15)
------- ------- ------- ------- ------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... -- (0.11) (0.10) (0.14) (0.30) -- (0.09)
Distributions from net
realized gains on
investments........... (0.70) -- -- -- (2.41) -- --
------- ------- ------- ------- ------- ------ ------ ------
TOTAL DISTRIBUTIONS..... (0.70) (0.11) (0.10) (0.14) (2.71) -- (0.09)
------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of
period................. $ 18.06 $ 15.68 $ 14.92 $ 10.57 $11.66 $10.38 $ 8.76
======= ======= ======= ======= ======= ====== ====== ======
Total return(1)......... 19.61% 5.83% 42.10% (8.15)% 38.44% 18.49% (11.52)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $51,696 $46,479 $37,470 $12,283 $4,264 $ 802 $3,891
Ratio of expenses to
average net assets**... 0.92% 0.94% 1.13% 1.85% 1.76% 1.80% 1.79%*
Ratio of net investment
income to average net
assets**............... 0.00% 0.78% 1.07% 1.90% 1.53% 0.63% 3.00%*
Portfolio turnover...... 34.95% 29.36% 27.89% 35.20% 67.79% 189.62% 2.36%
</TABLE>

- --------
* Annualized.
(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 date, and a sale at net
asset value on the last day of each period reported. Total return
information for periods less than one year has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Portfolio for a portion of its operating expenses and waived
all or a portion of its advisory fee. If such reimbursements and waivers
had not been made, the annualized ratio of expenses to average net assets
and the annualized ratio of net investment income (loss) to average net
assets would have been 1.91% and 1.84%, 3.61% and (0.31)%, 3.58% and
(1.15)%, and 5.44% and (0.64)%, respectively, for the years ending December
31, 1990, 1989 and 1988 and for the period ended December 31, 1987.
+ Commencement of operations.

PW 7
<PAGE>

<TABLE>
<CAPTION>
GLOBAL GROWTH PORTFOLIO
------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
----------------------------------------------------------- MAY 4, 1987+ TO
1994 1993 1992 1991 1990 1989 1988 DECEMBER 31, 1987
------- ------- ------- ------- ------- ------ ------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.10 $ 12.06 $ 11.76 $ 11.43 $10.49 $ 8.35 $10.00
------- ------- ------- ------- ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.03 0.10 0.23 0.19 0.07 0.07 0.05
Net realized and
unrealized gains
(losses) from
investment
transactions.......... 4.42 (1.01) 0.35 0.67 1.94 2.07 (1.59)
------- ------- ------- ------- ------- ------ ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS.. 4.45 (0.91) 0.58 0.86 2.01 2.14 (1.54)
------- ------- ------- ------- ------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... -- (0.05) (0.23) (0.19) (0.07) -- (0.05)
Distributions in excess
of net investment
income................ -- -- -- -- (0.19) -- --
Distributions from net
realized gains on
investments........... (0.58) -- (0.05) (0.34) (0.81) -- (0.06)
------- ------- ------- ------- ------- ------ ------ ------
TOTAL DISTRIBUTIONS..... (0.58) (0.05) (0.28) (0.53) (1.07) -- (0.11)
------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of
period................. $ 14.97 $ 11.10 $ 12.06 $ 11.76 $11.43 $10.49 $ 8.35
======= ======= ======= ======= ======= ====== ====== ======
Total return(1)......... 40.02% (7.55)% 4.93% 7.53% 19.18% 25.63% (15.42)%*
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $38,035 $21,493 $24,308 $16,149 $3,806 $3,250 $3,135
Ratio of expenses to
average net assets**... 1.40% 1.46% 1.53% 2.07% 2.10% 2.08% 2.10%*
Ratio of net investment
income to average net
assets**............... 0.38% 0.82% 2.12% 3.29% 0.71% 0.68% 1.09%*
Portfolio turnover...... 266.96% 127.06% 89.39% 119.65% 200.96% 32.86% 5.28%
</TABLE>

- --------
* Annualized.
(1) Total return is calculated assuming a $1,000 investment on the first day
of each fiscal period reported, reinvestment of all dividends and other
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. Total return
information for periods less than one year has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Portfolio for a portion of its operating expenses and waived
all or a portion of its advisory fee. If such reimbursements and waivers
had not been made, the annualized ratio of expenses to average net assets
and the annualized ratio of net investment income (loss) to average net
assets would have been 2.19% and 3.17%, 4.35% and (1.54)%, 4.55% and
(1.79)% and 4.87% and (1.68)%, respectively, for the years ended December
31, 1990, 1989, and 1988 and for the period ended December 31, 1987.
+ Commencement of operations.

PW 8
<PAGE>

<TABLE>
<CAPTION>
AGGRESSIVE GROWTH BALANCED FIXED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- --------------------------- ---------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
FOR THE YEAR NOVEMBER 2, FOR THE YEAR NOVEMBER 2, FOR THE YEAR NOVEMBER 8,
ENDED 1993+ TO ENDED 1993+ TO ENDED 1993+ TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994 1993
------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $10.00 $10.00 $10.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.01 0.01 0.02
Net realized and
unrealized losses from
investment
transactions.......... (0.05) (0.11) (0.39)
------ ------ ------ ------ ------ ------
TOTAL LOSS FROM
INVESTMENT OPERATIONS.. (0.04) (0.10) (0.37)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... (0.01) (0.01) (0.02)
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS..... (0.01) (0.01) (0.02)
------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $ 9.95 $ 9.89 $ 9.61
====== ====== ====== ====== ====== ======
Total return(1)......... (0.36)% (0.97)% (3.73)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)........ $2,814 $2,262 $1,480
Ratio of expenses to
average net assets**.. 0.00% 0.00% 0.00%
Ratio of net investment
income (loss) to
average net assets**.. 3.31%* 2.92%* 3.90%*
Portfolio turnover..... 0.00% 0.00% 0.00%
</TABLE>

- --------
* Annualized.
(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 date, and a sale at net
asset value on the last day of each period reported. Total return for
periods less than one year has not been annualized.
** During periods presented above, Mitchell Hutchins agreed to reimburse the
Portfolios for a portion of their operating expenses and waived all or a
portion of their advisory fees. If such reimbursements and waivers had not
been made, the annualized ratio of expenses to average net assets and the
annualized ratio of net investment income (loss) to average net assets
would have been 12.28% and (8.97)%, 15.95% and (13.03)%, and 23.52% and
(19.62)%, respectively, for the Aggressive Growth, Balanced and Fixed
Income Portfolios, respectively.
+ Commencement of operations.

PW 9
<PAGE>

THE FUND, ITS INVESTMENT OBJECTIVES AND POLICIES

The Fund is a professionally managed mutual fund. The Fund offers ten
Portfolios, each of which represents a segregated, separately managed portfolio
of securities with its own investment objective, as set forth on page PW 1, and
its own investment policies, which are summarized on page PW 1 and set forth in
more detail below. There can be no assurance that any Portfolio's investment
objective will be met. The Global Income Portfolio is managed as a non-
diversified investment company; the other Portfolios are all managed as
diversified investment companies.

Shares of each Portfolio are offered only to insurance company separate
accounts that fund the Contracts. An insurance company separate account's
interest is limited to the Portfolio(s) in which the separate account invests.
Separate accounts may purchase or redeem shares at net asset value without any
sales or redemption charge. Fees and charges imposed by the separate account,
however, will affect the actual return to the holder of a Contract. A separate
account may also impose certain restrictions or limitations on the allocation
of purchase payments or Contract value to one or more Portfolios, and not all
Portfolios may be available in connection with a particular Contract.
Prospective investors should consult the applicable Contract prospectus for
information regarding fees and expenses of the Contract and separate account
and any applicable restrictions or limitations.

Shares of the Portfolios are offered to the separate account of PaineWebber
Life Insurance Company and shares of certain Portfolios are also offered to the
separate accounts of unaffiliated insurance companies ("shared funding").
Shares of the Portfolios may serve as the underlying investments for both
annuity and life insurance Contracts ("mixed funding"). Due to differences in
tax treatment or other considerations, the interests of various Contract owners
might at some time be in conflict. The Fund currently does not foresee any such
conflict. However, the Fund's board of trustees intends to monitor events to
identify any material irreconcilable conflict that may arise and to determine
what action, if any, should be taken in response to such conflict. If such a
conflict were to occur, one or more insurance companies' separate accounts
might be required to withdraw its investments in one or more Portfolios. This
might force a Portfolio to sell securities at disadvantageous prices.

The MONEY MARKET PORTFOLIO invests in high grade money market instruments, with
remaining maturities of 13 months or less, and repurchase agreements secured by
such instruments and maintains a dollar-weighted average portfolio maturity of
90 days or less. These instruments include (1) U.S. government securities
(which may or may not be backed by the full faith and credit of the United
States), (2) obligations (including certificates of deposit, bankers'
acceptances and similar obligations) of U.S. banks, including foreign branches
of domestic banks and domestic branches of foreign banks, having total assets
in excess of $1.5 billion at the time of purchase, (3) interest-bearing savings
deposits in U.S. commercial and savings banks having total assets of $1.5
billion or less, provided that the principal amounts at each such bank are
fully insured by the Federal Deposit Insurance Corporation and the aggregate
amount of such deposits (plus interest earned) does not exceed 5% of the
Portfolio's asset value and (4) commercial paper and other short-term corporate
obligations including variable and floating rate securities and participation
interests. Participation interests are pro rata interests in securities held by
others.

The commercial paper and other short-term corporate obligations purchased by
the Money Market Portfolio consist only of obligations that Mitchell Hutchins
determines, pursuant to procedures adopted by the Fund's board of trustees,
present minimal credit risks and are either (1) rated in the highest short-term
rating category by at least two nationally recognized statistical rating
organizations ("NRSROs"), (2) rated in the highest short-term rating category
by a single NRSRO if only that NRSRO has assigned the obligations a short-term
rating or (3) unrated, but determined by Mitchell Hutchins to be of comparable
quality ("First Tier Securities"). The Money Market Portfolio

PW 10
<PAGE>

generally may invest no more than 5% of its total assets in the securities of a
single issuer (other than securities issued by the U.S. government, its
agencies or instrumentalities).

The GOVERNMENT PORTFOLIO invests primarily in high quality U.S. government
securities, which include U.S. Treasury obligations and obligations issued or
guaranteed by U.S. government agencies or instrumentalities. These latter
obligations may be backed by the full faith and credit of the U.S. government
or supported primarily or solely by the creditworthiness of the particular
agency or instrumentality. Under normal market conditions, at least 65% of the
Portfolio's total assets is invested in U.S. government securities. The
Portfolio also may invest in certain zero coupon securities that are U.S.
Treasury notes and bonds that have been stripped of their unmatured interest
coupon receipts or interests in such U.S. Treasury securities or coupons, such
as Certificates of Accrual Treasury Securities ("CATS") and Treasury Income
Growth Receipts ("TIGRS"). The staff of the Securities and Exchange Commission
("SEC") currently takes the position that "stripped" U.S. government securities
that are not issued through the U.S. Treasury STRIPS program are not U.S.
government securities. As long as the SEC staff takes this position, CATS and
TIGRS will not be counted as U.S. government securities for purposes of the 65%
investment requirement. The Portfolio may invest up to 35% of its total assets
in high quality debt securities issued or guaranteed by foreign governments,
their agencies, instrumentalities or political subdivisions or by supranational
organizations such as the World Bank ("foreign government securities"). The
Portfolio will invest only in those foreign government securities that are, at
the time of purchase, rated within one of the two highest grades assigned by
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service Inc.
("Moody's"), assigned a comparable rating by another NRSRO or, if unrated,
determined by Mitchell Hutchins to be of comparable quality. (For an
explanation of the ratings assigned to debt securities by S&P and Moody's, see
the Statement of Additional Information.) If the Portfolio invests in foreign
government securities, it will invest in issuers located in at least two
countries, except that the Portfolio may invest up to 35% of its total assets
in issuers located in any one of the following countries: Australia, Canada,
France, Germany, Japan or the United Kingdom. No more than 55% of the total
assets of the Portfolio may be represented by U.S. Treasury obligations to
assure the Portfolio's compliance with the diversification requirements imposed
by the Internal Revenue Code on segregated asset accounts used to fund variable
annuity contracts.

The FIXED INCOME PORTFOLIO invests in U.S. government securities, which include
U.S. Treasury obligations and obligations issued or guaranteed by U.S.
government agencies or instrumentalities, including mortgage-backed securities.
These latter obligations may be backed by the full faith and credit of the U.S.
government or supported primarily or solely by the creditworthiness of the
particular agency or instrumentality. The Portfolio may also invest in
corporate debt securities, including corporate bonds, debentures and non-
convertible fixed income preferred stocks, and may invest in mortgage-backed
and asset-backed securities of private issuers. The Portfolio will invest only
in those debt securities of private issuers that are, at the time of purchase,
rated within one of the two highest grades assigned by S&P or Moody's, assigned
a comparable rating by another NRSRO or, if unrated, determined by the
Portfolio's sub-adviser, Wolf, Webb, Burk & Campbell, Inc. ("WWBC") to be of
comparable quality, except that the Portfolio may invest up to 20% of its total
assets in corporate debt securities of U.S. issuers rated at least A at the
time of purchase by S&P or Moody's, assigned a comparable rating by another
NRSRO or, if unrated, determined by WWBC to be of comparable quality. The
Portfolio may invest up to 15% of its total assets in U.S. dollar-denominated
bonds sold in the United States by foreign issuers if the securities are
regularly traded on recognized U.S. exchanges or in the U.S. over-the-counter
("OTC") market. The Portfolio will not invest more than 25% of its total assets
in mortgage-backed and asset-backed securities of private issuers. No more than
55% of the total assets of the Portfolio may be represented by U.S. Treasury
obligations to assure the Portfolio's compliance with the diversification
requirements imposed by the Internal Revenue Code on segregated asset accounts
used to fund variable annuity contracts. WWBC will seek to vary the average
maturity of the Portfolio's securities depending on WWBC's perception

PW 11
<PAGE>

of future interest rate movements, so that the average maturity will be
shortened when WWBC believes that interest rates may rise and will be
lengthened when WWBC anticipates a decline in interest rates.

The GLOBAL INCOME PORTFOLIO invests principally in high quality debt securities
of foreign and U.S. issuers. Debt securities will be considered high quality if
they are assigned one of S&P's or Moody's two highest ratings, comparably rated
by another NRSRO or, if unrated, determined by Mitchell Hutchins to be of
comparable quality. Normally, at least 65% of the Portfolio's total assets are
invested in high quality debt securities, denominated in foreign currencies or
U.S. dollars, that are issued or guaranteed by foreign and U.S. governments or
their agencies, instrumentalities or political subdivisions or by supranational
organizations such as the World Bank, or that are issued by foreign and U.S.
companies, banks and bank holding companies. Such issuers will be located in at
least five of the following countries: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, Thailand, the United Kingdom and the United States. No more than
20% of the Portfolio's total assets will be invested in securities of issuers
located in any one country, except that the Portfolio may invest up to 35% of
its total assets in securities of issuers located in any one of the following
countries: Australia, Canada, France, Germany, Japan and the United Kingdom.
There is no limit on the amount of assets that may be invested in securities of
U.S. issuers. Mitchell Hutchins expects that normally more than 50% of the
Portfolio's total assets will be invested in U.S. and foreign government
securities in order to minimize credit risk and to capitalize on opportunities
that historically have been presented by, and are perceived to exist today with
respect to, such instruments. Up to 35% of the Portfolio's total assets may be
invested in debt securities rated below the two highest grades assigned by a
NRSRO but rated BBB or better by S&P, Baa or better by Moody's, comparably
rated by another NRSRO or, if unrated, determined by Mitchell Hutchins to be of
comparable quality. The Portfolio may invest up to 20% of its total assets in
sovereign debt securities rated below BBB by S&P, Baa by Moody's or comparably
rated by another NRSRO but no lower than BB by S&P, Ba by Moody's or comparably
rated by another NRSRO or, in the case of such securities assigned a commercial
paper rating, no lower than B by S&P or comparably rated by another NRSRO or,
if unrated determined by Mitchell Hutchins to be of comparable quality.
Mitchell Hutchins will purchase such securities for the Portfolio only when it
concludes that the anticipated return to the Portfolio on such investment
warrants exposure to the additional level of risk. Fundamental economic
strength, credit quality and currency and interest rate trends are the
principal determinants of the various country, geographic and industry sector
weightings within the Portfolio. Up to 5% of the Portfolio's total assets may
be invested in debt securities convertible into equity, although the Portfolio
has no current intention of converting such securities into equity or holding
them as equity upon conversion.

The Global Income Portfolio is "non-diversified," as that term is defined in
the Investment Company Act of 1940 ("1940 Act"), but intends to continue to
qualify as a "regulated investment company" for federal income tax purposes.
This means, in general, that although more than 5% of the Portfolio's total
assets may be invested in the securities of one issuer (including a foreign
government), at the close of each quarter of the Portfolio's taxable year the
aggregate amount of such holdings may not exceed 50% of the value of its total
assets, and no more than 25% of the value of its total assets may be invested
in the securities of a single issuer. To the extent that the Portfolio at times
may hold the securities of a smaller number of issuers than if it were
"diversified" (as defined in the 1940 Act), the Portfolio will at such times be
subject to greater risk with respect to its portfolio securities than a fund
that invests in a broader range of securities, because changes in the financial
condition or market assessment of a single issuer may cause greater
fluctuations in the Portfolio's total return and the net asset value of its
shares.

During its 1994 fiscal year, Global Income Portfolio had 100% of its average
annual net assets in debt securities that received a rating from S&P. The
Portfolio had the following percentages of its

PW 12
<PAGE>

average annual net assets invested in rated securities: AAA (including cash
items)-- %, AA-- %, A-- %, BBB-- % and BB-- %. It should be noted
that this information reflects the average composition of the Portfolio's
assets during the fiscal year ended December 31, 1994 and is not necessarily
representative of the Portfolio's assets as of the end of that fiscal year, the
current fiscal year, or at any time in the future.

The BALANCED PORTFOLIO invests in equity securities, including common stocks
and securities having the characteristics of common stocks, such as convertible
preferred stocks, convertible debt securities and warrants. The equity
securities in which the Portfolio invests are those of issuers that, in the
opinion of the Portfolio's sub-adviser, Provident Investment Counsel ("PIC"),
are high quality growth companies with superior financial and earnings
characteristics. Specifically, PIC will select equity securities of issuers
that it believes are experiencing an above-average rate of earnings growth and
have a three-year average performance record of sales, earnings, pretax
margins, return on equity and reinvestment rate at an aggregate average of 1.5
times the average performance of the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500") for the same period. The Portfolio invests in a range
of small, medium and large companies; the minimum market capitalization of an
issuer of a portfolio security is expected to be $250 million.

The Balanced Portfolio also invests no less than 25% of its total assets in
fixed income securities (including U.S. government and corporate debt
securities, mortgage- and asset-backed securities of U.S. government and
private issuers), both to earn current income and to achieve gains from an
increase in the value of such securities that may occur as a result of a
decrease in interest rates as well as a perception by investors that the credit
quality of the issuer has improved. Conversely, an increase in interest rates
or a deterioration in credit quality can lead to a decline in the value of the
fixed income security. In determining whether the Portfolio should invest in a
particular fixed income security, PIC considers such factors as the price,
coupon and yield to maturity; the credit quality of the issuer; the issuer's
cash flow and the related coverage ratios; the property, if any, securing the
obligation; and the terms of the debt instrument, including subordination,
default, sinking fund and early redemption provisions. The Balanced Portfolio
may invest up to 70% of its total assets in fixed income securities, but may
invest only in debt securities rated BBB or better by S&P, Baa or better by
Moody's, assigned a comparable rating by another NRSRO or, if unrated,
determined by PIC to be of comparable quality.

The Balanced Portfolio may invest up to 20% of its assets in U.S. dollar-
denominated securities of foreign issuers that are regularly traded on
recognized U.S. exchanges or in the U.S. OTC market.

The ASSET ALLOCATION PORTFOLIO invests in a broad range of equity securities,
bonds and money market instruments. The Portfolio follows a management strategy
developed by PaineWebber Asset Management ("PWAM"), a division of Mitchell
Hutchins, for the allocation of investments pursuant to a philosophy that, over
time, equity securities will outperform other financial assets; undervaluation
can be determined among equity securities; and active asset allocation can add
value by reducing risk. This investment strategy is intended for long-term
results. The Portfolio may invest any percentage, from zero to 100%, of its
assets in equity, debt or money market instruments. In determining the
percentage of the Portfolio's assets invested in each of these categories,
Mitchell Hutchins takes into account the recommendations of the PWAM Investment
Advisory Committee, which is composed of senior representatives of PaineWebber
and Mitchell Hutchins economics, fixed income, international, fundamental
research, technical research and portfolio management groups. Once Mitchell
Hutchins establishes the asset allocation guidelines, it selects individual
securities for the Portfolio as follows:

Equity Securities. Asset Allocation Portfolio invests in equity securities
based on the PWAM Equity Valuation Discipline, which is intended to identify
those industries, and companies within

PW 13
<PAGE>

industries, that appear relatively undervalued or overvalued. This strategy
tracks issuers with a minimum market capitalization of $300 million that are of
primary interest to institutional investors and currently includes
approximately 700 issuers. It determines relative investment merit by
appraising the historical performance of industries and companies through
fundamental analysis of income statement and balance sheet data, and relates
this historical record to the earnings outlook and current stock prices.

Debt Securities. The Portfolio's investments in debt securities are based on
analyses of the maturity structure and the risk structure (comparing yields on
Treasury securities to yields on riskier types of debt securities). The
Portfolio may invest in a broad variety of non-convertible debt securities,
including debt securities rated at least A by S&P or Moody's, comparably rated
by another NRSRO or, if unrated, determined by Mitchell Hutchins to be of
comparable quality, and debt securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities. The Portfolio may invest up to
20% of its total assets in non-convertible debt securities that are rated as
low as BBB by S&P, Baa by Moody's, comparably rated by another NRSRO or, if
unrated, determined by Mitchell Hutchins to be of comparable quality. The
Portfolio may invest up to 10% of its total assets in non-investment grade
convertible debt securities that are rated at least B by S&P or Moody's,
comparably rated by another NRSRO or, if unrated, determined by Mitchell
Hutchins to be of comparable quality.

Money Market Instruments. The Portfolio may invest in high grade money market
instruments, which are debt securities with maturities of 13 months or less.
Such instruments will be chosen by Mitchell Hutchins based on its judgment of
their utility in furthering the Portfolio's investment objective.

The Portfolio may invest in U.S. dollar-denominated securities of foreign
issuers that are regularly traded on recognized U.S. exchanges or in the U.S.
OTC market. For a more detailed description of the types of equity securities,
debt securities and money market instruments in which the Portfolio invests,
see the Statement of Additional Information.

The DIVIDEND GROWTH PORTFOLIO, under normal circumstances, invests at least 65%
of its total assets in dividend-paying common stocks of issuers that, at the
time of purchase, meet the following criteria:

--at least 5% compound annual growth in earnings per share over the past
five years;

--at least 5% compound annual growth in dividends per common share over the
past five years; and

--an increased dividend per common share in each of the past five years.

If a common stock owned by the Portfolio ceases to meet these criteria after
purchase, Mitchell Hutchins Institutional Investors Inc. ("MHII"), the
Portfolio's sub-adviser, will consider selling the stock, but is not required
to do so. Over the past 20 years, the universe of issuers that have met these
criteria has varied between 100 and 250 companies. The Portfolio may invest up
to 35% of its total assets in common stocks not meeting all the above criteria,
as well as convertible debt securities, convertible preferred stocks, U.S.
government securities, money market instruments and corporate debt securities
rated BBB or better by S&P, Baa or better by Moody's, comparably rated by
another NRSRO or, if unrated, determined by Mitchell Hutchins to be of
comparable quality. The Portfolio will invest in instruments other than common
stocks when, in the opinion of Mitchell Hutchins, their projected total return
is equal to or greater than that of common stocks or when such holdings might
reduce the volatility of its portfolio. The Portfolio purchases common stocks
only of issuers whose market capitalizations exceed $300 million. The Portfolio
may invest up to 25% of its total assets in U.S. dollar-denominated securities
of foreign issuers that are regularly traded on recognized U.S. exchanges or in
the U.S. OTC market.

PW 14
<PAGE>

The GROWTH PORTFOLIO invests primarily in common stocks issued by companies
that, in the judgment of Mitchell Hutchins, have substantial potential for
capital growth. In selecting stocks for investment by the Portfolio, Mitchell
Hutchins considers all of those factors it believes affect potential for
capital appreciation, including an issuer's current and projected revenues,
earnings, cash flow and assets, as well as general market conditions in
relevant industries. Under normal circumstances, at least 65% of the
Portfolio's total assets is invested in common stocks. For potential capital
appreciation (when, for instance, Mitchell Hutchins anticipates that market
interest rates may decline or credit factors or ratings affecting particular
issues may improve), the Portfolio's investment policies also permit investment
in debt securities, including debt securities convertible into equity
securities, rated BBB or better by S&P, Baa or better by Moody's, comparably
rated by another NRSRO or, if unrated, determined by Mitchell Hutchins to be of
comparable quality. Consistent with its investment objective, the Portfolio may
also invest up to 25% of its total assets in U.S. dollar-denominated securities
of foreign issuers if the securities are regularly traded on recognized U.S.
exchanges or in the U.S. OTC market.

The AGGRESSIVE GROWTH PORTFOLIO invests primarily in common stocks of U.S.
companies the assets and stock prices of which are expected by the Portfolio's
sub-adviser, Nicholas-Applegate Capital Management ("Nicholas-Applegate"), to
grow faster than the average rate of companies in the S&P 500. Companies in
which the Portfolio invests are diversified over a cross-section of industries
and may be growth companies, cyclical companies or companies believed to be
undergoing a basic change in operations or markets which, in the opinion of
Nicholas-Applegate, would result in a significant improvement in earnings. The
securities of such companies may be subject to more volatile market movements
than securities of larger, more established companies. The Portfolio is not
restricted to investments in companies of any particular size.

Under normal market conditions, the Portfolio will invest at least 75% of its
total assets in common stocks. The Aggressive Growth Portfolio may invest up to
25% of its total assets in preferred and convertible securities issued by
similar growth companies, corporate debt securities rated BBB or better by S&P,
Baa or better by Moody's, assigned a comparable rating by another NRSRO or, if
unrated, determined by Nicholas-Applegate to be of comparable quality, and
securities issued or guaranteed by the U.S. government, its agencies and
instrumentalities.

In making decisions with respect to common stocks for the Aggressive Growth
Portfolio, Nicholas-Applegate will use a proprietary investment methodology
that consists of investment techniques and processes designed to identify
companies with attractive earnings growth potential and to evaluate their
investment prospects.

The Aggressive Growth Portfolio may invest up to 25% of its total assets in
U.S. dollar-denominated securities of foreign issuers that are regularly traded
on recognized U.S. exchanges or in the U.S. OTC market.

The GLOBAL GROWTH PORTFOLIO invests primarily in the common stocks of companies
based in the United States, Europe, Japan and the Pacific Basin. Under normal
conditions, at least 65% of the Portfolio's total assets is invested in common
stocks and securities convertible into common stocks. The Portfolio will at all
times hold securities of issuers located in at least five countries and will
invest no more than 20% of its total assets in issuers located in any single
country outside the United States, except that the Portfolio may invest up to
35% of its total assets in issuers located in Japan. Mitchell Hutchins seeks to
identify those companies, both in the United States and abroad, likely to
benefit from long-term trends and shifting trade patterns as they develop in
the global economy. The Portfolio may also hold other types of securities,
including non-convertible corporate debt securities, government and money
market securities of U.S. and foreign issuers, and cash (foreign currencies or
U.S. dollars), in such proportions as, in the opinion of Mitchell Hutchins,
prevailing market, economic or political conditions warrant.

PW 15
<PAGE>

DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES

U.S. GOVERNMENT SECURITIES. Under normal market conditions, the Government
Portfolio invests at least 65% of its total assets in U.S. government
securities. The Fixed Income Portfolio and the Global Income Portfolio are
authorized to invest a substantial portion of their assets in U.S. government
securities and the other Portfolios may invest in U.S. government securities
consistent with their investment objectives. The U.S. government securities in
which the Portfolios may invest include direct obligations of the U.S.
government (such as Treasury bills, notes and bonds) and obligations issued by
U.S. government agencies and instrumentalities, including securities that are
backed by the full faith and credit of the U.S. government (such as Government
National Mortgage Association ("Ginnie Mae") certificates) and securities that
are supported primarily or solely by the creditworthiness of the issuer (such
as securities of the Federal National Mortgage Association ("Fannie Mae"), the
Federal Home Loan Mortgage Corporation ("Freddie Mac") and the Tennessee Valley
Authority). U.S. government securities are considered among the most
creditworthy of fixed income investments. Because of this, the yields available
from U.S. government securities are generally lower than the yields available
from corporate debt securities. Nevertheless, the values of U.S. government
securities (like those of fixed income securities generally) will change as
interest rates fluctuate.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-backed securities
represent direct or indirect participations in, or are secured by and payable
from, mortgage loans secured by real property and include single- and multi-
class pass-through securities and collateralized mortgage obligations ("CMOs").
U.S. government mortgage-backed securities include mortgage-backed securities
issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. Other mortgage-
backed securities are issued by private issuers, generally originators of and
investors in mortgage loans, including savings associations, mortgage bankers,
commercial banks, investment bankers and special purpose entities
(collectively, "Private Mortgage Lenders"). Such private mortgage-backed
securities may be supported by pools of mortgage loans or other mortgage-backed
securities that are guaranteed, directly or indirectly, by the U.S. government
or one of its agencies or instrumentalities, or they may be issued without any
government guarantee of the underlying mortgage assets but with some form of
non-governmental credit enhancement. For more information concerning the types
of mortgage-backed securities in which the Portfolios may invest, see Appendix
A to this Prospectus.

Asset-backed securities have structural characteristics similar to mortgage-
backed securities. However, the underlying assets are not first-lien mortgage
loans or interests therein, but include assets such as motor vehicle
installment loan contracts, home equity loans, leases of various types of real
and personal property and receivables from revolving credit (credit card)
agreements. Such assets are securitized through the use of trusts or special
purpose corporations. Payments or distributions of principal and interest on
asset-backed securities may be guaranteed up to certain amounts and for a
certain time period by a letter of credit or a pool insurance policy issued by
a financial institution unaffiliated with the issuer or other credit
enhancements may be present. Asset-backed securities are described briefly in
Appendix A to this Prospectus and are discussed further in the Statement of
Additional Information.

PW 16
<PAGE>

prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity. Amounts available for reinvestment are likely to be greater
during a period of declining interest rates and, as a result, are likely to be
reinvested at lower interest rates than during a period of rising interest
rates. Accelerated prepayments on securities purchased by a Portfolio at a
premium also impose a risk of loss of principal because the premium may not
have been fully amortized at the time the principal is repaid in full. The
market for privately issued mortgage-backed and asset-backed securities is
smaller and less liquid than the market for mortgage-backed securities of
government issuers. Derivative securities, such as stripped mortgage-backed
securities ("SMBS"), generally are more sensitive to changes in prepayment and
interest rates and the market for such securities is less liquid than is the
case for traditional debt securities and mortgage-backed and asset-backed
securities. In some cases, the market value of SMBS may be extremely volatile.

It should be noted that new types of mortgage-backed and asset-backed
securities and derivative securities are developed and marketed from time to
time and that, consistent with their investment limitations, the Portfolios
expect to invest in those new types of securities that Mitchell Hutchins or the
applicable sub-adviser believes may assist the Portfolio in achieving its
investment objective.

FOREIGN SECURITIES. The Global Growth and Global Income Portfolios invest a
substantial portion of their assets in foreign securities and the Government
Portfolio may invest up to 35% of its total assets in foreign government
securities. In addition, the Growth, Dividend Growth, Fixed Income, Balanced
and Aggressive Growth Portfolios may each invest a portion of its total assets
in U.S. dollar-denominated securities of foreign issuers if such securities are
regularly traded on recognized U.S. exchanges or in the U.S. OTC market and the
Asset Allocation Portfolio also may invest in such securities. Accordingly, an
investment in any of these Portfolios involves risks relating to political,
social and economic developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. and foreign issuers and
markets are subject. These risks are greater with respect to the Global Growth,
Global Income and Government Portfolios because a substantially greater portion
of their assets may be invested in such securities and because these Portfolios
may invest in foreign securities that are denominated in foreign currencies and
traded outside the U.S. securities markets. These risks may include
expropriation, confiscatory taxation, withholding taxes on dividends and
interest, limitations on the use or transfer of Portfolio 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 Portfolios
generally invest only in securities that are regularly traded on recognized
exchanges or in 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 these Portfolios than is available
concerning U.S. companies. 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 differ substantially
from those of U.S. courts.

PW 17
<PAGE>

payments, speculation and other economic and political conditions. In addition,
some foreign currency values may be volatile and there is the possibility of
governmental controls on currency exchange or governmental intervention in
currency markets. Foreign securities trading practices, including those
involving securities settlement where Portfolio assets may be released prior to
receipt of payment, may expose a Portfolio to increased risk in the event of a
failed trade or the insolvency of a foreign broker-dealer. Any of these factors
could adversely affect these Portfolios.

The costs attributable to foreign investing that the Global Growth, Global
Income and Government Portfolios must bear frequently are higher than those
attributable to domestic investing. For example, the costs of maintaining
custody of securities in foreign countries exceed custodian costs for domestic
securities.

The Global Income and the Global Growth Portfolios may invest in securities of
issuers located in emerging market countries. The risks of investing in foreign
securities may be greater with respect to securities of issuers in, or
denominated in the currencies of, emerging market countries. The economies of
emerging market countries generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be adversely affected by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
adversely affected by economic conditions in the countries with which they
trade. Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain emerging market
countries. The securities markets of emerging market countries are
substantially smaller, less developed, less liquid and more volatile than the
securities markets of the U.S. and other developed countries. Disclosure and
regulatory standards in many respects are less stringent in emerging market
countries than in the U.S. and other major markets. There also may be a lower
level of monitoring and regulation of emerging markets and the activities of
investors in such markets, and enforcement of existing regulations may be
extremely limited. Investing in local markets, particularly in emerging market
countries, may require the Global Income and Global Growth Portfolios to adopt
special procedures, seek local government approvals or take other actions, each
of which may involve additional costs to the Portfolios. Certain emerging
market countries may also restrict investment opportunities in issuers in
industries deemed important to national interests.

FOREIGN GOVERNMENT SECURITIES. Foreign government securities generally consist
of obligations supported by national, state or provincial governments or
similar political subdivisions. Foreign government securities also include debt
obligations of supranational entities, which include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development, international banking institutions and
related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.

Foreign government securities also include debt securities of "quasi-
governmental agencies" and debt securities denominated in multinational
currency units of an issuer (including supranational issuers). An example of a
multinational currency unit is the European Currency Unit ("ECU"). An ECU
represents specified amounts of the currencies of certain member states of the
European Community. Debt securities of quasi-governmental agencies are issued
by entities owned by either a national, state or equivalent government or are
obligations of a political unit that is not backed by the national government's
full faith and credit and general taxing powers. Foreign government securities
also include mortgage-related securities issued or guaranteed by national,
state or provincial governmental instrumentalities, including quasi-
governmental agencies.

PW 18
<PAGE>

FOREIGN BANK AND FOREIGN BRANCH INSTRUMENTS. The Money Market Portfolio may
invest in obligations of domestic branches of foreign banks and foreign
branches of domestic banks. The Global Income Portfolio may invest in these
instruments and also in obligations of bank holding companies and foreign
banks. The other Portfolios may invest in such securities consistent with their
investment objectives and policies. Such investments may involve risks that are
different from investments in obligations of U.S. branches of domestic banks.
These risks may include future unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits, currency controls,
interest limitations or other governmental restrictions that might affect the
payment of principal or interest on the securities held by a Portfolio.
Additionally, there may be less publicly available information about foreign
banks and foreign branches of U.S. banks, as these institutions may not be
subject to the same regulatory requirements as domestic banks.

DEBT SECURITIES. The Global Income, Balanced, Asset Allocation, Dividend
Growth, Growth, Aggressive Growth and Global Growth Portfolios all may invest a
substantial portion of their assets in debt securities rated within any one of
the four highest grades assigned by S&P or Moody's or assigned a comparable
rating by another NRSRO. Debt securities rated Baa by Moody's or BBB by S&P 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. The Asset Allocation Portfolio may invest up to 10% of
its total assets in non-investment grade convertible debt securities and the
Global Income Portfolio may invest up to 20% of its total assets in non-
investment grade sovereign debt securities. Debt securities rated below
investment grade are deemed by these agencies to be predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal and
may involve major risk exposures to adverse conditions. Such securities are
commonly referred to as "junk bonds." All Portfolios are permitted to purchase
debt securities that are not rated by S&P, Moody's or another NRSRO but that
Mitchell Hutchins or the applicable sub-adviser determines to be of comparable
quality to that of rated securities in which such Portfolio may invest. Such
securities are included in the computation of any percentage limitations
applicable to the comparable rated securities.

The market value of debt securities generally varies inversely with interest
rate changes. Ratings of debt securities represent the rating agency's opinion
regarding their quality, are not a guarantee of quality and may be reduced
after a Portfolio has acquired the security. Mitchell Hutchins or the
applicable sub-adviser will consider such an event in determining whether the
Portfolio should continue to hold the security but the Portfolio is not
required to dispose of it. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not evaluate the risks of fluctuations
in market value. Also, rating agencies may fail to make timely changes in
response to subsequent events, so that an issuer's financial condition may be
better or worse than the rating indicates.

Lower rated debt securities generally offer a higher current yield than that
available from higher grade issues, but they involve higher risks, in that they
are especially subject to adverse changes in general economic conditions and in
the industries in which the issuers are engaged, to changes in the financial
condition of the issuers and to price fluctuation in response to changes in
interest rates. During periods of economic downturn or rising interest rates,
highly leveraged issuers may experience financial stress which could adversely
affect their ability to make payments of principal and interest and increase
the possibility of default. In addition, such issuers may not have more
traditional methods of financing available to them, and may be unable to repay
debt at maturity by refinancing. The risk of loss due to default by such
issuers is significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior indebtedness.

The market for lower rated securities has expanded rapidly in recent years, and
its growth paralleled a long economic expansion. In the past, the prices of
many lower rated debt securities declined

PW 19
<PAGE>

substantially, reflecting an expectation that many issuers of such securities
might experience financial difficulties. As a result, the yields on lower rated
debt securities rose dramatically, but such higher yields did not reflect the
value of the income stream that holders of such securities expected, but rather
the risk that holders of such securities could lose a substantial portion of
their value as a result of the issuers' financial restructuring or default.
There can be no assurance that such declines will not recur. The market for
lower rated debt securities generally is thinner and less active than that for
higher quality securities, which may limit a Portfolio's ability to sell such
securities at fair value in response to changes in the economy or the financial
markets. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may also decrease the values and liquidity of lower rated
securities, especially in a thinly traded market.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Portfolio may purchase
securities on a "when-issued" basis or may purchase or sell securities for
delayed delivery. In when-issued or delayed delivery transactions, delivery of
the securities occurs beyond normal settlement periods, but a Portfolio would
not pay for such securities or start earning interest on them until they are
delivered. However, when a Portfolio 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, a Portfolio'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 Portfolio's total
assets, including the value of when-issued and delayed-delivery securities held
by the Portfolio, exceed its net assets.

REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase agreements.
Repurchase agreements are transactions in which a Portfolio purchases
securities from a bank or recognized securities dealer and simultaneously
commits to resell the securities to the bank or dealer at an agreed-upon date
and price reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased securities. Repurchase agreements carry certain risks
not associated with direct investments in securities, including possible
decline in the market value of the underlying securities and delays and costs
to a Portfolio if the other party to the repurchase agreement becomes
insolvent, each Portfolio intends to enter into repurchase agreements only with
banks and dealers in transactions believed by Mitchell Hutchins or the
applicable sub-adviser to present minimal credit risks in accordance with
guidelines established by the Fund's board of trustees.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. The Global Income and Balanced
Portfolios each may enter into reverse repurchase agreements with banks and
broker-dealers up to an aggregate value of not more than 10% of its total
assets. Such agreements involve the sale of securities held by the Portfolio
subject to the Portfolio's agreement to repurchase the securities at an agreed-
upon date and price. Such agreements are considered to be borrowings and may be
entered into only for temporary purposes. The market value of securities sold
under reverse repurchase agreements typically is greater than the proceeds of
the sale, and accordingly, the market value of the securities sold is likely to
be greater than the value of the securities in which the Global Income
Portfolio or Balanced Portfolio invests those proceeds. Thus, reverse
repurchase agreements involve the risk that the buyer of the securities sold by
the Portfolio might be unable to deliver them when the Portfolio seeks to
repurchase. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, such buyer or its trustee
or receiver may receive an extension of time to determine whether to enforce
the Portfolio's obligation to repurchase the securities and the Portfolio's use
of the proceeds of the reverse repurchase agreement may effectively be
restricted pending such decision. Neither Portfolio will purchase securities
while borrowings (including reverse repurchase agreements) in excess of 5% of
the value of the Portfolio's total assets are outstanding.

PW 20
<PAGE>

The Balanced Portfolio may enter into dollar rolls, in which the Portfolio
sells mortgage-backed or other securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar securities on a
specified future date. In the case of dollar rolls involving mortgage-backed
securities, the mortgage-backed securities that are repurchased will be of the
same type, and will have the same interest rate and maturity, as those sold but
generally will be supported by different pools of mortgages with substantially
similar prepayment characteristics. The Portfolio forgoes principal and
interest paid during the roll period on the securities sold in a dollar roll,
but the Portfolio is compensated by the difference between the current sales
price and the lower price for the future purchase as well as by any interest
earned on the proceeds of the securities sold. The Portfolio also could be
compensated through the receipt of fee income equivalent to a lower forward
price.

The dollar rolls and reverse repurchase agreements entered into by the Balanced
Portfolio normally will be arbitrage transactions in which the Portfolio will
maintain an offsetting position in securities or repurchase agreements that
mature on or before the settlement date on the related dollar roll or reverse
repurchase agreement. Since the Portfolio will receive interest on the
securities or repurchase agreements in which it invests the transaction
proceeds, such transactions may involve leverage. However, since such
securities or repurchase agreements must satisfy the quality requirements of
the Portfolio, and will mature on or before the settlement date on the dollar
roll or reverse repurchase agreement, PIC believes that such arbitrage
transactions do not present the risks to the Portfolio that are associated with
other types of leverage.

Dollar rolls and reverse repurchase agreements will be considered to be
borrowings and, accordingly, will be subject to the Balanced Portfolio's
limitations on borrowings, which will restrict the aggregate of such
transactions (plus any other borrowings) to 10% of the Portfolio's total
assets. The Portfolio will not enter into dollar rolls or reverse repurchase
agreements, other than in arbitrage transactions as described above, in an
aggregate amount in excess of 5% of the Portfolio's total assets. The Portfolio
has no present intention to enter into dollar rolls other than in such
arbitrage transactions, and it has no present intention to enter into reverse
repurchase agreements other than in such arbitrage transactions or for
temporary or emergency purposes.

HEDGING AND RELATED INCOME STRATEGIES. Except for the Money Market and Asset
Allocation Portfolios, each Portfolio may use options (both exchange-traded and
OTC) and futures contracts to attempt to enhance income and may attempt to
reduce the overall risk of its investments (hedge) by using options and futures
contracts, although the Fixed Income and Aggressive Growth Portfolios have no
intention of doing so during the coming year. The Government, Global Income and
Global Growth Portfolios may also use forward currency contracts. A Portfolio's
ability to use these strategies may be limited by market conditions, regulatory
limits and tax considerations. Appendix B to this Prospectus describes the
hedging instruments that the Portfolios may use. The Statement of Additional
Information contains further information on these strategies. Each Portfolio
eligible to use hedging and related income strategies may write (sell) covered
call and put options, buy call and put options on securities in which it is
authorized to invest and on stock indexes, sell stock index or interest rate
futures contracts and buy put and call options and write covered call options
on such futures contracts. The Government, Global Income and Global Growth
Portfolios each may write covered call options and buy put and call options on
foreign currencies, buy or sell foreign currency futures contracts, buy put and
call options and write covered call options on such contracts. These Portfolios
may enter into forward currency contracts for the purchase or sale of a
specified currency at a specified future date either with respect to specific
transactions or with respect to portfolio positions. For example, when Mitchell
Hutchins anticipates making a currency exchange transaction in connection with
the purchase or sale of a security, a Portfolio may enter into a forward
contract in order to set the exchange rate at which the transaction will be
made. A Portfolio also may enter into a forward contract to sell an amount of a
foreign currency approximating the value of some or all of

PW 21
<PAGE>

the Portfolio's securities positions denominated in such currency. A Portfolio
may use forward contracts in one currency or a basket of currencies to hedge
against fluctuations in the value of another currency when Mitchell Hutchins
anticipates that there will be a correlation between the two and may use
forward currency contracts to shift a Portfolio's exposure to foreign currency
fluctuations from one country to another. The purpose of entering into these
contracts is to minimize the risk to a Portfolio from adverse changes in the
relationship between the U.S. dollar and foreign currencies.

Global Income Portfolio may enter into interest rate protection transactions,
including interest rate swaps and interest rate caps, collars and floors, for
hedging purposes. For example, the Portfolio may enter into interest rate
protection transactions to preserve a return or spread on a particular
investment or portion of its portfolio or to protect against any increase in
the price of securities the Portfolio anticipates purchasing at a later date.
The Portfolio will enter into interest rate protection transactions only with
banks and recognized securities dealers believed by Mitchell Hutchins to
present minimal credit risks in accordance with guidelines established by the
Fund's board of trustees.

A Portfolio might not employ any of the strategies described above, and there
can be no assurance that any strategy used will succeed. If Mitchell Hutchins
or the applicable sub-adviser incorrectly forecasts interest rates, market
values or other economic factors for a Portfolio, the Portfolio would be in a
better position had it not hedged at all. The use of these strategies involves
certain special risks, including (1) the fact that skills needed to use hedging
instruments are different from those needed to select the Portfolios'
securities, (2) possible imperfect correlation, or even no correlation, between
price movements of hedging instruments and price movements of the investments
being hedged, (3) the fact that, while hedging strategies can reduce the risk
of loss, they can also reduce the opportunity for gain, or even result in
losses, by offsetting favorable price movements in hedged investments and (4)
the possible inability of a Portfolio 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 a Portfolio to sell a portfolio security at a disadvantageous time,
due to the need for the Portfolio to maintain "cover" or to segregate
securities in connection with hedging transactions and the possible inability
of a Portfolio to close out or to liquidate its hedged position.

New financial products and risk management techniques continue to be developed.
Each Portfolio may use these instruments and techniques to the extent
consistent with its investment objectives and regulatory and federal tax
considerations.

ILLIQUID SECURITIES. Each Portfolio may invest up to 10% of its net assets (15%
for the Aggressive Growth Portfolio) in illiquid securities, including certain
cover for OTC options, repurchase agreements with maturities in excess of seven
days and securities whose disposition is restricted under the federal
securities laws (other than "Rule 144A" securities which Mitchell Hutchins has
determined to be liquid under procedures approved by the Trust's board of
trustees). Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act of 1933 ("1933 Act"). 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 a Portfolio, however, could affect
adversely the marketability of such portfolio securities and the Portfolio
might be unable to dispose of such securities promptly or at favorable prices.

PORTFOLIO TURNOVER. The portfolio turnover rate may vary greatly from year to
year and will not be a limiting factor when Mitchell Hutchins or the applicable
sub-adviser deems portfolio changes appropriate. A higher turnover rate may
involve correspondingly greater brokerage and other transaction costs, which
will be borne directly by the affected Portfolio.

PW 22
<PAGE>

OTHER INFORMATION. When Mitchell Hutchins or the applicable sub-adviser
believes unusual circumstances warrant a defensive posture, each Portfolio
temporarily may commit all or any portion of its assets to cash, U.S.
government securities or money market instruments, including repurchase
agreements. The Government, Global Income and Global Growth Portfolios may hold
cash in U.S. dollars or foreign currencies and money market instruments of U.S.
or foreign issuers, including instruments backed by the U.S. or foreign
governments, their agencies or instrumentalities and repurchase agreements
secured thereby. Each Portfolio may borrow money for temporary purposes but not
in excess of 10% of its total assets (33 1/3% for the Fixed Income Portfolio
and 20% for the Aggressive Growth Portfolio).

Each Portfolio's investment objective and certain investment limitations, as
described in the Statement of Additional Information, are fundamental policies
that may not be changed without shareholder approval. All other investment
policies may be changed by the Fund's board of trustees without shareholder
approval.

PURCHASES, REDEMPTIONS AND EXCHANGES

Shares of the Portfolios are offered only to the insurance company separate
accounts that fund the Contracts. All such shares may be purchased or redeemed
by the separate accounts without any sales or redemption charge at net asset
value. Proceeds from redemptions in any of the Portfolios will be paid on or
before the seventh day following the request for redemption by a Contract
holder.

A separate account may exchange shares of one Portfolio for shares of another
Portfolio at their relative net asset values per share.

DIVIDENDS, OTHER DISTRIBUTIONS AND FEDERAL INCOME TAX

DIVIDENDS AND OTHER DISTRIBUTIONS. With the exception of the Money Market
Portfolio, each Portfolio distributes all of its net investment income as
dividends to its shareholders shortly after the close of the Fund's fiscal year
on December 31. At the same time, those Portfolios also distribute to their
shareholders all of their net short-term capital gain and their 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. Those Portfolios
may make a second distribution of net investment income, net short-term capital
gain, net capital gain and net gains from foreign currency transactions if
necessary to avoid income tax.

The Money Market Portfolio declares as dividends on each Business Day all of
its net investment income, payable to shareholders of record as of the close of
regular trading on the New York Stock Exchange ("NYSE") (currently 4:00 p.m.,
eastern time) on the preceding Business Day; those dividends are paid monthly.
A "Business Day" is any day, Monday through Friday, on which the NYSE is open
for business. Net investment income of the Portfolio consists of accrued
interest and earned discount (including both original issue and market
discounts), less amortization of market premium and applicable expenses. Net
investment income is calculated and dividends are declared immediately prior to
the determination of net asset value per share. The Portfolio generally
distributes to its shareholders any net short-term capital gain annually after
the end of its fiscal year on December 31 but may make more frequent
distributions of that gain if necessary to maintain its net asset value per
share at $1.00 or to avoid income tax. The Portfolio does not expect to realize
long-term capital gain and thus does not anticipate any distributions of net
capital gain.

Dividends and capital gain distributions from a Portfolio are paid in
additional shares of that Portfolio at net asset value per share, unless the
Fund's transfer agent is instructed otherwise. See

PW 23
<PAGE>

the applicable Contract prospectus for information regarding the federal income
tax treatment of distributions to the separate accounts.

FEDERAL INCOME TAX. Each Portfolio intends to continue to qualify for treatment
as a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code so that it will be relieved of federal income tax on that part of
its investment company taxable income (consisting generally of net investment
income, net gains from certain foreign currency transactions and net short-term
capital gain) and net capital gain that is distributed to its shareholders.

Dividends and other distributions declared by a Portfolio in October, November
or December of any year and payable to shareholders of record on a date in any
of those months will be deemed to have been paid by the Portfolio and received
by the shareholders on December 31 of that year if the distributions are paid
by the Portfolio during the succeeding January.

Portfolio shares are offered only to insurance company separate accounts that
fund variable annuity and variable life insurance contracts. Under the Internal
Revenue Code, no tax is imposed on an insurance company with respect to income
of a qualifying separate account properly allocable to the value of eligible
variable annuity or variable life insurance contracts. See the applicable
Contract prospectus for a discussion of the federal income tax status of (1)
the separate accounts that purchase and hold shares of the Portfolios and (2)
the holders of Contracts funded through those accounts.

Each Portfolio intends to continue to comply with the diversification
requirements imposed by section 817(h) of the Internal Revenue Code and the
regulations thereunder. These requirements, which are in addition to the
diversification requirements imposed on the Portfolios by the 1940 Act and
Subchapter M, place certain limitations on the assets of each separate
account--and, because section 817(h) and those regulations treat the assets of
each Portfolio as assets of the related separate account, of each Portfolio--
that may be invested in securities of a single issuer. Specifically, the
regulations provide that, except as permitted by the "safe harbor" described
below, as of the end of each calendar quarter or within 30 days thereafter no
more than 55% of the total assets of a Portfolio may be represented by any one
investment, no more than 70% by any two investments, no more than 80% by any
three investments and no more than 90% by any four investments. For this
purpose, all securities of the same issuer are considered a single investment,
and while each U.S. government agency and instrumentality is considered a
separate issuer, a particular foreign government and its agencies,
instrumentalities and political subdivisions all will be considered the same
issuer. Section 817(h) provides, as a safe harbor, that a separate account will
be treated as being adequately diversified if the diversification requirements
under Subchapter M are satisfied and no more than 55% of the value of the
account's total assets are cash and cash items, government securities and
securities of other RICs. Failure of a Portfolio to satisfy the section 817(h)
requirements would result in taxation of the insurance company issuing the
Contracts and treatment of the Contract holders other than as described in the
applicable Contract prospectus.

The foregoing is only a summary of some of the important federal income tax
considerations generally affecting the Portfolios and their shareholders; see
the Statement of Additional Information for a more detailed discussion.
Prospective shareholders are urged to consult their tax advisers.

VALUATION OF SHARES

PW 24
<PAGE>

number of Portfolio shares outstanding. Except for the Money Market Portfolio,
each Portfolio values its assets based on the current market value where market
quotations are readily available. If such value cannot be established, the
assets are valued at fair value as determined in good faith by or under the
direction of the Fund's board of trustees. 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 trustees determines that this does
not represent fair value. All investments denominated in foreign currency are
valued daily in U.S. dollars on the basis of the then-prevailing exchange
rates.

The Money Market Portfolio intends to use its best efforts to maintain its net
asset value at $1.00 per share. The value of each share of this Portfolio is
computed by dividing its net assets by the number of its outstanding shares.
"Net assets" equals the value of the investments and other assets minus its
liabilities. The Money Market Portfolio values its portfolio securities using
the amortized cost method of valuation, under which market value is
approximated by amortizing the difference between the acquisition cost and
value at maturity of the instrument on a straight-line basis over its remaining
life. All cash, receivables and current payables are generally carried at their
face value. Other assets are valued at fair value as determined in good faith
by or under the direction of the Fund's board of trustees. All investments
denominated in foreign currencies are valued daily in U.S. dollars based on the
then-prevailing exchange rate. It should be recognized that judgment plays a
greater role in valuing lower rated debt securities because there is less
reliable, objective data available.

MANAGEMENT

The Fund's board of trustees, as part of its overall management responsibility,
oversees various organizations responsible for each Portfolio's day-to-day
management. Mitchell Hutchins, the investment adviser and administrator for
each Portfolio, makes and implements all investment decisions and supervises
all aspects of the operations of the Money Market, Government, Global Income,
Asset Allocation, Dividend Growth, Growth and Global Growth Portfolios.
Mitchell Hutchins supervises the activities of WWBC, PIC, Nicholas-Applegate
and MHII, the sub-advisers for the Fixed Income, Balanced, Aggressive Growth
and Dividend Growth Portfolios, respectively, and supervises all other aspects
of these Portfolios' operations. WWBC, PIC, Nicholas-Applegate and MHII, as
sub-advisers for the Fixed Income, Balanced, Aggressive Growth and Dividend
Growth Portfolios, respectively, make and implement all investment decisions
for these Portfolios. Brokerage transactions for the Portfolios may be
conducted through PaineWebber or its affiliates in accordance with procedures
adopted by the Fund's board of trustees.

For advisory and administrative services, the Fund pays Mitchell Hutchins a
fee, computed daily and paid monthly, at the following annual rates for each
Portfolio:

<TABLE>
<CAPTION>
% OF AVERAGE
PORTFOLIO DAILY NET ASSETS
<S> <C>
Money Market Portfolio .50
Government Portfolio .50
Fixed Income Portfolio .50
Global Income Portfolio .75
Balanced Portfolio .75
Asset Allocation Portfolio .75
Dividend Growth Portfolio .70
Growth Portfolio .75
Aggressive Growth Portfolio .80
Global Growth Portfolio .75
</TABLE>

PW 25
<PAGE>

The fee of .75% of average net assets paid by the Global Income, Balanced,
Growth and Global Growth Portfolios and the fee of .80% of average net assets
paid by the Aggressive Growth Portfolio are higher than those paid by most
funds to their advisers but not higher than fees paid by many funds with
similar objectives and policies. THE FEE OF .75% OF AVERAGE NET ASSETS PAID BY
THE ASSET ALLOCATION PORTFOLIO IS HIGHER THAN THAT PAID BY FUNDS WITH SIMILAR
INVESTMENT OBJECTIVES AND POLICIES TO THEIR ADVISERS.

The Portfolios also incur other expenses in their operations, such as custody
fees, brokerage commissions, professional fees, expenses of board and
shareholder meetings, fees and expenses relating to registration of their
shares, taxes and governmental fees, fees and expenses of the trustees, costs
of obtaining insurance, organizational expenses and extraordinary expenses,
including costs or losses in any litigation.

For the fiscal year ended December 31, 1994, total expenses stated as a
percentage of average net assets were % for the Money Market Portfolio, %
for the Government Portfolio, % for the Global Income Portfolio, % for
the Asset Allocation Portfolio, % for the Dividend Growth Portfolio, %
for the Growth Portfolio and % for the Global Growth Portfolio.

For the fiscal period ended December 31, 1993 Mitchell Hutchins reimbursed
Fixed Income, Balanced and Aggressive Growth Portfolios for a portion of their
operating expenses and waived all or a portion of its advisory fees so that
each such Portfolio's total expenses stated as a percentage of average net
assets was 0.00%. If such reimbursements and waivers had not been made, the
annualized ratio of expenses to average net assets would have been 23.52%,
15.95% and 12.28%, respectively. Mitchell Hutchins does not expect to waive its
fees or reimburse expenses for any Portfolio during the current fiscal year.

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. At March 31, 1994 Mitchell Hutchins was adviser or sub-adviser to 31
investment companies with 60 separate portfolios and aggregate assets of
approximately $25 billion.

Mitchell Hutchins (not the Fund) pays WWBC a fee for its services as sub-
adviser for the Fixed Income Portfolio in the amount of .30% of the Portfolio's
average daily net assets. WWBC is located at 1525 Locust Street, 11th Floor,
Philadelphia, Pennsylvania 19102, and is a corporation controlled by four
individuals, each of whom owns 25% of its capital stock. WWBC provides
investment advisory services to corporations, government funds, Taft-Hartley
plans, foundations and endowments and, as of March 31, 1994, managed
approximately $1.1 billion in assets.

Mitchell Hutchins (not the Fund) pays PIC a fee for its services as sub-adviser
for the Balanced Portfolio in the amount of .45% of the Portfolio's average
daily net assets. PIC is located at 300 North Lake Avenue, Pasadena, California
91101 and is an indirect wholly owned subsidiary of United Asset Management
Corporation, a publicly owned company principally engaged, through affiliated
firms, in providing institutional management services. PIC provides investment
advisory services to individual and institutional clients and, as of February
15, 1994, managed approximately $13.4 billion in assets.

Mitchell Hutchins (not the Fund) pays MHII a fee for its services as sub-
adviser for the Dividend Growth Portfolio in the amount of .25% of the
Portfolio's average daily net assets. MHII is a wholly owned subsidiary of
Mitchell Hutchins. The principal business address of MHII is 1285 Avenue of the
Americas, New York, New York 10019. MHII provides asset management services to
corporations, mutual funds, governmental organizations, employee benefit plans,
insurance funds, endowments and foundations, and as of March 31, 1994, managed
approximately $8.9 billion in assets.

PW 26
<PAGE>

Mitchell Hutchins (not the Fund) pays Nicholas-Applegate a fee for its services
as sub-adviser for the Aggressive Growth Portfolio in the amount of .50% of the
Portfolio's average daily net assets. Nicholas-Applegate is located at 600 West
Broadway, 30th Floor, San Diego, California 92101 and is a California limited
partnership. Nicholas-Applegate's general partner is Nicholas-Applegate Capital
Management Inc., a California corporation owned by Arthur E. Nicholas. He and
five other partners manage a staff of 130 employees. As of March 31, 1994,
Nicholas-Applegate managed a total of approximately $13 billion in assets for
its client accounts, which include employee benefit plans of corporations,
public retirement systems and unions, university endowments and other
institutional investors.

Nimal Singh and Craig Varrelman are primarily responsible for the day-to-day
management of the Government Portfolio. Mr. Singh, is a vice president of
Mitchell Hutchins and Mr. Varrelman, CFA, is also a vice president of Mitchell
Hutchins. Prior to joining MHII in 1993, Mr. Singh was with Merrill Lynch Asset
Management, Inc., where he was a member of the portfolio management team
responsible for managing several diversified funds, including mortgage-backed
securities funds with assets totaling $8 billion. From 1990 to 1993, Mr. Singh
was a senior portfolio manager at Nomura Mortgage Fund Management Corporation,
where he was responsible for managing $3 billion in mortgage assets. From 1987
o 1990, Mr. Singh was with the Federal National Mortgage Association. Mr.
Varrelman has been with MHII as a portfolio manager since 1988 and manages
fixed income portfolios with assets totaling approximately $1.5 billion, with
an emphasis on U.S. government securities.

William J. Campbell and Raymond J. Munsch are primarily responsible for the
day-to-day management of the Fixed Income Portfolio. Mr. Campbell is a vice
president and a principal of WWBC and has held these positions since 1980. He
has 23 years of investment experience. Mr. Munsch is a vice president and
portfolio manager of WWBC. Prior to December 1989, Mr. Munsch was a vice
president and manager of the Asset Management Department for Meritor Savings
Bank. Mr. Munsch has over 19 years of investment experience in all areas of
fixed income securities.

Stuart Waugh is primarily responsible for the day-to-day management of the
Global Income Portfolio. Mr. Waugh is a vice president of the Fund, a managing
director and a portfolio manager of Mitchell Hutchins responsible for global
fixed income investments and currency trading. He has held his Global Income
Portfolio responsibilities since its inception in May 1988 and has been
employed by Mitchell Hutchins as a portfolio manager for the last five years.

Thomas J. Condon, Paula B. Blacher and Thomas M. Mitchell are primarily
responsible for the day-to-day management of the Balanced Portfolio. Mr. Condon
has been a managing director of PIC since 1981. Ms. Blacher is a vice president
of PIC and has held that position since 1985. Mr. Mitchell is executive vice
president of PIC and has held that position since 1983.

Gyanendra (Joe) Joshi has been primarily responsible for the day-to-day
portfolio management of the Portfolio since May 1994. Mr. Joshi has been a
Managing Director, Equity Investments, of MHII since 1989.

Ellen R. Harris is primarily responsible for the day-to-day management of the
Growth and Asset Allocation Portfolios. Ms. Harris is a vice president of the
Fund and chief domestic equity strategist, a managing director and chief
investment officer-domestic of Mitchell Hutchins. She has held her Growth and
Asset Allocation Portfolios responsibilities since its inception in May 1987
and November 1994, respectively, and has been employed by Mitchell Hutchins as
a portfolio manager since 1983.

The Systems Driven Internal Research team at Nicholas-Applegate, which is
primarily responsible for the day-to-day management of the Aggressive Growth
Portfolio, is currently under the

PW 27
<PAGE>

supervision of Arthur E. Nicholas (since February 1994). Mr. Nicholas has been
the chief investment officer and managing partner of Nicholas-Applegate since
its organization in 1984.

Frank Jennings is primarily responsible for the day-to-day management of the
Global Growth Portfolio. Mr. Jennings is a vice president of the Fund and a
managing director of Mitchell Hutchins responsible for global equities. He
assumed responsibility for the Global Growth Portfolio in December 1992, when
he joined Mitchell Hutchins. Prior to December 1992, Mr. Jennings served as
managing director of global investments for AIG Global Investors.

GENERAL INFORMATION

The Fund is registered with the SEC as an open-end management investment
company and was organized as a business trust under the laws of the
Commonwealth of Massachusetts by Declaration of Trust dated November 21, 1986.
The Fund commenced operations as an investment company on May 4, 1987. The
trustees have authority to issue an unlimited number of shares of beneficial
interest of separate series, par value $.001 per share. Shares of ten series
are authorized.

The Fund does not hold annual meetings of shareholders. There normally will be
no meetings of shareholders to elect trustees unless fewer than a majority of
the trustees holding office have been elected by shareholders. Shareholders of
record of no less than two-thirds of the outstanding shares of the Fund may
remove a trustee by votes cast in person or by proxy at a meeting called for
that purpose. The trustees are required to call a meeting of shareholders for
the purpose of voting upon the question of removal of any trustee when so
requested in writing by the shareholders of record of not less than 10% of the
Fund's outstanding shares. Each share of a Portfolio has equal voting, dividend
and liquidation rights. The shares of each Portfolio will be voted separately
except when an aggregate vote of all series is required by the 1940 Act.

CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, Massachusetts 02171, is custodian of the assets
of the Money Market, Government, Fixed Income, Balanced, Asset Allocation,
Dividend Growth, Growth and Aggressive Growth Portfolios. Brown Brothers
Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, is custodian of
the assets of the Global Income and Global Growth Portfolios and employs
foreign subcustodians approved by the board of trustees in accordance with
those requirements to provide custody of the foreign assets of these
Portfolios. PFPC Inc., a subsidiary of PNC Bank, National Association, whose
principal business address is 103 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 Portfolio shares. Monthly statements sent to each separate
account report that account's Portfolio activity.

PW 28
<PAGE>

APPENDIX A

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

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

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

PRIVATE, RTC AND SIMILAR MORTGAGE-BACKED SECURITIES. Mortgage-backed securities
issued by Private Mortgage Lenders are structured similarly to the pass-through
certificates and CMOs issued or guaranteed by Ginnie Mae, Fannie Mae and
Freddie Mac. Such mortgage-backed securities may be supported by pools of U.S.
government or agency insured or guaranteed mortgage loans or by other mortgage-
backed securities issued by a government agency or instrumentality, but they
generally are supported by pools of conventional (i.e., non-government
guaranteed or insured) mortgage loans. Since such mortgage-backed securities
normally are not guaranteed by an entity having the credit standing of Ginnie
Mae, Fannie Mae or Freddie Mac, they normally are structured with one or more
types of credit enhancement. See "--Types of Credit Enhancement."

The Resolution Trust Corporation ("RTC"), which was organized by the U.S.
government in connection with the savings and loan crisis, holds assets of
failed savings associations as either a conservator or receiver for such
associations, or it acquires such assets in its corporate capacity. These
assets include, among other things, single family and multi-family mortgage
loans, as well as commercial mortgage loans. In order to dispose of such assets
in an orderly manner, RTC has established a vehicle registered with the SEC
through which it sells mortgage-backed securities. RTC mortgage-backed
securities represent pro rata interests in pools of mortgage loans that RTC
holds

PW 29
<PAGE>

or has acquired, as described above, and are supported by one or more of the
types of private credit enhancements used by Private Mortgage Lenders.

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

Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous payments are taken into
account in calculating the stated maturity date or final distribution date of
each class, which, as with other CMO structures, must be retired by its stated
maturity date or final distribution date but may be retired earlier. Planned
amortization class mortgage-backed securities ("PAC Bonds") are a form of
parallel pay CMO. PAC Bonds are designed to provide relatively predictable
payments of principal provided that, among other things, the actual prepayment
experience on the underlying mortgage loans falls within a contemplated range.
If the actual prepayment experience on the underlying mortgage loans is at a
rate faster or slower than the contemplated range, or if deviations from other
assumptions occur, principal payments on a PAC Bond may be greater or smaller
than predicted. The magnitude of the contemplated range varies from one PAC
Bond to another; a narrower range increases the risk that prepayments will be
greater or smaller than contemplated.

ARM AND FLOATING RATE MORTGAGE-BACKED SECURITIES. ARM mortgage-backed
securities are mortgage-backed securities that represent a right to receive
interest payments at a rate that is adjusted to reflect the interest earned on
a pool of mortgage loans bearing variable or adjustable rates of interest (such
mortgage loans are referred to as "ARMs"). Floating rate mortgage-backed
securities are classes of mortgage-backed securities that have been structured
to represent the right to receive interest payments at rates that fluctuate in
accordance with an index but that generally are supported by pools comprised of
fixed-rate mortgage loans. Because the interest rates on ARM and floating rate
mortgage-backed securities are reset in response to changes in a specified
market index, the values of such securities tend to be less sensitive to
interest rate fluctuations than the values of fixed-rate securities.

PW 30
<PAGE>

STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed securities
("SMBS") are classes of mortgage-backed securities that receive different
proportions of the interest and principal distributions from the underlying
pool of Mortgage Assets and may be issued by agencies or instrumentalities of
the U.S. government or by Private Mortgage Lenders. In the most extreme case,
one class will be entitled to receive all or a portion of the interest but none
of the principal from the Mortgage Assets (the interest-only or "IO" class) and
one class will be entitled to receive all or a portion of the principal but
none of the interest (the principal-only or "PO" class).

The yields on IO and PO classes created from mortgage-backed securities that
are not PAC Bonds generally are extremely sensitive to the rate of principal
payments (including prepayments) on the underlying Mortgage Assets. If the
underlying Mortgage Assets of such an IO class experience greater than
anticipated prepayments of principal, an investor may fail to recoup fully its
initial investment even if the securities are rated in the highest rating
category.

TYPES OF CREDIT ENHANCEMENT. To lessen the effect of failures by obligors on
Mortgage Assets to make payments, mortgage-backed securities may contain
elements of credit enhancement. Such credit enhancement falls into two
categories: (1) liquidity protection; and (2) protection against losses
resulting after default by an obligor on the underlying assets and collection
of all amounts recoverable directly from the obligor and through liquidation of
the collateral. Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets (usually the bank,
savings association or mortgage banker that transferred the underlying loans to
the issuer of the security), to ensure that the receipt of payments on the
underlying pool occurs in a timely fashion. Protection against losses resulting
after default and liquidation ensures ultimate payment of the obligations on at
least a portion of the assets in the pool. Such protection may be provided
through guarantees, insurance policies or letters of credit obtained by the
issuer or sponsor from third parties, through various means of structuring the
transaction or through a combination of such approaches. The Portfolios will
not pay any additional fees for such credit enhancement, although the existence
of credit enhancement may increase the price of a security.

Examples of credit enhancement arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal
thereof and interest thereon, with the result that defaults on the underlying
assets are borne first by the holders of the subordinated class), creation of
"spread accounts" or "reserve funds" (where cash or investments, sometimes
funded from a portion of the payments on the underlying assets, are held in
reserve against future losses) and "over-collateralization" (where the
scheduled payments on, or the principal amount of, the underlying assets exceed
that required to make payment of the securities and pay any servicing or other
fees). The degree of credit enhancement provided for each issue generally is
based on historical information regarding the level of credit risk associated
with the underlying assets. Delinquency or loss in excess of that anticipated
could adversely affect the return on an investment in such a security.

PW 31
<PAGE>

APPENDIX B

HEDGING AND OPTION INCOME INSTRUMENTS

Certain Portfolios 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 contract.

INTEREST RATE AND FOREIGN CURRENCY FUTURES CONTRACTS--Interest rate and
foreign currency futures contracts are bilateral agreements pursuant to
which one party agrees to make, and the other party agrees to accept,
delivery of a specified type of debt security or currency at a specified
future time and at a specified price. Although such futures contracts by
their terms call for actual delivery or acceptance of debt securities or
currency, in most cases the contracts are closed out before the settlement
date without the making or taking of delivery.

OPTIONS ON FUTURES CONTRACTS--Options on futures contracts are similar to
options on securities or currency, except that an option on a futures
contract gives the purchaser the right, in return for the premium, to
assume a position in a futures contract (a long position if the option is a
call and a short position if the option is a put), rather than to purchase
or sell a security or currency, at a specified price at any time during the
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.

FORWARD CURRENCY CONTRACTS--A forward currency contract involves an
obligation to purchase or sell a specific currency at a specified future
date, which may be any fixed number of days from the contract date agreed
upon by the parties, at a price set at the time the contract is entered
into.

PW 32
<PAGE>

PAINEWEBBER SERIES TRUST
1285 Avenue of the Americas
New York, New York 10019

PaineWebber Series Trust ("Fund") is a professionally managed, open-end
investment company that offers the seven series of shares ("Portfolios") listed
below. All the Portfolios except the Global Income Portfolio are diversified,
and each has its own investment objective and policies. Shares of each
Portfolio are offered only to insurance company separate accounts that fund
certain variable contracts ("Contracts"). Advisory and administrative services
are provided to the Fund by Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly owned subsidiary of PaineWebber Incorporated
("PaineWebber").

* The DIVIDEND GROWTH PORTFOLIO seeks current income and capital growth.
This Portfolio invests primarily in dividend-paying common stocks with
the potential for increasing dividends.

* The GLOBAL GROWTH PORTFOLIO seeks long-term capital appreciation. This
Portfolio invests primarily in common stocks of companies based in the
United States, Europe, Japan and the Pacific Basin.

* The ASSET ALLOCATION PORTFOLIO seeks a high total return with low
volatility. This Portfolio invests primarily in a combination of equity
securities, bonds and money market instruments.

The date of this Prospectus is May 1, 1995.

PW 1
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Financial Information..................................................... PW 3
The Fund, Its Investment Objectives and Policies.......................... PW 9
Description of Securities and Investment Techniques....................... PW 13
Purchases, Redemptions and Exchanges...................................... PW 20
Dividends, Other Distributions and Federal Income Tax..................... PW 20
Valuation of Shares....................................................... PW 21
Management................................................................ PW 22
General Information....................................................... PW 23
Appendix A................................................................ PW 24
Appendix B................................................................ PW 27
</TABLE>

PW 2
<PAGE>

FINANCIAL INFORMATION

The tables below provide selected per share data and ratios for one share of
each Portfolio for 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 December 31, 1993, which are
incorporated by reference into the Statement of Additional Information. The
financial statements and notes, as well as the information in the tables
appearing below insofar as it relates to the five years ended December 31,
1993 have been audited by Ernst & Young, independent auditors, whose report
thereon is also included in the Annual Report to Shareholders. Additional
information about the performance of each Portfolio 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 December 31,
1989 also has been audited by Ernst & Young whose reports thereon were
unqualified.

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
-------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
------------------------------------------------------ MAY 4, 1987+ TO
1994 1993 1992 1991 1990 1989 1988 DECEMBER 31, 1987
---- ------- ------- ------- ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.02 0.03 0.05 0.05 0.08 0.06 0.03
------- ------- ------- ------ ------ ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. 0.02 0.03 0.05 0.05 0.08 0.06 0.03
------- ------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... (0.02) (0.03) (0.05) (0.05) (0.08) (0.06) (0.03)
------- ------- ------- ------ ------ ------ ------
TOTAL DISTRIBUTIONS..... (0.02) (0.03) (0.05) (0.05) (0.08) (0.06) (0.03)
------- ------- ------- ------ ------ ------ ------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ====== ====== ====== ======
Total return(1)......... 2.45% 3.00% 5.00% 5.00% 8.00% 6.00% 3.40%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $15,468 $19,383 $20,249 $8,720 $4,367 $3,278 $2,974
Ratio of expenses to
average net assets**... 0.86% 0.81% 1.00% 2.02% 1.55% 1.56% 1.54%*
Ratio of net investment
income to average net
assets**............... 2.43% 3.13% 4.92% 6.13% 7.62% 5.74% 5.40%*
</TABLE>
- --------
* Annualized.
(1) Total return is calculated assuming a $1,000 investment on the first day
of each period reported, reinvestment of all dividends at net asset value
on the payable date, and a sale at net asset value on the last day of each
period reported. Total return information for periods less than one year
has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Portfolio for a portion of its operating expenses and waived
all or a portion of its advisory fee. If such reimbursements and waivers
had not been made, the annualized ratio of expenses to average net assets
and the annualized ratio of net investment income to average net assets
would have been 2.04% and 6.11%, 2.17% and 6.99%, 2.36% and 4.94%, and
4.60% and 2.34%, respectively, for the years ending December 31, 1990, 1989
and 1988 and for the period ended December 31, 1987.
+ Commencement of operations.

PW 3
<PAGE>

<TABLE>
<CAPTION>
GROWTH PORTFOLIO
---------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
-------------------------------------------------------- MAY 4, 1987+ TO
1994 1993 1992 1991 1990 1989 1988 DECEMBER 31, 1987
---- ------- ------- ------- ------- ------ ------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 15.68 $ 14.92 $ 10.57 $ 11.66 $10.38 $ 8.76 $10.00
------- ------- ------- ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. -- 0.11 0.10 0.14 0.09 0.21 0.09
Net realized and
unrealized gains
(losses) from
investment
transactions.......... 3.08 0.76 4.35 (1.09) 3.90 1.41 (1.24)
------- ------- ------- ------- ------ ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS.. 3.08 0.87 4.45 (0.95) 3.99 1.62 (1.15)
------- ------- ------- ------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... -- (0.11) (0.10) (0.14) (0.30) -- (0.09)
Distributions from net
realized gains on
investments........... (0.70) -- -- -- (2.41) -- --
------- ------- ------- ------- ------ ------ ------
TOTAL DISTRIBUTIONS..... (0.70) (0.11) (0.10) (0.14) (2.71) -- (0.09)
------- ------- ------- ------- ------ ------ ------
Net asset value, end of
period................. $ 18.06 $ 15.68 $ 14.92 $ 10.57 $11.66 $10.38 $ 8.76
======= ======= ======= ======= ====== ====== ======
Total return(1)......... 19.61% 5.83% 42.10% (8.15)% 38.44% 18.49% (11.52)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $51,696 $46,479 $37,470 $12,283 $4,264 $ 802 $3,891
Ratio of expenses to
average net assets**... 0.92% 0.94% 1.13% 1.85% 1.76% 1.80% 1.79%*
Ratio of net investment
income to average net
assets**............... 0.00% 0.78% 1.07% 1.90% 1.53% 0.63% 3.00%*
Portfolio turnover...... 34.95% 29.36% 27.89% 35.20% 67.79% 189.62% 2.36%
</TABLE>
- --------
* Annualized.
(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 date, and a sale at net
asset value on the last day of each period reported. Total return
information for periods less than one year has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Portfolio for a portion of its operating expenses and waived
all or a portion of its advisory fee. If such reimbursements and waivers
had not been made, the annualized ratio of expenses to average net assets
and the annualized ratio of net investment income (loss) to average net
assets would have been 1.91% and 1.84%, 3.61% and (0.31)%, 3.58% and
(1.15)%, and 5.44% and (0.64)%, respectively, for the years ending December
31, 1990, 1989 and 1988 and for the period ended December 1987.
+ Commencement of operations.

PW 4
<PAGE>

<TABLE>
<CAPTION>
GLOBAL GROWTH PORTFOLIO
---------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
-------------------------------------------------------- MAY 4, 1987+ TO
1994 1993 1992 1991 1990 1989 1988 DECEMBER 31, 1987
---- ------- ------- ------- ------- ------ ------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.10 $ 12.06 $ 11.76 $ 11.43 $10.49 $ 8.35 $10.00
------- ------- ------- ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.03 0.10 0.23 0.19 0.07 0.07 0.05
Net realized and
unrealized gains
(losses) from
investment
transactions.......... 4.42 (1.01) 0.35 0.67 1.94 2.07 (1.59)
------- ------- ------- ------- ------ ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS.. 4.45 (0.91) 0.58 0.86 2.01 2.14 (1.54)
------- ------- ------- ------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... -- (0.05) (0.23) (0.19) (0.07) -- (0.05)
Distributions in excess
of net investment
income................ -- -- -- -- (0.19) -- --
Distributions from net
realized gains on
investments........... (0.58) -- (0.05) (0.34) (0.81) -- (0.06)
------- ------- ------- ------- ------ ------ ------
TOTAL DISTRIBUTIONS..... (0.58) (0.05) (0.28) (0.53) (1.07) -- (0.11)
------- ------- ------- ------- ------ ------ ------
Net asset value, end of
period................. $ 14.97 $ 11.10 $ 12.06 $ 11.76 $11.43 $10.49 $ 8.35
======= ======= ======= ======= ====== ====== ======
Total return(1)......... 40.02% (7.55)% 4.93% 7.53% 19.18% 25.63% (15.42)%*
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $38,035 $21,493 $24,308 $16,149 $3,806 $3,250 $3,135
Ratio of expenses to
average net assets**... 1.40% 1.46% 1.53% 2.07% 2.10% 2.08% 2.10%*
Ratio of net investment
income to average net
assets**............... 0.38% 0.82% 2.12% 3.29% 0.71% 0.68% 1.09%*
Portfolio turnover...... 266.96% 127.06% 89.39% 119.65% 200.96% 32.86% 5.28%
</TABLE>
- --------
* Annualized.
(1) Total return is calculated assuming a $1,000 investment on the first day
of each fiscal period reported, reinvestment of all dividends and other
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. Total return
information for periods less than one year has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Portfolio for a portion of its operating expenses and waived
all or a portion of its advisory fee. If such reimbursements and waivers
had not been made, the annualized ratio of expenses to average net assets
and the annualized ratio of net investment income (loss) to average net
assets would have been 2.19% and 3.17%, 4.35% and (1.54)%, 4.55% and
(1.79)% and 4.87% and (1.68)%, respectively, for the years ended December
31, 1990, 1989, and 1988 and for the period ended December 31, 1987.
+ Commencement of operations.

PW 5
<PAGE>

<TABLE>
<CAPTION>
GLOBAL INCOME PORTFOLIO
------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
----------------------------------------------- MAY 1, 1988+ TO
1994 1993 1992 1991 1990 1989 DECEMBER 31, 1988
---- ------- ------- ------- ------- ------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.17 $ 11.65 $ 11.16 $ 10.19 $10.67 $10.00
------- ------- ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.96 0.80 0.75 0.52 0.94 0.28
Net realized and
unrealized gains
(losses) from
investment
transactions.......... 0.90 (0.65) 0.40 1.00 (0.22) 0.39
------- ------- ------- ------- ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. 1.86 0.15 1.15 1.52 0.72 0.67
------- ------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... (0.94) (0.56) (0.65) (0.52) (1.06) --
Distributions in excess
of current year net
investment income..... (0.16) -- -- -- -- --
Distributions from net
realized gains from
investments........... (0.21) (0.07) (0.01) (0.03) (0.14) --
------- ------- ------- ------- ------ ------
TOTAL DISTRIBUTIONS..... (1.31) (0.63) (0.66) (0.55) (1.20) --
------- ------- ------- ------- ------ ------
Net asset value, end of
period................. $ 11.72 $ 11.17 $ 11.65 $ 11.16 $10.19 $10.67
======= ======= ======= ======= ====== ======
Total return(1)......... 16.65% 1.29% 10.30% 14.92% 6.80% 6.70%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $64,610 $63,172 $51,988 $30,778 $7,425 $7,298
Ratio of expenses to
average net assets**... 0.98% 1.07% 1.20% 1.72% 1.86% 1.86%*
Ratio of net investment
income to average net
assets**............... 7.47% 7.20% 7.59% 8.64% 9.00% 6.35%*
Portfolio turnover rate. 68.60% 75.44% 14.29% 110.23% 32.28% 136.21%
</TABLE>
- --------
* Annualized.
(1) Total return is calculated assuming a $1,000 investment on the first day
of each fiscal period reported, reinvestment of all dividends and other
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. Total return
information for periods less than one year has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Portfolio for a portion of its operating expenses and waived
all or a portion of its advisory fee. If such reimbursements and waivers
had not been made, the annualized ratio of expenses to average net assets
and the annualized ratio of net investment income to average net assets
would have been 1.75% and 8.61%, 2.59% and 8.27% and 3.30% and 4.91%,
respectively, for the years ended December 31, 1990 and 1989, and for the
period ended December 31, 1988.
+ Commencement of operations.

PW 6
<PAGE>

<TABLE>
<CAPTION>
GOVERNMENT PORTFOLIO
---------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
-------------------------------------- JULY 5, 1989+ TO
1994 1993 1992 1991 1990 DECEMBER 31, 1989
---- ------- ------- ------- ------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.58 $ 11.61 $ 10.49 $10.17 $10.00
------- ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.87 0.74 0.47 0.45 0.10
Net realized and
unrealized gains from
investment
transactions.......... 0.48 0.05 1.12 0.32 0.17
------- ------- ------- ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. 1.35 0.79 1.59 0.77 0.27
------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... (0.87) (0.74) (0.47) (0.45) (0.10)
Distributions from net
realized gains on
investments........... (0.13) (0.08) -- -- --
------- ------- ------- ------ ------
TOTAL DISTRIBUTIONS..... (1.00) (0.82) (0.47) (0.45) (0.10)
------- ------- ------- ------ ------
Net asset value, end of
period................. $ 11.93 $ 11.58 $ 11.61 $10.49 $10.17
======= ======= ======= ====== ======
Total return(1)......... 11.66% 6.76% 15.17% 7.58% 2.70%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $22,354 $24,103 $15,690 $5,192 $1,294
Ratio of expenses to
average net assets**... 0.79% 0.76% 1.25% 1.55% 1.55%*
Ratio of net investment
income to average net
assets**............... 6.13% 6.59% 6.43% 6.80% 6.17%*
Portfolio turnover...... 7.93% 23.13% 1.39% 66.14% 0.37%
</TABLE>
- --------
* Annualized.
(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 date, and a sale at net
asset value on the last day of each period reported. Total return
information for periods less than one year has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Portfolio for a portion of its operating expenses and waived
all or a portion of its advisory fee. If such reimbursements and waivers
had not been made, the annualized ratio of expenses to average net assets
and the annualized ratio of net investment income (loss) to average net
assets would have been 1.28% and 6.40%, 3.14% and 5.20% and 13.87% and
(6.15)%, respectively, for the years ending December 31, 1991 and 1990, and
for the period ended December 31, 1989.
+ Commencement of operations.

PW 7
<PAGE>

<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO
-------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
------------------------------------------------ JUNE 1, 1988+ TO
1994 1993 1992 1991 1990 1989 DECEMBER 31, 1988
---- ------- ------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period........... $ 11.63 $ 11.39 $ 9.99 $ 10.37 $ 10.54 $ 10.00
------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income.......... 0.33 0.35 0.47 0.65 0.66 0.28
Net realized and
unrealized gains
(losses) from
investment
transactions.... 1.48 0.24 1.40 (0.38) 0.52 0.26
------- ------- ------- ------- ------- -------
TOTAL INCOME FROM
INVESTMENT
OPERATIONS....... 1.81 0.59 1.87 0.27 1.18 0.54
------- ------- ------- ------- ------- -------
LESS
DISTRIBUTIONS:
Dividends from
net investment
income.......... (0.33) (0.35) (0.47) (0.65) (0.94) --
Distributions
from net
realized gains
on investments.. (1.16) -- -- -- (0.41) --
------- ------- ------- ------- ------- -------
TOTAL
DISTRIBUTIONS.... (1.49) (0.35) (0.47) (0.65) (1.35) --
------- ------- ------- ------- ------- -------
Net asset value,
end of period.... $ 11.95 $ 11.63 $ 11.39 $ 9.99 $ 10.37 $ 10.54
======= ======= ======= ======= ======= =======
Total return(1).. 15.76% 5.18% 18.73% 2.63% 11.10% 5.40%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(000's).......... $33,367 $38,583 $33,327 $25,681 $26,851 $22,845
Ratio of expenses
to average net
assets**......... 0.95% 0.93% 0.94% 1.48% 1.25% 1.24%*
Ratio of net
investment income
to average net
assets**......... 2.27% 3.11% 4.64% 5.71% 6.54% 6.11%*
Portfolio
turnover......... 60.36% 30.74% 100.84% 168.87% 230.12% 69.86%
<CAPTION>
DIVIDEND GROWTH PORTFOLIO
-------------------------------------------------------
FOR THE YEARS ENDED FOR THE PERIOD
----------------------------------- JANUARY 2, 1992+ TO
DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
----------------- ----------------- -------------------
<S> <C> <C> <C>
Net asset value,
beginning of
period........... $ 10.26 $ 10.00
------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income.......... 0.16 0.08
Net realized and
unrealized gains
(losses) from
investment
transactions.... (0.39) 0.26
------- -------
TOTAL INCOME FROM
INVESTMENT
OPERATIONS....... (0.23) 0.34
------- -------
LESS
DISTRIBUTIONS:
Dividends from
net investment
income.......... (0.16) (0.08)
Distributions
from net
realized gains
on investments.. -- --
------- -------
TOTAL
DISTRIBUTIONS.... (0.16) (0.08)
------- -------
Net asset value,
end of period.... $ 9.87 $ 10.26
======= =======
Total return(1).. (2.26)% 3.40%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(000's).......... $16,281 $20,037
Ratio of expenses
to average net
assets**......... 1.12% 1.29%*
Ratio of net
investment income
to average net
assets**......... 1.37% 1.21%*
Portfolio
turnover......... 51.68% 13.74%
</TABLE>
- ----
* Annualized.
(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 date, and a sale at net asset value on
the last day of each period reported. Total return information for periods
less than one year has not been annualized.
** During certain periods presented above, Mitchell Hutchins agreed to
reimburse the Asset Allocation Portfolio for a portion of its operating
expenses and waived all or a portion of its advisory fee. If such
reimbursements and waivers had not been made, the annualized ratio of
expenses to average net assets and the annualized ratio of net investment
income to average net assets would have been 1.50% and 5.69%, 1.39% and
6.40% and 1.44% and 5.91%, respectively, for the years ending December 31,
1990 and 1989 and for the period ended December 31, 1988.
+ Commencement of operations.

PW 8
<PAGE>

THE FUND, ITS INVESTMENT OBJECTIVES AND POLICIES

The Fund is a professionally managed mutual fund. The Fund offers seven
Portfolios, each of which represents a segregated, separately managed portfolio
of securities with its own investment objective, as set forth on page PW 1, and
its own investment policies, which are summarized on page PW 1 and set forth in
more detail below. There can be no assurance that any Portfolio's investment
objective will be met. The Global Income Portfolio is managed as a non-
diversified investment company; the other Portfolios are all managed as
diversified investment companies.

Shares of the Portfolios may be offered to separate accounts of various
insurance companies ("shared funding") and may serve as the underlying
investments for both annuity and life insurance Contracts ("mixed funding").
Due to differences in tax treatment or other considerations, the interests of
various Contract owners might at some time be in conflict. The Fund currently
does not foresee any such conflict. However, the Fund's board of trustees
intends to monitor events to identify any material irreconcilable conflict that
may arise and to determine what action, if any, should be taken in response to
such conflict. If such a conflict were to occur, one or more insurance
companies' separate accounts might be required to withdraw its investments in
one or more Portfolios. This might force a Portfolio to sell securities at
disadvantageous prices.

The GROWTH PORTFOLIO invests primarily in common stocks issued by companies
that, in the judgment of Mitchell Hutchins, have substantial potential for
capital growth. In selecting stocks for

PW 9
<PAGE>

investment by the Portfolio, Mitchell Hutchins considers all of those factors
it believes affect potential for capital appreciation, including an issuer's
current and projected revenues, earnings, cash flow and assets, as well as
general market conditions in relevant industries. Under normal circumstances,
at least 65% of the Portfolio's total assets is invested in common stocks. For
potential capital appreciation (when, for instance, Mitchell Hutchins
anticipates that market interest rates may decline or credit factors or ratings
affecting particular issues may improve), the Portfolio's investment policies
also permit investment in debt securities, including debt securities
convertible into equity securities, rated BBB or better by Standard & Poor's
Ratings Group ("S&P"), Baa or better by Moody's Investors Service Inc.
("Moody's"), comparably rated by another NRSRO or, if unrated, determined by
Mitchell Hutchins to be of comparable quality. (For an explanation of the
ratings assigned to debt securities by S&P and Moody's, see the Statement of
Additional Information.) Consistent with its investment objective, the
Portfolio may also invest up to 25% of its total assets in U.S. dollar-
denominated securities of foreign issuers if the securities are regularly
traded on recognized U.S. exchanges or in the U.S. over-the-counter ("OTC")
market.

--at least 5% compound annual growth in earnings per share over the past
five years;

--at least 5% compound annual growth in dividends per common share over the
past five years; and

--an increased dividend per common share in each of the past five years.

If a common stock owned by the Portfolio ceases to meet these criteria after
purchase, Mitchell Hutchins Institutional Investors Inc. ("MHII") the Portfolio
Subadviser, will consider selling the stock, but is not required to do so. Over
the past 20 years, the universe of issuers that have met these criteria has
varied between 100 and 250 companies. The Portfolio may invest up to 35% of its
total assets in common stocks not meeting all the above criteria, as well as
convertible debt securities, convertible preferred stocks, U.S. government
securities, money market instruments and corporate debt securities rated BBB or
better by S&P, Baa or better by Moody's, comparably rated by another NRSRO or,
if unrated, determined by Mitchell Hutchins to be of comparable quality. The
Portfolio will invest in instruments other than common stocks when, in the
opinion of Mitchell Hutchins, their projected total return is equal to or
greater than that of common stocks or when such holdings might reduce the
volatility of its portfolio. The Portfolio purchases common stocks only of
issuers whose market capitalizations exceed $300 million. The Portfolio may
invest up to 25% of its total assets in U.S. dollar-denominated securities of
foreign issuers that are regularly traded on recognized U.S. exchanges or in
the U.S. OTC market.

The GLOBAL GROWTH PORTFOLIO invests primarily in the common stocks of companies
based in the United States, Europe, Japan and the Pacific Basin. Under normal
conditions, at least 65% of the Portfolio's total assets is invested in common
stocks and securities convertible into common stocks. The Portfolio will at all
times hold securities of issuers located in at least five countries and will
invest no more than 20% of its total assets in issuers located in any single
country outside the United States, except that the Portfolio may invest up to
35% of its total assets in issuers located in Japan. Mitchell Hutchins seeks to
identify those companies, both in the United States and abroad, likely to
benefit from long-term trends and shifting trade patterns as they develop in
the global economy. The Portfolio may also hold other types of securities,
including non-convertible corporate debt securities, government and money
market securities of U.S. and foreign issuers, and cash (foreign currenceies or
U.S. dollars), in such proportions as, in the opinion of Mitchell Hutchins,
prevailing market, economic or political conditions warrant.

PW 10
<PAGE>

The GLOBAL INCOME PORTFOLIO invests principally in high quality debt securities
of foreign and U.S. issuers. Debt securities will be considered high quality if
they are assigned one of S&P's or Moody's two highest ratings, comparably rated
by another NRSRO or, if unrated, determined by Mitchell Hutchins to be of
comparable quality. Normally, at least 65% of the Portfolio's total assets are
invested in high quality debt securities, denominated in foreign currencies or
U.S. dollars, that are issued or guaranteed by foreign and U.S. governments or
their agencies, instrumentalities or political subdivisions or by supranational
organizations such as the World Bank, or that are issued by foreign and U.S.
companies, banks and bank holding companies. Such issuers will be located in at
least five of the following countries: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, Thailand, the United Kingdom and the United States. No more than
20% of the Portfolio's total assets will be invested in securities of issuers
located in any one country, except that the Portfolio may invest up to 35% of
its total assets in securities of issuers located in any one of the following
countries: Australia, Canada, France, Germany, Japan and the United Kingdom.
There is no limit on the amount of assets that may be invested in securities of
U.S. issuers. Mitchell Hutchins expects that normally more than 50% of the
Portfolio's total assets will be invested in U.S. and foreign government
securities in order to minimize credit risk and to capitalize on opportunities
that historically have been presented by, and are perceived to exist today with
respect to, such instruments. Up to 35% of the Portfolio's total assets may be
invested in debt securities rated below the two highest grades assigned by a
NRSRO but rated BBB or better by S&P, or Baa or better by Moody's, comparably
rated by another NRSRO or, if unrated, determined by Mitchell Hutchins to be of
comparable quality. The Portfolio may invest up to 20% of its total assets in
sovereign debt securities rated below BBB by S&P, Baa by Moody's or comparably
rated by another NRSRO but no lower than BB by S&P, Ba by Moody's or comparably
rated by another NRSRO or, in the case of such securities assigned a commercial
paper rating, no lower than B by S&P or comparably rated by another NRSRO or,
if unrated, determined by Mitchell Hutchins to be of comparable quality.
Mitchell Hutchins will purchase such securities for the Portfolio only when it
concludes that the anticipated return to the Portfolio on such investment
warrants exposure to the additional level of risk. Fundamental economic
strength, credit quality and currency and interest rate trends are the
principal determinants of the various country, geographic and industry sector
weightings within the Portfolio. Up to 5% of the Portfolio's total assets may
be invested in debt securities convertible into equity, although the Portfolio
has no current intention of converting such securities into equity or holding
them as equity upon conversion.

During its 1994 fiscal year, Global Income Portfolio had 100% of its average
annual net assets in debt securities that received a rating from S&P. The
Portfolio had the following percentages of its average annual net assets
invested in rated securities: AAA (including cash items) %, AA-- %, A-- %,
BBB-- % and BB-- %. It should be noted that this information reflects the
average composition of the Portfolio's assets during the fiscal year ended
December 31, 1994 and is not

PW 11
<PAGE>

necessarily representative of the Portfolio's assets as of the end of that
fiscal year, the current fiscal year, or at any time in the future.

The GOVERNMENT PORTFOLIO invests primarily in high quality U.S. government
securities, which include U.S. Treasury obligations and obligations issued or
guaranteed by U.S. government agencies or instrumentalities. These latter
obligations may be backed by the full faith and credit of the U.S. government
or supported primarily or solely by the creditworthiness of the particular
agency or instrumentality. Under normal market conditions, at least 65% of the
Portfolio's total assets is invested in U.S. government securities. The
Portfolio also may invest in certain zero coupon securities that are U.S.
Treasury notes and bonds that have been stripped of their unmatured interest
coupon receipts or interests in such U.S. Treasury securities or coupons, such
as Certificates of Accrual Treasury Securities ("CATS") and Treasury Income
Growth Receipts ("TIGRs"). The staff of the Securities and Exchange Commission
("SEC") currently takes the position that "stripped" U.S. government securities
that are not issued through the U.S. Treasury STRIPS program are not U.S.
government securities. As long as the SEC staff takes this position, CATS and
TIGRs will not be counted as U.S. government securities for purposes of the 65%
investment requirement. The Portfolio may invest up to 35% of its total assets
in high quality debt securities issued or guaranteed by foreign governments,
their agencies, instrumentalities or political subdivisions or by supranational
organizations such as the World Bank ("foreign government securities"). The
Portfolio will invest only in those foreign government securities that are, at
the time of purchase, rated within one of the two highest grades assigned by
S&P or Moody's, assigned a comparable rating by another NRSRO or, if unrated,
determined by Mitchell Hutchins to be of comparable quality. If the Portfolio
invests in foreign government securities, it will invest in issuers located in
at least two countries, except that the Portfolio may invest up to 35% of its
total assets in issuers located in any one of the following countries:
Australia, Canada, France, Germany, Japan or the United Kingdom. No more than
55% of the total assets of the Portfolio may be represented by U.S. Treasury
obligations to assure the Portfolio's compliance with the diversification
requirements imposed by the Internal Revenue Code on segregated asset accounts
used to fund variable annuity contracts.

Equity Securities. Asset Allocation Portfolio invests in equity securities
based on the PWAM Equity Valuation Discipline, which is intended to identify
those industries, and companies within industries, that appear relatively
undervalued or overvalued. This strategy tracks issuers with a minimum market
capitalization of $300 million that are of primary interest to institutional
investors and currently includes approximately 700 issuers. It determines
relative investment merit by appraising the historical performance of
industries and companies through fundamental analysis of income statement and
balance sheet data, and relates this historical record to the earnings outlook
and current stock prices.

PW 12
<PAGE>

DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES

U.S. GOVERNMENT SECURITIES. Under normal market conditions, the Government
Portfolio invests at least 65% of its total assets in U.S. government
securities. The Global Income Portfolio also is authorized to invest a
substantial portion of its assets in U.S. government securities and the other
Portfolios may invest in U.S. government securities consistent with their
investment objectives. The U.S. government securities in which the Portfolios
may invest include direct obligations of the U.S. government (such as Treasury
bills, notes and bonds) and obligations issued by U.S. government agencies and
instrumentalities, including securities that are backed by the full faith and
credit of the U.S. government (such as Government National Mortgage Association
("Ginnie Mae") certificates and securities that are supported primarily or
solely by the creditworthiness of the issuer (such as securities of the Federal
National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage
Corporation ("Freddie Mac") and the Tennessee Valley Authority). U.S.
government securities are considered among the most creditworthy of fixed
income investments. Because of this, the yields available from U.S. government
securities are generally lower than the yields available from corporate debt
securities. Nevertheless, the values of U.S. government securities (like those
of fixed income securities generally) will change as interest rates fluctuate.

PW 13
<PAGE>

The yield characteristics of mortgage-backed securities and asset-backed
securities differ from those of traditional debt securities. Among the major
differences are that interest and principal payments on mortgage-backed and
asset-backed securities are made more frequently (usually monthly), and that
principal may be prepaid at any time because the underlying mortgage loans or
other assets generally may be prepaid at any time. As a result, if a Portfolio
purchases these securities at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if a Portfolio purchases these securities at a discount, faster
than expected prepayments will increase, while slower than expected prepayments
will reduce, yield to maturity. Amounts available for reinvestment are likely
to be greater during a period of declining interest rates and, as a result, are
likely to be reinvested at lower interest rates than during a period of rising
interest rates. Accelerated prepayments on securities purchased by a Portfolio
at a premium also impose a risk of loss of principal because the premium may
not have been fully amortized at the time the principal is repaid in full. The
market for privately issued mortgage-backed and asset-backed securities is
smaller and less liquid than the market for mortgage-backed securities of
government issuers. Derivative securities, such as stripped mortgage-backed
securities ("SMBS"), generally are more sensitive to changes in prepayment and
interest rates and the market for such securities is less liquid than is the
case for traditional debt securities and mortgage-backed and asset-backed
securities. In some cases, the market value of SMBS may be extremely volatile.

It should be noted that new types of mortgage-backed and asset-backed
securities and derivative securities are developed and marketed from time to
time and that, consistent with their investment limitations, the Portfolios
expect to invest in those new types of securities that Mitchell Hutchins
believes may assist the Portfolio in achieving its investment objective.

PW 14
<PAGE>

markets, and enforcement of existing regulations may be extremely limited.
Investing in local markets, particularly in emerging market countries, may
require the Global Income and Global Growth Portfolios to adopt special
procedures, seek local government approvals or take other actions, each of
which may involve additional costs to the Portfolios. Certain emerging market
countries may also restrict investment opportunities in issuers in industries
deemed important to national interests.

FOREIGN SECURITIES. The Global Growth and Global Income Portfolios invest a
substantial portion of their assets in foreign securities, and the Government
Portfolio may invest up to 35% of its total assets in foreign government
securities. In addition, the Growth and Dividend Growth Portfolios may each
invest up to 25% of its total assets in U.S. dollar-denominated securities of
foreign issuers if such securities are regularly traded on recognized U.S.
exchanges or in the U.S. OTC market and the Asset Allocation Portfolio also may
invest in such securities. Accordingly, an investment in any of these
Portfolios involves risks relating to political, social and economic
developments abroad, as well as risks resulting from the differences between
the regulations to which U.S. and foreign issuers and markets are subject.
These risks are greater with respect to the Global Growth, Global Income and
Government Portfolios because a substantially greater portion of their assets
may be invested in such securities and because these Portfolios may invest in
foreign securities that are denominated in foreign currencies and traded
outside the U.S. securities markets. These risks may include expropriation,
confiscatory taxation, withholding taxes on dividends and interest, limitations
on the use or transfer of Portfolio 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 Portfolios generally invest only in
securities that are regularly traded on recognized exchanges or in 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 issues of securities
held by these Portfolios than is available concerning U.S. companies.
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 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 a Portfolio'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 Portfolio. If the value of a foreign
currency rises against the U.S. dollar, the value of a Portfolio'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 a Portfolio'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 controls on
currency exchange or governmental intervention in currency markets. Foreign
securities trading practices, including those involving securities settlement
where Portfolio assets may be released prior to receipt of payment, may expose
a Portfolio to increased risk in the event of a failed trade or the insolvency
of a foreign broker-dealer. Any of these factors could adversely affect these
Portfolios.

PW 15
<PAGE>

DEBT SECURITIES. The Growth, Dividend Growth, Global Growth, Global Income and
Asset Allocation Portfolios all may invest a substantial portion of their
assets in debt securities rated within any one of the four highest grades
assigned by S&P or Moody's or assigned a comparable rating by another NRSRO.
Debt securities rated Baa by Moody's or BBB by S&P 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. The Asset
Allocation Portfolio may invest up to 10% of its total assets in non-investment
grade convertible debt securities and the Global Income Portfolio may invest up
to 20% of its total assets in non-investment grade sovereign debt securities.
Debt securities rated below investment grade are deemed by these agencies to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal and may involve major risk exposures to adverse conditions.
Such securities are commonly referred to as "junk bonds." All Portfolios are
permitted to purchase debt securities that are not rated by S&P, Moody's or
another NRSRO but that Mitchell Hutchins determines to be of comparable quality
to that of rated securities in which such Portfolio may invest. Such securities
are included in the computation of any percentage limitations applicable to the
comparable rated securities.

The market value of debt securities generally varies inversely with the
interest rate changes. Ratings of debt securities represent the rating agency's
opinion regarding their quality, are not a guarantee of quality and may be
reduced after a Portfolio has acquired the security. Mitchell Hutchins will
consider such an event in determining whether the Portfolio should continue to
hold the security but

PW 16
<PAGE>

the Portfolio is not required to dispose of it. Credit ratings attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in response to subsequent events, so that an issuer's financial
condition may be better or worse than the rating indicates. Lower rated debt
securities generally offer a higher current yield than that available from
higher grade issues, but they involve higher risks, in that they are especially
subject to adverse changes in general economic conditions and in the industries
in which the issuers are engaged, to changes in the financial condition of the
issuers and to price fluctuation in response to changes in interest rates.
During periods of economic downturn or rising interest rates, highly leveraged
issuers may experience financial stress which could adversely affect their
ability to make payments of principal and interest and increase the possibility
of default. In addition, such issuers may not have more traditional methods of
financing available to them, and may be unable to repay debt at maturity by
refinancing. The risk of loss due to default by such issuers is significantly
greater because such securities frequently are unsecured and subordinated to
the prior payment of senior indebtedness.

The market for lower rated securities has expanded rapidly in recent years, and
its growth paralleled a long economic expansion. In the past, the prices of
many lower rated debt securities declined substantially, reflecting an
expectation that many issuers of such securities might experience financial
difficulties. As a result, the yields on lower rated debt securities rose
dramatically, but such higher yields did not reflect the value of the income
stream that holders of such securities expected, but rather the risk that
holders of such securities could lose a substantial portion of their value as a
result of the issuers' financial restructuring or default. There can be no
assurance that such declines will not recur. The market for lower rated debt
securities generally is thinner and less active than that for higher quality
securities, which may limit a Portfolio's ability to sell such securities at
fair value in response to changes in the economy or the financial markets.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of lower rated securities,
especially in a thinly traded market.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Portfolio may purchase
securities on a "when-issued" basis or may purchase or sell securities for
delayed delivery. In when-issued or delayed delivery transactions, delivery of
the securities occurs beyond normal settlement periods, but a Portfolio would
not pay for such securities or start earning interest on them until they are
delivered. However, when a Portfolio 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 Portfolio'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 Portfolio's total
assets, including the value of when-issued and delayed-delivery securities held
by the Portfolio, exceed its net assets.

REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase agreements.
Repurchase agreements are transactions in which a Portfolio purchases
securities from a bank or recognized securities dealer and simultaneously
commits to resell the securities to the bank or dealer at an agreed-upon date
and price reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased securities. Repurchase agreements carry certain risks
not associated with direct investments in securities, including possible
decline in the market value of the underlying securities and delays and costs
to each Portfolio if the other party to the repurchase agreement becomes
insolvent, each Portfolio intends to enter into repurchase agreements only with
banks and dealers in transactions believed by Mitchell Hutchins to present
minimal credit risks in accordance with guidelines established by the Fund's
board of trustees.

PW 17
<PAGE>

REVERSE REPURCHASE AGREEMENTS. The Global Income Portfolio may enter into
reverse repurchase agreements with banks and broker-dealers up to an aggregate
value of not more than 10% of its total assets. Such agreements involve the
sale of securities held by the Portfolio subject to the Portfolio's agreement
to repurchase the securities at an agreed-upon date. The market value of
securities sold under reverse repurchase agreements typically is greater than
the proceeds of the sale, and accordingly, the market value of the securities
sold is likely to be greater than the value of the securities in which the
Global Income Portfolio invests those proceeds. Thus, reverse repurchase
agreements involve the risk that the buyer of the securities sold by the
Portfolio might be unable to deliver them when the Portfolio seeks to
repurchase. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, such buyer or its trustee
or receiver may receive an extension of time to determine whether to enforce
the Portfolio's obligation to repurchase the securities and the Portfolio's use
of the proceeds of the reverse repurchase agreement may effectively be
restricted pending such decision. Such agreements are considered to be
borrowings and may be entered into only for temporary purposes. The Portfolio
will not purchase securities while borrowings (including reverse repurchase
agreements) in excess of 5% of the value of the Portfolio's total assets are
outstanding.

HEDGING AND RELATED INCOME STRATEGIES. Except for the Money Market and Asset
Allocation Portfolios, each Portfolio may use options (both exchange-traded and
OTC) and futures contracts to attempt to enhance income and may attempt to
reduce the overall risk of its investments (hedge) by using options and futures
contracts. The Global Growth, Global Income and Government Portfolios may also
use forward currency contracts. A Portfolio's ability to use these strategies
may be limited by market conditions, regulatory limits and tax considerations.
Appendix B to this Prospectus describes the hedging instruments that the
Portfolios may use. The Statement of Additional Information contains further
information on these strategies. Each Portfolio eligible to use hedging and
related income strategies may write (sell) covered call and put options, buy
call and put options on securities in which it is authorized to invest and on
stock indexes, sell stock index or interest rate futures contracts and buy put
and call options and write covered call options on such futures contracts. The
Global Growth, Global Income and Government Portfolios each may write covered
call options and buy put and call options on foreign currencies, buy or sell
foreign currency futures contracts, buy put and call options and write covered
call options on such contracts. These Portfolios may enter into forward
currency contracts for the purchase or sale of a specified currency at a
specified future date either with respect to specific transactions or with
respect to portfolio positions. For example, when Mitchell Hutchins anticipates
making a currency exchange transaction in connection with the purchase or sale
of a security, a Portfolio may enter into a forward contract in order to set
the exchange rate at which the transaction will be made. A Portfolio also may
enter into a forward contract to sell an amount of a foreign currency
approximating the value of some or all of the Portfolio's securities positions
denominated in such currency. A Portfolio may use forward contracts in one
currency or a basket of currencies to hedge against fluctuations in the value
of another currency when Mitchell Hutchins anticipates that there will be a
correlation between the two and may use forward currency contracts to shift a
Portfolio's exposure to foreign currency fluctuations from one country to
another. The purpose of entering into these contracts is to minimize the risk
to a Portfolio from adverse changes in the relationship between the U.S. dollar
and foreign currencies.

PW 18
<PAGE>

A Portfolio 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
for a Portfolio, the Portfolio would be in a better position had it not hedged
at all. The use of these strategies involves certain special risks, including
(1) the fact that skills needed to use hedging instruments are different from
those needed to select the Portfolios' securities, (2) possible imperfect
correlation, or even no correlation, between price movements of hedging
instruments and price movements of the investments being hedged, (3) the fact
that, while hedging strategies can reduce the risk of loss, they can also
reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in hedged investments and (4) the possible inability
of a Portfolio 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 a
Portfolio to sell a portfolio security at a disadvantageous time, due to the
need for the Portfolio to maintain "cover" or to segregate securities in
connection with hedging transactions and the possible inability of a Portfolio
to close out or to liquidate its hedged position.

ILLIQUID SECURITIES. Each Portfolio may invest up to 10% of its net assets in
illiquid securities, including certain cover for OTC options, repurchase
agreements with maturities in excess of seven days and securities whose
disposition is restricted under the federal securities laws (other than "Rule
144A" securities which Mitchell Hutchins has determined to be liquid under
procedures approved by the Trust's board of trustees). Rule 144A establishes a
"safe harbor" from the registration requirements of the Securities Act of 1933
("1933 Act"). 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 a Portfolio, however, could affect adversely the marketability of such
portfolio securities and the Portfolio might be unable to dispose of such
securities promptly or at favorable prices.

PORTFOLIO TURNOVER. The portfolio turnover rate may vary greatly from year to
year and will not be a limiting factor when Mitchell Hutchins deems portfolio
changes appropriate. A higher turnover rate may involve correspondingly greater
brokerage and other transaction costs, which will be borne directly by the
affected Portfolio.

OTHER INFORMATION. When Mitchell Hutchins believes unusual circumstances
warrant a defensive posture, each Portfolio temporarily may commit all or any
portion of its assets to cash, U.S. government securities or money market
instruments, including repurchase agreements. The Global Growth, Global Income
and Government Portfolios may hold cash in U.S. dollars or foreign currencies
and money market instruments of U.S. or foreign issuers, including instruments
backed by the U.S. or foreign governments, their agencies or instrumentalities
and repurchase agreements secured thereby. Each Portfolio may borrow money for
temporary purposes but not in excess of 10% of its total assets.

PW 19
<PAGE>

PURCHASES, REDEMPTIONS AND EXCHANGES

A separate account may exchange shares of one Portfolio for shares of another
Portfolio at their relative net asset values per share.

DIVIDENDS, OTHER DISTRIBUTIONS AND FEDERAL INCOME TAX

Dividends and capital gain distributions from a Portfolio are paid in
additional shares of that Portfolio at net asset value per share, unless the
Fund's transfer agent is instructed otherwise. See the applicable Contract
prospectus for information regarding the federal income tax treatment of
distributions to the separate accounts.

PW 20
<PAGE>

VALUATION OF SHARES

The net asset value of each Portfolio's shares fluctuates and is determined as
of the close of regular trading on the NYSE (currently 4:00 p.m., eastern time)
on each Business Day. For each Portfolio other than the Money Market Portfolio,
net asset value per share is computed by dividing the value of the securities
held by the Portfolio plus any cash or other assets minus all liabilities by
the total number of Portfolio shares outstanding. Except for the Money Market
Portfolio, each Portfolio values its assets based on the current market value
where market quotations are readily available. If such value cannot be
established, the assets are valued at fair value as determined in good faith by
or under the direction of the Fund's board of trustees. 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 trustees determines that this
does not represent fair value. All investments denominated in foreign currency
are valued daily in U.S. dollars on the basis of the then-prevailing exchange
rates.

PW 21
<PAGE>

MANAGEMENT

For advisory and administrative services, the Fund pays Mitchell Hutchins a
fee, computed daily and paid monthly, at the following annual rates for each
Portfolio:

<TABLE>
<CAPTION>
% OF AVERAGE
PORTFOLIO DAILY NET ASSETS
<S> <C>
Money Market Portfolio .50
Growth Portfolio .75
Dividend Growth Portfolio .70
Global Growth Portfolio .75
Global Income Portfolio .75
Government Portfolio .50
Asset Allocation Portfolio .75
</TABLE>

The fee of .75% of average net assets paid by the Growth, Global Growth and
Global Income Portfolios is higher than that paid by most funds to their
advisers but is not higher than fees paid by many funds with similar
objectives and policies. THE FEE OF .75% OF AVERAGE NET ASSETS PAID BY THE
ASSET ALLOCATION PORTFOLIO IS HIGHER THAN THAT PAID BY FUNDS WITH SIMILAR
INVESTMENT OBJECTIVES AND POLICIES TO THEIR ADVISERS.

For the fiscal year ended December 31, 1994, total expenses stated as a
percentage of average net assets for each Portfolio were 0.86% for the Money
Market Portfolio, % for the Growth Portfolio, % for the Global Growth
Portfolio, % for the Global Income Portfolio, % for the Asset Allocation
Portfolio, % for the Government Portfolio and % for the Dividend Growth
Portfolio.

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. At March 31, 1994 Mitchell Hutchins was adviser or sub-
adviser to 31 investment companies with 60 separate portfolios and aggregate
assets of over $25 billion.

Mitchell Hutchins (not the Portfolio) will pay MHII a fee for its services as
sub-adviser for the Dividend Growth Portfolio in the amount of .25% of the
Portfolio's average daily net assets. MHII is a wholly owned subsidiary of
Mitchell Hutchins. The principal business address of MHII is 1285 Avenue of
the Americas, New York, New York 10019. MHII provides asset management
services to corporations, mutual funds, governmental organizations, employee
benefit plans, insurance funds, endowments and foundations, and as of March
31, 1994, managed approximately $8.9 billion in assets.

Nirmal Singh and Craig Varrelman are primarily responsible for the day-to-day
management of the Government Portfolio. Mr. Singh, is a vice president of
Mitchell Hutchins and Mr. Varrelman, CFA, is also a vice president of Mitchell
Hutchins. Prior to joining MHII in 1993, Mr. Singh was with Merrill Lynch
Asset Management, Inc., where he was a member of the portfolio management team
responsible for managing several diversified funds, including mortgage-backed
securities funds with assets totalling $8 billion. From 1990 to 1993, Mr.
Singh was a senior portfolio manager at Nomura Mortgage Fund Management
Corporation, where he was responsible for managing $3 billion in mortgage
assets. From 1987 to 1990, Mr. Singh was with the Federal National Mortgage
Association. Mr. Varrelman has been with MHII as a portfolio manager since
1988 and manages fixed income portfolios with assets totalling approximately
$1.5 billion, with an emphasis on U.S. government securities.

PW 22
<PAGE>

GENERAL INFORMATION

CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, Massachusetts 02171, is custodian of the assets
of the Money Market, Growth, Dividend Growth, Government and Asset Allocation
Portfolios. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts 02109, is custodian of the assets of the Global Growth and Global
Income Portfolios and employs foreign subcustodians approved by the board of
trustees in accordance with those requirements to provide custody of the
foreign assets of these Portfolios. PFPC Inc., a subsidiary of PNC Bank,
National Association, whose principal business address is 103 Bellevue Parkway,
Wilmington, Delaware 19809, is the Fund's transfer and dividend disbursing
agent.

PW 23
<PAGE>

APPENDIX A

PW 24
<PAGE>

or has acquired, as described above, and are supported by one or more of the
types of private credit enhancements used by Private Mortgage Lenders.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS MORTGAGE PASS-THROUGHS.
CMOs are debt obligations that are collateralized either by mortgage loans or
mortgage pass-through securities (such collateral collectively being called
"Mortgage Assets"). CMOs may be issued by Private Mortgage Lenders or by
government entities such as Fannie Mae or Freddie Mac. Multi-class mortgage
pass-through securities are interests in trusts that are comprised of Mortgage
Assets and that have multiple classes similar to those of CMOs. Unless the
context indicates otherwise, references herein to CMOs include multi-class
mortgage pass-through securities. Payments of principal of and interest on the
Mortgage Assets (and in the case of CMO's any reinvestment income thereon)
provide the funds to pay debt service on the CMOs or to make scheduled
distributions on the multi-class mortgage pass-through securities. In a CMO, a
series of bonds or certificates is issued in multiple classes. Each class of
CMO, also referred to as a "tranche," is issued at a specific fixed or floating
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the Mortgage Assets may cause CMOs to be retired substantially
earlier than their stated maturities or final distribution dates. Interest is
paid or accrues on all classes of a CMO (other than any PO class) on a monthly,
quarterly or semi-annual basis. The principal and interest on the Mortgage
Assets may be allocated among the several classes of a CMO in many ways. In one
structure, payments of principal, including any principal prepayments, on the
Mortgage Assets are applied to the classes of a CMO in order of their
respective stated maturities or final distribution dates so that no payment of
principal will be made on any class of the CMO until all other classes having
an earlier stated maturity or final distribution date have been paid in full.
In some CMO structures, all or a portion of the interest attributable to one or
more of the CMO classes may be added to the principal amounts attributable to
such classes, rather than passed through to certificateholders on a current
basis, until other classes of the CMO are paid in full.

STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed securities
("SMBS") are classes of mortgage-backed securities that receive different
proportions of the interest and principal

PW 25
<PAGE>

distributions from the underlying pool of Mortgage Assets and may be issued by
agencies or instrumentalities of the U.S. government or by Private Mortgage
Lenders. In the most extreme case, one class will be entitled to receive all or
a portion of the interest but none of the principal from the Mortgage Assets
(the interest-only or "IO" class) and one class will be entitled to receive all
or a portion of the principal but none of the interest (the principal-only or
"PO" class).

PW 26
<PAGE>

APPENDIX B

HEDGING AND OPTION INCOME INSTRUMENTS

Certain Portfolios may use the following hedging instruments:

PW 27
<PAGE>

May 1, 1995

PaineWebber Series Trust
1285 Avenue of the Americas
New York, New York 10019

STATEMENT OF ADDITIONAL INFORMATION

PaineWebber Series Trust ("Fund") is a professionally managed mutual fund
that offers the ten series of shares ("Portfolios") listed below. All the
Portfolios except the Global Income Portfolio are diversified and each has its
own investment objective and policies. Shares of each Portfolio are offered
only to insurance company separate accounts that fund certain variable contracts
("Contracts"). Advisory and administrative services are provided to the Fund by
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned
subsidiary of PaineWebber Incorporated ("PaineWebber") and certain portfolios,
as indicated below, have sub-advisers ("Sub-Advisers").

*The Money Market Portfolio seeks maximum current income consistent with
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liquidity and conservation of capital. This Portfolio invests in high
grade money market instruments and repurchase agreements secured by such
instruments.

*The Government Portfolio primarily seeks high current income consistent
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with the preservation of capital and secondarily seeks capital
appreciation. This Portfolio invests primarily in high quality debt
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities.

*The Fixed Income Portfolio primarily seeks current income consistent with
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the preservation of capital and secondarily seeks capital appreciation.
This Portfolio invests primarily in debt securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities and high quality
corporate debt securities and mortgage-backed and asset-backed securities
of private issuers. Wolf, Webb, Burk & Campbell, Inc., serves as Sub-
Adviser to this Portfolio.

*The Global Income Portfolio primarily seeks high current income and
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secondarily seeks capital appreciation. This
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Portfolio invests principally in high quality debt securities of foreign
and U.S. issuers.

*The Balanced Portfolio seeks total return while preserving capital. This
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Portfolio invests in growth equity securities but also invests no less than
25% of its assets in fixed income securities. Provident Investment Counsel
serves as Sub-Adviser to this Portfolio.

*The Asset Allocation Portfolio seeks a high total return with low
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volatility. This Portfolio invests primarily in a combination of equity
securities, bonds and money market instruments.

*The Dividend Growth Portfolio seeks current income and capital growth.
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This Portfolio invests primarily in dividend-paying common stocks with the
potential for increasing dividends. Mitchell Hutchins Institutional
Investors Inc. ("MHII") serves as Sub-Adviser to this Portfolio.

*The Growth Portfolio seeks long-term capital appreciation. This Portfolio
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invests primarily in common stocks of companies that, in the judgment of
Mitchell Hutchins, have substantial potential for capital growth.

*The Aggressive Growth Portfolio seeks to maximize long-term capital
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appreciation. This Portfolio invests primarily in the common stocks of
U.S. companies. Nicholas-Applegate Capital Management serves as Sub-
Adviser to this Portfolio.

*The Global Growth Portfolio seeks long-term capital appreciation. This
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Portfolio invests primarily in common stocks of companies based in the
United States, Europe, Japan and the Pacific Basin.

This Statement of Additional Information is not a prospectus and
should be read only in conjunction with the Fund's current Prospectus, dated May
1, 1995. A copy of the Prospectus may be obtained by contacting the Fund or
your PaineWebber investment executive.

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TABLE OF CONTENTS

Page

Investment Policies and Limitations............. 4
Hedging and Related Income Strategies........... 18
Trustees and Officers........................... 30
Investment Advisory Services.................... 39
Portfolio Transactions.......................... 41
Additional Purchase and Redemption Information.. 45
Valuation of Shares............................. 46
Taxes........................................... 48
Dividends....................................... 51
Other Information............................... 51
Financial Statements............................ 52
Appendix - Description of Commercial Paper
and Bond Ratings.............................. 53

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INVESTMENT POLICIES AND LIMITATIONS

The following supplements the information contained in the Fund's
Prospectus concerning the investment policies and limitations of its ten
Portfolios.

Special Considerations Relating to Foreign Securities. As noted in the
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Prospectus, the Global Income Portfolio and Global Growth Portfolio each invests
a substantial portion of its assets in securities of foreign issuers and the
Government Portfolio may invest up to 35% of its total assets in foreign
government securities. In addition, the Fixed Income Portfolio, Balanced
Portfolio, Asset Allocation Portfolio, Dividend Growth Portfolio, Growth
Portfolio and Aggressive Growth Portfolio each may invest in U.S. dollar-
denominated securities of foreign issuers. Many of the foreign securities held
by these Portfolios are not registered with the Securities and Exchange
Commission ("SEC"), nor are the issuers thereof subject to its reporting
requirements. Accordingly, there may be less publicly available information
concerning foreign issuers of securities held by those Portfolios than is
available concerning U.S. companies. Foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards or to
other regulatory requirements comparable to those applicable to U.S. companies.

In addition to purchasing securities of foreign issuers in foreign markets,
the Global Income and Global Growth Portfolios may invest in American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") or other securities
convertible into securities of companies based in foreign countries. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Generally, ADRs, in registered
form, are denominated in U.S. dollars and are designed for use in the U.S.
securities markets and EDRs, in bearer form, may be denominated in other
currencies and are designed for use in European securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs are European receipts evidencing a similar
arrangement. The Fixed Income, Balanced, Asset Allocation, Dividend Growth,
Growth and Aggressive Growth Portfolios generally invest in securities of
foreign companies only if such securities are traded in the U.S. securities
markets directly or through ADRs. For purposes of the Fund's investment
policies, ADRs and EDRs are deemed to have the same classification as the
underlying securities they represent. Thus, an ADR or EDR evidencing ownership
of common stock will be treated as common stock.

The Global Growth Portfolio anticipates that its brokerage transactions
involving securities of companies headquartered in countries other than the
United States will be conducted

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primarily on the principal exchanges of such countries. Foreign security
trading practices, including those involving securities settlement where
Portfolio assets may be released prior to receipt of payment, may expose the
Portfolio to increased risk in the event of a failed trade or the insolvency of
a foreign broker-dealer. Transactions on foreign exchanges are usually subject
to fixed commissions that are generally higher than negotiated commissions on
U.S. transactions, although the Portfolio will endeavor to achieve the best net
results in effecting portfolio transactions. There is generally less government
supervision and regulation of exchanges and brokers in foreign countries than in
the United States.

Investment income on certain foreign securities may be subject to foreign
withholding or other taxes that could reduce the return on these securities.
Tax treaties between the United States and foreign countries, however, may
reduce or eliminate the amount of foreign taxes to which the Portfolio would be
subject.

Sovereign Debt. Investment in debt securities issued by foreign
governments and their political subdivisions or agencies ("Sovereign Debt")
involves special risks. The issuer of the debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to repay
principal and/or interest when due in accordance with the terms of such debt,
and the Portfolio may have limited legal recourse in the event of a default.

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

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

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country's trade account surplus, if any, or the credit standing of a particular
local government or agency.

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

Foreign Currency Transactions. Although each of the Government, Global
Income and Global Growth Portfolios values its assets daily in U.S. dollars, it
does not intend to convert its holdings of foreign currencies to U.S. dollars on
a daily basis. The Portfolios' foreign currencies may be held as "foreign
currency call accounts" at foreign branches of foreign or domestic banks. These
accounts bear interest at negotiated rates and are payable upon relatively short
demand periods. If a bank became insolvent, a Portfolio could suffer a loss of
some or all of the amounts deposited. The Portfolios may convert foreign
currency to U.S. dollars from time to time. Although foreign exchange dealers
generally do not charge a stated commission or fee for conversion, the prices
posted generally include a "spread," which is the difference between the prices
at which the dealers are buying and selling foreign currencies.

The Global Income and the Global Growth Portfolios may invest in securities
of issuers located in emerging market countries. The risks of investing in
foreign securities may be greater with respect to securities of issuers in, or
denominated in the currencies of, emerging market countries. The economies of
emerging market countries generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be adversely affected by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
adversely affected by economic conditions in the countries with which they
trade. Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain emerging market
countries. The securities markets of emerging market countries are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of the U.S. and other developed countries. Disclosure and regulatory
standards in many respects are less stringent in emerging market countries than
in the U.S. and other major markets. There also may be a lower level of
monitoring and regulation of emerging markets and the activities of investors in
such markets, and enforcement of existing regulations may be extremely limited.
Investing in local markets, particularly in emerging market countries, may
require the Global Income and Global Growth Portfolios to adopt special
procedures, seek local government approvals or take other actions, each of which
may involve additional costs to the Portfolios. Certain emerging market
countries may also restrict investment opportunities in issuers in industries
deemed important to national interests.

Investment Criteria - Dividend Growth Portfolio. Under normal
circumstances, at least 65% of Dividend Growth Portfolio's total assets is
invested in dividend-paying common stocks of issuers that, at the time of
purchase, meet the following criteria:

-at least 5% compound annual growth in earnings per share over the past
five years;

-at least 5% compound annual growth in dividends per common share over the
past five years; and

-an increased dividend per common share in each of the past 5 years.

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an adjustment could increase or decrease earnings per share for purposes of
determining whether an issuer qualifies under the growth in earnings criterion.

MHII will determine whether to disregard the effects on reported income of
such items based upon its evaluation of whether the items are isolated or
extraordinary occurrences that are unlikely to have a material and continuing
effect on earnings per share. MHII's determination will not necessarily accord
with an issuer's classification of an item for financial reporting purposes, and
an item that is not classified as "extraordinary" on an issuer's income
statement might nonetheless be disregarded for purposes of the growth in
earnings criterion if MHII believes the item to be an isolated occurrence.
Conversely, MHII might take into account the effect of an item classified as
"extraordinary" if it believes that the item could have a material and
continuing effect on earnings per share. In making adjustments for items not
classified as extraordinary, MHII will estimate the change in income taxes
payable resulting from its adjustments.

In determining whether an issuer has met the two criteria relating to
growth in dividends, MHII may disregard a dividend classified by the issuer as
an "extraordinary" or "special" dividend.

Selection of Investments by Asset Allocation Portfolio. As stated in the
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Prospectus, the Asset Allocation Portfolio invests in a broad range of equity
securities, bonds and money market instruments and follows a management strategy
developed by PaineWebber Asset Management ("PWAM"), a division of Mitchell
Hutchins, for the allocation of investments.

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management performance. The PWAM Equity Valuation Discipline assesses the future
for industry groups and individual companies in terms of the earnings forecast
for the coming year and yearly changes in earnings estimates. The price to be
paid for the combination of historical performance and earnings outlook is taken
into account by use of the price/earnings ratios for industry groups and
individual issuers. The historical operating performance, earnings outlook and
price/earnings ratio are compared to derive a "Relative Attraction Index," which
is used to develop a list of equity securities for purchase that are ranked as
the most undervalued. Under the Equity Valuation Discipline, equity securities
will be sold, for example, if they become overvalued relative to the universe;
the asset allocation guidelines shift away from equity securities; or a change
in the fundamentals of an issuer will result in future deterioration in its
value.

The money market instruments in which the Asset Allocation Portfolio may
invest include U.S. Treasury bills and other obligations issued or guaranteed as
to interest and principal by the U.S. government, its agencies and
instrumentalities; obligations of U.S. banks (including certificates of deposit
and bankers' acceptances) having total assets at the time of purchase in excess
of $1.5 billion and interest-bearing savings deposits in U.S. commercial and
savings banks in principal amounts at each such bank not greater than are fully
insured by the Federal Deposit Insurance Corporation, provided that the
aggregate amount of such deposits does not exceed 5% of the value of the
Portfolio's assets; commercial paper and other short-term corporate obligations;
and variable and floating rate securities and repurchase agreements. The
Portfolio may also hold cash.

The commercial paper and other short-term corporate obligations purchased
by the Portfolio will consist only of obligations of U.S. corporations that are
(1) rated at least Prime-2 by Moody's Investors Service ("Moody's") or A-2 by
Standard & Poor's Ratings Group ("S&P"), (2) comparably rated by another
nationally recognized statistical rating organization ("NRSRO") or (3) unrated
and determined by Mitchell Hutchins to be of comparable quality. These
obligations may include variable amount master demand notes, which are unsecured
obligations redeemable upon notice that permit investment of fluctuating amounts
at varying rates of interest pursuant to direct arrangements with the issuer of
the instrument. Such obligations are usually unrated by a rating agency.

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specific money market rates such as the prime rate. These changes are reflected
in adjustments to the yields of the variable rate securities at least
semi-annually, and different securities may have different adjustment rates.

Adjustable Rate and Floating Rate Mortgage-Backed Securities. Certain
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Portfolios may invest in adjustable rate mortgage ("ARM") and floating rate
mortgage-backed securities. Because the interest rates on ARM and floating rate
mortgage-backed securities are reset in response to changes in a specified
market index, the values of such securities tend to be less sensitive to
interest rate fluctuations than the values of fixed-rate securities. As a
result, during periods of rising interest rates, ARMs generally do not decrease
in value as much as fixed rate securities. Conversely, during periods of
declining interest rates, ARMs generally do not increase in value as much as
fixed rate securities. ARM mortgage-backed securities represent a right to
receive interest payments at a rate that is adjusted to reflect the interest
earned on a pool of ARMs. ARMs generally provide that the borrower's mortgage
interest rate may not be adjusted above a specified lifetime maximum rate or, in
some cases, below a minimum lifetime rate. In addition, certain ARMs provide
for limitations on the maximum amount by which the mortgage interest rate may
adjust for any single adjustment period. ARMs also may provide for limitations
on changes in the maximum amount by which the borrower's monthly payment may
adjust for any single adjustment period. In the event that a monthly payment is
not sufficient to pay the interest accruing on the ARM, any such excess interest
is added to the mortgage loan ("negative amortization"), which is repaid through
future monthly payments. If the monthly payment exceeds the sum of the interest
accrued at the applicable mortgage interest rate and the principal payment that
would have been necessary to amortize the outstanding principal balance over the
remaining term of the loan, the excess reduces the principal balance of the ARM.
Borrowers under ARMs experiencing negative amortization may take longer to build
up their equity in the underlying property and may be more likely to default.

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

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

Special Characteristics of Mortgage-Backed and Asset-Backed Securities.
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Prepayments on a pool of mortgage loans are influenced by a variety of economic,
geographic, social and other factors, including changes in mortgagors' housing
needs, job transfers, unemployment, mortgagors' net equity in the mortgaged
properties and servicing decisions. Generally, however, prepayments on fixed-
rate mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Similar factors apply to
prepayments on asset-backed securities, but the receivables underlying asset-
backed securities generally are of a shorter maturity and thus are less likely
to experience substantial prepayments. Such securities, however, often provide
that for a specified time period the issuers will replace receivables in the
pool that are repaid with comparable obligations. If the issuer is unable to do
so, repayment of principal on the asset-backed securities may commence at an
earlier date. Mortgage-backed and asset-backed securities may decrease in value
as a result of increases in interest rates and may benefit less than other
fixed-income securities from declining interest rates because of the risk of
prepayment.

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

Illiquid Securities. Each Portfolio may invest up to 10% (15% for the
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Aggressive Growth Portfolio) of its net assets in

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illiquid securities. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which a Portfolio has valued the
securities and includes, among other things, purchased over-the-counter ("OTC")
options, repurchase agreements maturing in more than seven days and restricted
securities other than those securities Mitchell Hutchins or the applicable Sub-
Adviser has determined are liquid pursuant to guidelines established by the
Fund's board of trustees. The assets used as cover for OTC options written by a
Portfolio will be considered illiquid unless the OTC options are sold to
qualified dealers who agree that the Portfolio may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure will
be considered illiquid only to the extent that the maximum repurchase price
under the option formula exceeds the intrinsic value of the option. Illiquid
restricted securities may be sold only in privately negotiated transactions or
in public offerings with respect to which a registration statement is in effect
under the Securities Act of 1933 ("1933 Act"). Restricted securities acquired
by the Government, Global Income and Global Growth Portfolios include those that
are subject to restrictions contained in the securities laws of other countries.
For these Portfolios, securities that are freely marketable in the country where
they are principally traded, but would not be freely marketable in the United
States, will not be considered illiquid. Where registration is required, a
Portfolio may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time it may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
the Portfolio might obtain a less favorable price than prevailed when it decided
to sell.

Not all restricted securities are illiquid. In recent years a large
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institutional market has developed for certain securities that are not
registered under the 1933 Act, including private placements, repurchase
agreements, commercial paper, foreign securities and corporate bonds and notes.
These instruments are often restricted securities because the securities are
sold in transactions not requiring registration. Institutional investors
generally will not seek to sell these instruments to the general public, but
instead will often depend either on an efficient institutional market in which
such unregistered securities can be readily resold or on an issuer's ability to
honor a demand for repayment. Therefore, the fact that there are contractual or
legal restrictions on resale to the general public or certain institutions is
not dispositive of the liquidity of such investments.

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Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales 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. Such markets might include automated systems
for the trading, clearance and settlement of unregistered securities of domestic
and foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc. ("NASD"). An insufficient number of
qualified buyers interested in purchasing Rule 144A-eligible restricted
securities held by a Portfolio, however, could affect adversely the
marketability of such portfolio securities and a Portfolio might be unable to
dispose of such securities promptly or at favorable prices.

The board of trustees has delegated the function of making day-to-day
determinations of liquidity to Mitchell Hutchins or the applicable Sub-Adviser,
pursuant to guidelines approved by the board. Mitchell Hutchins or the
applicable Sub-Adviser takes into account a number of factors in reaching
liquidity decisions, including but not limited to (1) the frequency of trades
for the security, (2) the number of dealers that make quotes for the security,
(3) the number of dealers that have undertaken to make a market in the security,
(4) the number of other potential purchasers and (5) the nature of the security
and how trading is effected (e.g., the time needed to sell the security, how
bids are solicited and the mechanics of transfer). Mitchell Hutchins or the
applicable Sub-Adviser monitors the liquidity of restricted securities in each
Portfolio and reports periodically on such decisions to the board of trustees.

Section 4(2) Paper. Commercial paper issues in which the Portfolios may
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invest include securities issued by major corporations without registration
under the 1933 Act in reliance on the exemption from such registration afforded
by Section 3(a)(3) thereof, and commercial paper issued in reliance on the so-
called "private placement" exemption from registration which is afforded by
Section 4(2) of the 1933 Act ("Section 4(2) paper"). Section 4(2) paper is
restricted as to disposition under the federal securities laws in that any
resale must similarly be made in an exempt transaction. Section 4(2) paper is
normally resold to other institutional investors through or with the assistance
of investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Section 4(2) paper that is issued by a company that files reports
under the Securities Exchange Act of 1934 is generally eligible to be sold in
reliance on the safe harbor of Rule 144A described under "Illiquid Securities"
above. The Portfolios' 10% (15% for the Aggressive Growth Portfolio) limitation
on investments in illiquid securities includes Section 4(2) paper other than

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Section 4(2) paper that Mitchell Hutchins or the applicable Sub-Adviser has
determined to be liquid pursuant to guidelines established by the Fund's board
of trustees. The board has delegated to Mitchell Hutchins or the applicable
Sub-Adviser the function of making day-to-day determinations of liquidity with
respect to Section 4(2) paper, pursuant to guidelines approved by the board that
require Mitchell Hutchins or the applicable Sub-Adviser to take into account the
same factors described under "Illiquid Securities" above for other restricted
securities and require Mitchell Hutchins or the applicable Sub-Adviser to
perform the same monitoring and reporting functions.

Repurchase Agreements. Repurchase agreements are transactions in which a
---------------------
Portfolio purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. The Portfolio maintains
custody of the underlying securities prior to their repurchase; thus, the
obligation of the bank or dealer to pay the repurchase price on the date agreed
to is, in effect, secured by such securities. If the value of these securities
is less than the repurchase price, plus any agreed-upon additional amount, the
other party to the agreement must provide additional collateral so that at all
times the collateral is at least equal to the repurchase price plus any agreed-
upon additional amount. The difference between the total amount to be received
upon repurchase of the securities and the price that was paid by the Portfolio
upon their acquisition is accrued as interest and included in the Portfolio's
net investment income.

Repurchase agreements carry certain risks not associated with direct
investments in securities, including possible declines in the market value of
the underlying securities and delays and costs to a Portfolio if the other party
to a repurchase agreement becomes insolvent. Each Portfolio intends to enter
into repurchase agreements only with banks and dealers in transactions believed
by Mitchell Hutchins or the applicable Sub-Adviser to present minimum credit
risks in accordance with guidelines established by the Fund's board of trustees.
Mitchell Hutchins or the applicable Sub-Adviser will review and monitor the
creditworthiness of those institutions under the board's general supervision.

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may be entered into only for temporary purposes. While a reverse repurchase
agreement is outstanding, a Portfolio's custodian segregates assets to cover the
amount of the Portfolio's obligations under the reverse repurchase agreement.

See "Investment Policies and Limitations -- Segregated Accounts." Neither the
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Global Income Portfolio nor the Balanced Portfolio will purchase securities
while borrowings (including reverse repurchase agreements) in excess of 5% of
its total assets are outstanding. No other Portfolio has any intention of
entering into reverse repurchase agreements during the coming year.

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

Lending of Portfolio Securities. Although they have no intention of doing
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so during the coming year, the Government Portfolio is authorized to lend up to
33 1/3% of the total value of its portfolio securities and each other Portfolio
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, but only when the borrower maintains with the Portfolio's custodian
bank collateral either in cash or money market instruments, marked to market
daily, in an amount at least equal to the market value of the securities loaned,
plus accrued interest and dividends. In determining whether to lend securities
to a particular broker-dealer or institutional investor, Mitchell Hutchins or
the applicable Sub-Adviser will consider, and during the period of the loan will
monitor, all relevant facts and circumstances, including the creditworthiness of
the borrower. The Portfolios will retain authority to terminate any loans at
any time. A Portfolio may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest earned
on the cash or money market instruments held as collateral to the borrower or
placing broker. A Portfolio will receive reasonable interest on the loan or a
flat fee from the borrower and amounts equivalent to any dividends, interest or
other distributions on the securities loaned. A Portfolio will regain record
ownership of loaned securities to exercise beneficial

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rights, such as voting and subscription rights and rights to dividends, interest
or other distributions, when regaining such rights is considered to be in the
Portfolio's interest.

Segregated Accounts. When a Portfolio enters into certain transactions
-------------------
that involve obligations to make future payments to third parties, including
dollar rolls, reverse repurchase agreements or the purchase of securities on a
when-issued or delayed delivery basis, the Portfolio will maintain with an
approved custodian in a segregated account cash, U.S. government securities or
other liquid high grade debt securities, marked to market daily, in an amount at
least equal to the Portfolio's obligation or commitment under such transactions.
As described below under "Hedging and Related Income Strategies," segregated
accounts may also be required in connection with certain transactions involving
options or futures contracts, interest rate protection transactions or forward
currency contracts.

Concentration. All Portfolios follow a policy not to make an investment in
-------------
any one industry if the investment would cause the aggregate value of the
Portfolio's investment in such industry to exceed 25% of the Portfolio's total
assets, except that this policy does not apply to obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities ("U.S.
government securities"), certificates of deposit and bankers' acceptances. This
is a fundamental policy and cannot be changed with respect to a Portfolio
without the affirmative vote of its shareholders. Under this policy as applied
to the Money Market Portfolio, gas, electric, water and telephone companies are
considered separate industries and, with respect to finance companies, the
following categories are considered separate industries: (a) captive automotive
finance; (b) captive equipment finance; (c) retail finance; (d) consumer loan;
and (e) diversified finance.

Investment Limitations. Except as indicated otherwise, each Portfolio may
----------------------
not:

(1) purchase securities (except U.S. government securities) of any
one issuer, if as a result at the time of purchase more than 5%
of the Portfolio's total assets would be invested in such issuer,
or the Portfolio would own or hold 10% or more of the outstanding
voting securities of that issuer, except that 25% of the total
assets of the Portfolio (50% in the case of the Global Income
Portfolio) may be invested without regard to this limitation;

(2) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that
a Portfolio

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<PAGE>

that may use options or futures strategies may make margin
deposits in connection with its use of options, futures contracts
and options on futures contracts;

(3) mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the
Portfolio, except as may be necessary in connection with
permitted borrowings and then not in excess of 5% of the
Portfolio's total assets taken at cost, provided that this does
not prohibit escrow, collateral or margin arrangements in
connection with the use of options, futures contracts and options
on futures contracts by a Portfolio that may use options or
futures strategies;

(4) make short sales of securities or maintain a short position,
except that a Portfolio that may use options or futures
strategies may make short sales and may maintain short positions
in connection with its use of options, futures contracts and
options on futures contracts and the Fixed Income, Balanced,
Dividend Growth and Aggressive Growth Portfolios may sell short
"against the box";

(5) purchase or sell real estate, provided that a Portfolio may
invest in securities secured by real estate or interests therein
or issued by companies which invest in real estate or interests
therein;

(6) purchase or sell commodities or commodity contracts, except that
a Portfolio that may use options or futures strategies may
purchase or sell stock index futures and interest rate futures
and options thereon and the Government, Global Income and Global
Growth Portfolios may purchase or sell foreign currency futures
and options thereon;

(7) invest in oil, gas or mineral-related programs or leases;

(8) make loans, except through loans of portfolio securities of up to
10% of the value of the Portfolio's securities (33 1/3% for the
Government Portfolio) and through repurchase agreements, provided
that for purposes of this restriction the acquisition of bonds,
debentures or other corporate debt securities and investment in
government obligations, short-term commercial paper, certificates
of deposit and bankers'

-16-
<PAGE>

acceptances shall not be deemed to be the making of a loan;

(9) purchase any securities issued by any other investment company
except by purchase in the open market where no commission or
profit, other than a customary broker's commission, is earned by
any sponsor or dealer associated with the investment company
whose shares are acquired as a result of such purchase, provided
that such securities in the aggregate do not represent more than
10% of the total assets of the Portfolio, and except in
connection with the merger, consolidation or acquisition of all
the securities or assets of another investment company; or

(10) issue senior securities or borrow money, except from banks for
temporary purposes and except for reverse repurchase agreements
(and, for the Balanced Portfolio, dollar rolls) and provided that
the aggregate amount of all such borrowing does not exceed 10%
(33 for the Fixed Income Portfolio and 20% for the Aggressive
Growth Portfolio) of the total asset value of the Portfolio at
the time of such borrowing; provided further that the Portfolio
will not purchase securities while borrowings (including reverse
repurchase agreements and, for the Balanced Portfolio, dollar
rolls) in excess of 5% of the total asset value of the Portfolio
are outstanding.

The foregoing fundamental investment limitations cannot be changed with respect
to a Portfolio without the affirmative vote of the lesser of (a) more than 50%
of the outstanding shares of the Portfolio or (b) 67% or more of the Portfolio's
shares present at a meeting of its shareholders if more than 50% of the
outstanding shares of the Portfolio are represented at the meeting in person or
by proxy. If a percentage restriction is adhered to at the time of an
investment or transaction, a later change in percentage resulting from a change
in values of portfolio securities or amount of total assets will not be
considered a violation of any of the foregoing limitations.

The following investment restrictions may be changed by the vote of the
Fund's board of trustees without shareholder approval:

(1) No Portfolio will hold assets of any issuers, at the end of any
calendar quarter (or within 30 days thereafter), to the extent
such holdings would cause the Portfolio to fail to comply with
the

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<PAGE>

diversification requirements imposed by section 817(h) of the
Internal Revenue Code and the Treasury regulations issued
thereunder on segregated asset accounts used to fund variable
annuity contracts; and

(2) Except under unusual circumstances, the Global Growth Portfolio
will not purchase securities issued by investment companies
unless they are issued by companies that follow a policy of
investment primarily in the capital markets of a single foreign
country.

HEDGING AND RELATED INCOME STRATEGIES

As discussed in the Prospectus, Mitchell Hutchins or the applicable Sub-
Adviser may use a variety of financial instruments ("Hedging Instruments"),
including certain options, futures contracts (sometimes referred to as
"futures") and options on futures contracts, to attempt to hedge the Portfolios'
investments or attempt to enhance the Portfolios' income. For the Government,
Global Income and Global Growth Portfolios, Mitchell Hutchins also may use
forward currency contracts, foreign currency options and futures and options
thereon. Global Income Portfolio also may enter into interest rate protection
transactions. The particular Hedging Instruments are described in Appendix B to
the Prospectus. The Money Market and Asset Allocation Portfolios are not
authorized to engage in hedging or related income strategies.

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

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<PAGE>

Portfolio takes a position in a Hedging Instrument whose price is expected to
move in the same direction as the price of the prospective investment being
hedged. For example, a Portfolio might purchase a call option on a security it
intends to purchase in order to hedge against an increase in the cost of the
security. If the price of the security increased above the exercise price of
the call, the Portfolio could exercise the call and thus limit its acquisition
cost to the exercise price plus the premium paid and transaction costs.
Alternatively, the Portfolio might be able to offset the price increase by
closing out an appreciated call option and realizing a gain.

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

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

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

In addition to the products, strategies and risks described below and in
the Prospectus, Mitchell Hutchins or the applicable Sub-Adviser expects to
discover additional opportunities in connection with options, future contracts,
forward currency contracts and other hedging techniques. These new
opportunities may become available as Mitchell Hutchins or the applicable Sub-
Adviser develops new techniques, as regulatory authorities

-19-
<PAGE>

broaden the range of permitted transactions and as new options, futures
contracts, forward currency contracts or other techniques are developed.
Mitchell Hutchins or the applicable Sub-Adviser may utilize these opportunities
to the extent that they are consistent with the Portfolios' investment
objectives and permitted by the Portfolios' investment limitations and
applicable regulatory authorities. The Fund's Prospectus or Statement of
Additional Information will be supplemented to the extent that new products or
techniques involve materially different risks than those described below or in
the Prospectus.

Special Risks of Hedging Strategies. The use of Hedging Instruments
involves special considerations and risks, as described below. Risks pertaining
to particular Hedging Instruments are described in the sections that follow.

(1) Successful use of most Hedging Instruments depends upon Mitchell
Hutchins' or the applicable Sub-Adviser's ability to predict movements of the
overall securities, currency and interest rate markets, which requires different
skills than predicting changes in the prices of individual securities. While
Mitchell Hutchins or the applicable Sub-Adviser is experienced in the use of
Hedging Instruments, there can be no assurance that any particular hedging
strategy adopted will succeed.

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

(3) Hedging strategies, if successful, can reduce risk of loss by wholly or
partially offsetting the negative effect of unfavorable price movements in the
investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Portfolio entered into a
short hedge because Mitchell Hutchins or the applicable Sub-Adviser projected a
decline in the price of a security held by a Portfolio, and the price of that
security increased instead, the gain from that increase might be wholly or
partially offset by a decline in the price of the Hedging Instrument. Moreover,
if the price of the Hedging Instrument declined by more than the increase in the
price of the security, the Portfolio could suffer

-20-
<PAGE>

a loss. In either such case, the Portfolio would have been in a better position
had it not hedged at all.

(4) As described below, a Portfolio might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Hedging Instruments involving obligations to third parties (i.e.,
Hedging Instruments other than purchased options). If a Portfolio were unable
to close out its positions in such Hedging Instruments, it might be required to
continue to maintain such assets or accounts or make such payments until the
position expired or matured. These requirements might impair a Portfolio's
ability to sell a portfolio security or make an investment at a time when it
would otherwise be favorable to do so, or require that a Portfolio sell a
portfolio security at a disadvantageous time. A Portfolio's ability to close
out a position in a Hedging Instrument prior to expiration or maturity depends
on the existence of a liquid secondary market or, in the absence of such a
market, the ability and willingness of a contra party to enter into a
transaction closing out the position. Therefore, there is no assurance that any
hedging position can be closed out at a time and price that is favorable to the
Portfolio.

Cover for Hedging Strategies. Transactions using Hedging Instruments,
other than purchased options, expose a Portfolio to an obligation to another
party. A Portfolio will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities, currencies or other
options, futures contracts or forward currency contracts or (2) cash and short-
term liquid debt securities, with a value sufficient at all times to cover its
potential obligations to the extent not covered as provided in (1) above. Each
Portfolio will comply with SEC guidelines regarding cover for hedging
transactions and will, if the guidelines so require, set aside cash, U.S.
government securities or other liquid, high-grade debt securities in a
segregated account with its custodian in the prescribed amount.

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

-21-
<PAGE>

options on stock indices. The purchase of call options serves as a long hedge,
and the purchase of put options serves as a short hedge. Writing covered put or
call options can enable a Portfolio to enhance income by reason of the premiums
paid by the purchasers of such options. However, if the market price of the
security underlying a covered put option declines to less than the exercise
price of the option, minus the premium received, the Portfolio would expect to
suffer a loss. Writing covered call options serves as a limited short hedge,
because declines in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the security
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Portfolio will be
obligated to sell the security at less than its market value. If the covered
call option is an OTC option, the securities or other assets used as cover would
be considered illiquid to the extent described under "Investment Policies and
Restrictions -- Illiquid Securities."

The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options normally have expiration
dates of up to nine months. Options that expire unexercised have no value.

A Portfolio may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, a Portfolio may
terminate its obligation under a call option that it had written by purchasing
an identical call option; this is known as a closing purchase transaction.
Conversely, a Portfolio may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction.

The Portfolios may purchase or write both exchange-traded and OTC options.
Currently, many options on equity securities are exchange-traded. Exchange
markets for options on debt securities and foreign currencies exist but are
relatively new, and these instruments are primarily traded on the OTC market.
Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed which,
in effect, guarantees completion of every exchange-traded option transaction.
In contrast, OTC options are contracts between the Portfolio and its contra
party (usually a securities dealer or a bank) with no clearing organization
guarantee. Thus, when the Portfolio purchases or writes an OTC option, it
relies on the contra party to make or take delivery of the underlying investment
upon exercise of the option. Failure by the contra party to do so would result
in the loss of any

-22-
<PAGE>

premium paid by the Portfolio as well as the loss of any expected benefits of
the transaction.

Generally, the OTC debt and foreign currency options used by the Portfolios
are European-style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American-style
options, which are exercisable at any time prior to the expiration date of the
option.

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

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

Limitations on the Use of Options. The Portfolios' use of options is
governed by the following guidelines, which can be changed by the Fund's board
of trustees without shareholder vote:

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

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

-23-
<PAGE>

(3) The aggregate premiums paid on all options (including options on
securities, foreign currencies and stock or bond indices and
options on futures contracts) purchased by a Portfolio that are
held at any time will not exceed 20% of the Portfolio's total net
assets.

Futures. The purchase of futures or call options thereon can serve as a
long hedge, and the sale of futures or the purchase of put options thereon can
serve as a short hedge. Writing covered call options on futures contracts can
serve as a limited short hedge, using a strategy similar to that used for
writing covered call options on securities and indices.

Futures strategies also can be used to manage the average duration of a
Portfolio. If Mitchell Hutchins or the applicable Sub-Adviser wishes to shorten
the average duration of a Portfolio, the Portfolio may sell a futures contract
or a call option thereon, or purchase a put option on that futures contract. If
Mitchell Hutchins or the applicable Sub-Adviser wishes to lengthen the average
duration of a Portfolio, the Portfolio may buy a futures contract or a call
option thereon.

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

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

-24-
<PAGE>

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

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

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

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

-25-
<PAGE>

moving unfavorably to avoid being subject to further calls. These liquidations
could increase price volatility of the instruments and distort the normal price
relationship between the futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.

Limitations on the Use of Futures. The Portfolios' use of futures is
governed by the following guidelines, which can be changed by the Fund's board
of trustees without shareholder vote.

(1) To the extent a Portfolio enters into futures contracts, options
on futures positions and options on foreign currencies trade on
a commodities exchange that are not for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin
and premiums on those positions (excluding the amount by which
options are "in-the-money") may not exceed 5% of the Portfolio's
net assets.

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

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

Foreign Currency Hedging Strategies -- Special Considerations. The
Government, Global Income and Global Growth Portfolios may use options and
futures on foreign currencies, as described above, and forward currency forward
contracts, as described below, to hedge against movements in the values of the
foreign currencies in which the Portfolios' securities are denominated. Such
currency hedges can protect against price movements in a security that a
Portfolio owns or intends to acquire that are attributable to changes in the
value of the currency in which it is denominated. Such hedges do not, however,
protect against price movements in the securities that are attributable to other
causes.

-26-
<PAGE>

The Portfolios might seek to hedge against changes in the value of a
particular currency when no Hedging Instruments on that currency are available
or such Hedging Instruments are more expensive than certain other Hedging
Instruments. In such cases, a Portfolio may hedge against price movements in
that currency by entering into transactions using Hedging Instruments on another
foreign currency or a basket of currencies, the values of which Mitchell
Hutchins believes will have a high degree of positive correlation to the value
of the currency being hedged. The risk that movements in the price of the
Hedging Instrument will not correlate perfectly with movements in the price of
the currency being hedged is magnified when this strategy is used.

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

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

Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, a Portfolio might be required to accept or make delivery of the underlying
foreign currency in accordance with any U.S. or foreign regulations regarding
the maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.

-27-
<PAGE>

may purchase a forward currency contract to lock in the U.S. dollar price of a
security denominated in a foreign currency that the Portfolio intends to
acquire. Forward currency contract transactions may also serve as short hedges
- -- for example, a Portfolio may sell a forward currency contract to lock in the
U.S. dollar equivalent of the proceeds from the anticipated sale of a security
denominated in a foreign currency.

As noted above, these Portfolios may seek to hedge against changes in the
value of a particular currency by using forward contracts on another foreign
currency or a basket of currencies, the value of which Mitchell Hutchins
believes will have a positive correlation to the values of the currency being
hedged. In addition, the Portfolios may use forward currency contracts to shift
exposure to foreign currency fluctuations from one country to another. For
example, if a Portfolio owns securities denominated in a foreign currency and
Mitchell Hutchins believes that currency will decline relative to another
currency, it might enter into a forward contract to sell an appropriate amount
of the first foreign currency, with payment to be made in the second foreign
currency. Transactions that use two foreign currencies are sometimes referred
to as "cross hedging." Use of a different foreign currency magnifies the risk
that movements in the price of the Hedging Instrument will not correlate or will
correlate unfavorably with the foreign currency being hedged.

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

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

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<PAGE>

be required to maintain a position in securities denominated in the securities
or currencies that are the subject of the hedge or to maintain cash or
securities in a segregated account.

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

Limitations on the Use of Forward Currency Contracts. The Government,
Global Income and Global Growth Portfolios may enter into forward currency
contracts or maintain a net exposure to such contracts only if (1) the
consummation of the contracts would not obligate the Portfolio to deliver an
amount of foreign currency in excess of the value of the position being hedged
by such contracts or (2) the Portfolio maintains appropriate assets in a
segregated account in an amount not less than the value of its total assets
committed to the consummation of the contract and not covered as provided in (1)
above, as described above in "Investment Policies and Limitations - Segregated
Accounts."

Interest Rate Protection Transactions. The Global Income Portfolio may
enter into interest rate protection transactions, including interest rate swaps
and interest rate caps, collars and floors. Interest rate swap transactions
involve an agreement between two parties to exchange payments that are based,
for example, on variable and fixed rates of interest and that are calculated on
the basis of a specified amount of principal (the "notional principal amount")
for a specified period of time. Interest rate cap and floor transactions
involve an agreement between two parties in which the first party agrees to make
payments to the counterparty when a designated market interest rate goes above
(in the case of a cap) or below (in the case of a floor) a designated level on
predetermined dates or during a specified time period. Interest rate collar
transactions involve an agreement between two parties in which payments are made
when a designated market interest rate either goes above a designated ceiling
level or goes below a designated floor level on predetermined dates or during a
specified time period.

Global Income Portfolio expects to enter into interest rate protection
transactions to preserve a return or spread on a particular investment or
portion of its portfolio or to protect against any increase in the price of
securities it anticipates purchasing at a later date. The Portfolio intends to
use these transactions as a hedge and not as a speculative investment.

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<PAGE>

Interest rate protection transactions are subject to risks comparable to those
described above with respect to other hedging strategies.

Global Income Portfolio may enter into interest rate swaps, caps, collars
and floors on either an asset-based or liability-based basis, depending on
whether it is hedging its assets or its liabilities, and will usually enter into
interest rate swaps on a net basis, i.e., the two payment streams are netted
out, with the Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. Inasmuch as these interest rate protection
transactions are entered into for good faith hedging purposes, and inasmuch as
segregated accounts will be established with respect to such transactions,
Mitchell Hutchins and the Portfolio believe such obligations do not constitute
senior securities and, accordingly, will not treat them as being subject to the
Portfolio's borrowing restrictions. The net amount of the excess, if any, of
the Portfolio's obligations over its entitlements with respect to each interest
rate swap will be accrued on a daily basis and appropriate Portfolio assets
having an aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account as described above in "Investment Policies
and Restrictions - Segregated Accounts." The Portfolio also will establish and
maintain such segregated accounts with respect to its total obligations under
any interest rate swaps that are not entered into on a net basis and with
respect to any interest rate caps, collars and floors that are written by the
Portfolio.

Global Income Portfolio will enter into interest rate protection
transactions only with banks and recognized securities dealers believed by
Mitchell Hutchins to present minimal credit risks in accordance with guidelines
established by the Fund's board of trustees. If there is a default by the other
party to such a transaction, the Portfolio will have to rely on its contractual
remedies (which may be limited by bankruptcy, insolvency or similar laws)
pursuant to the agreements related to the transaction.

The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Caps, collars and floors are more
recent innovations for which documentation is less standardized, and,
accordingly, they are less liquid than swaps.

TRUSTEES AND OFFICERS

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

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<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------

E. Garrett Bewkes, Jr.;68** Trustee and Chairman of the Board of
Trustees. Mr. Bewkes is a director
of Paine Webber Group Inc. ("PW
Group") (holding company of PaineWebber
and Mitchell Hutchins) and a consultant
to PW Group. Prior to 1988 he was
Chairman of the board, president and
Chief executive officer of American
Bakers Company. Mr. Bewkes is also a
director of Interstate Bakeries
Corporation and a director or trustee of
26 other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.

Meyer Feldberg;52 Trustee. Mr. Feldberg is Dean and
Columbia University Professor of Management of the
101 Uris Hall Graduate School of Business, Columbia
New York, New York 10027 University. Prior to 1989, he was
president of the Illinois Institute
of Technology. Dean Feldberg is also
a director of AMSCO International
Inc., Federated Department Stores,
Inc., Inco Homes Corporation and New
World Communications Group
Incorporated and a director or
trustee of 18 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.

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<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------

George W. Gowen; 65 Trustee. Mr. Gowen is a partner in
666 Fifth Avenue the law firm of Dunnington, Bartholow
New York, New York 10017 & Miller. Prior to May 1994 he was a
partner in the law firm of Fryer,
Ross & Gowen. Mr. Gowen is also a
director of Columbia Real Estate
Investments, Inc. and a director or
trustee of 16 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.

Frank P.L. Minard; 49** Trustee. Mr. Minard is chairman and
chief executive officer of Mitchell
Hutchins, chairman of the board of MHII
and a director of PaineWebber. Prior to
1993, Mr. Minard was managing director
of Oppenheimer Capital in New York and
Director of Oppenheimer Capital Ltd. in
London. Mr. Minard is also a director or
trustee of 26 other investment companies
for which Mitchell Hutchins or Paine
Webber serves as investment adviser.

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<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------

Frederic V. Malek; 58 Trustee. Mr. Malek is Chairman of
901 15th Street, N.W. Thayer Capital Partners (investment
Suite 300 bank) and a co-chairman and director
Washington, D.C. 20005 of CB Commercial Group Inc. (real
estate). From January 1992 to
November 1992 he was campaign manager
of Bush-Quayle '92. From 1990 to
1992, he was vice chairman and, from
1989 to 1990, he was president of
Northwest Airlines Inc., NWA Inc.
(holding company of Northwest
Airlines Inc.) and Wings Holdings
Inc. (holding company of NWA Inc.).
Prior to 1989, he was employed by the
Marriott Corporation (hotels,
restaurants, airline catering and
contract feeding), where he most
recently was an executive vice
president and president of Marriott
Hotels and Resorts. Mr. Malek is
also a director of American
Management Systems, Inc., Automatic
Data Processing, Inc., Avis, Inc.,
FPL Group, Inc., ICF International,
Manor Care, Inc. and National
Education Corporation and a director
or trustee of 16 other investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.

Judith Davidson Moyers; 59 Trustee. Mrs. Moyers is president of
Public Affairs Television Public Affairs Television, Inc., an
356 W. 58th Street educational consultant and a home
New York, New York 10019 economist. Mrs. Moyers is also a
director of Ogden Corporation and a
director or trustee of 16 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.

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<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------

Thomas F. Murray; 84 Trustee. Mr. Murray is a real
400 Park Avenue estate and financial consultant. Mr.
New York, New York 10022 Murray is also a director and
chairman of American Continental
Properties, Inc., a trustee of
Prudential Realty Trust, and a
director or trustee of 16 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.

Teresa M. Boyle; 36 Vice President. Ms. Boyle is a vice
president and manager - advisory
administration of Mitchell Hutchins.
Prior to November 1993, she was
compliance manager of Hyperion
Capital Management, Inc., an
investment advisory firm. Prior to
April 1993, Ms. Boyle was a vice
president and manager - legal
administration of Mitchell Hutchins.
Ms. Boyle is also a vice president of
26 other investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.

Joan L. Cohen; 30 Vice President and Assistant
Secretary. Ms. Cohen is a vice
president and attorney of Mitchell
Hutchins. Prior to December 1993,
she was an associate at the law firm
of Seward & Kissel. Ms. Cohen is
also a vice president and assistant
secretary of 26 other investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.

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<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------

Ellen R. Harris; 48 Vice President. Ms. Harris is
chief domestic equity strategist, a
managing director and chief
investment officer-domestic of
Mitchell Hutchins. Ms. Harris is
also a vice president of 19 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.

Frank Jennings; 47 Vice President. Mr. Jennings is a
managing director and director of
global equities of Mitchell Hutchins.
Mr. Jennings is also a vice president
of 3 other investment companies for
which Mitchell Hutchins serves as
investment adviser.

Clifford E. Kirsch; 35 Vice President. Mr. Kirsch is a first
vice president and associate general
counsel of Mitchell Hutchins. Prior to
March 1994, he was an assistant director
in the Division of Investment Management
at the SEC. Mr. Kirsch is also a vice
president and assistant secretary of 26
other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.

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<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------

Ann E. Moran; 37 Vice President and Assistant
Treasurer. Ms. Moran is a vice
president of Mitchell Hutchins. Ms.
Moran is also a vice president and
assistant treasurer of 26 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.

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<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------

Dianne E. O'Donnell; 42 Vice President and Secretary. Ms.
O'Donnell is a senior vice president
and senior associate general counsel
of Mitchell Hutchins. Ms. O'Donnell
is also a vice president and
secretary of 26 other investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.

Victoria E. Schonfeld; 43 Vice President. Ms. Schonfeld is a
managing director and general counsel of
Mitchell Hutchins. From April 1990 to
May 1994, she was a partner in the law
firm of Arnold & Porter. Prior to April
1990, she was a partner in the law firm
of Shereff, Friedman, Hoffman & Goodman.
Ms. Schonfeld is also a vice president
and assistant secretary of 26 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

Paul H. Schubert; 31 Vice President and Assistant Treasurer.
Mr. Schubert is a vice president of
Mitchell Hutchins. From August 1992 to
August 1994, he was a vice president at
BlackRock Financial Management L.P.
Prior to August 1992, he was an audit
manager with Ernst & Young LLP. Mr.
Schubert is also a vice president and
assistant secretary of 26 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

Martha J. Slezak; 32 Vice President and Assistant
Treasurer. Ms. Slezak is a vice
president of Mitchell Hutchins. From
September 1991 to April 1992, she was
a fundraising director for a U.S.
senate campaign. Prior to September
1991, she was a tax manager with
Arthur Andersen & Co. Ms. Slezak is
also a vice president and assistant
treasurer of 26 other investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.

Julian F. Sluyters; 34 Vice President and Treasurer. Mr.
Sluyters is a senior vice president
and the director of the mutual fund
finance division of Mitchell
Hutchins. Prior to 1991, he was an
audit senior manager with Ernst &
Young. Mr. Sluyters is also a vice
president and treasurer of 26 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment advisor.

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<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------

Gregory K. Todd; 34 Vice President and Assistant
Secretary. Mr. Todd is a first vice
president and associate general
counsel of Mitchell Hutchins. Prior
to 1993, he was a partner with the
law firm of Shereff, Friedman,
Hoffman & Goodman. Mr. Todd is also
a vice president and assistant
secretary of 26 other investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.

Stuart Waugh; 39 Vice President. Mr. Waugh is a
managing director and a portfolio
manager of Mitchell Hutchins
responsible for global fixed income
investments and currency trading.
Mr. Waugh is also a vice president of
5 other investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
- ------------------

*Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.

**Messrs. Bewkes, Grano and Minard are "interested persons" of the Fund as
defined in the Investment Company Act of 1940 ("1940 Act") by virtue of their
positions with PW Group, PaineWebber and/or Mitchell Hutchins.

The Fund pays trustees who are not "interested persons" of the Fund $4,000
annually and $250 per meeting of the board or any committee thereof. Trustees
are reimbursed for any expenses incurred in attending meetings. Because
Mitchell Hutchins performs substantially all of the services necessary for the
operation of the Fund, the Fund requires no employees. No officer, director or
employee of Mitchell Hutchins or PaineWebber receives any compensation from the
Fund for acting as a trustee or officer.

-38-
<PAGE>

INVESTMENT ADVISORY SERVICES

Mitchell Hutchins acts as the investment adviser and administrator of
each Portfolio pursuant to a contract with the Fund dated April 21, 1988 as
supplemented by Fee Agreements dated May 1, 1989, December 30, 1991 and
September 1, 1993 ("Advisory Contract"). Under the Advisory Contract, the Fund
pays Mitchell Hutchins a fee for each Portfolio, computed daily and payable
monthly, according to the schedule set forth in the Prospectus.

During the fiscal year ended December 31, 1993, Mitchell Hutchins
earned advisory fees in the amount of $78,323 for the Money Market Portfolio;
$132,588 for the Government Portfolio; $519,148 for the Global Income Portfolio;
$302,573 for the Asset Allocation Portfolio; $139,064 for the Dividend Growth
Portfolio; and $201,799 for the Global Growth Portfolio. During the period
November 8, 1993 (commencement of operations) to December 31, 1993, Mitchell
Hutchins earned advisory fees in the amount of $291 for the Fixed Income
Portfolio. During the period November 2, 1993 (commencement of operations) to
December 31, 1993, Mitchell Hutchins earned advisory fees in the amount of $640
for the Balanced Portfolio and $948 for the Aggressive Growth Portfolio.

The Advisory Contract authorizes Mitchell Hutchins to retain one or
more sub-advisers but does not require Mitchell Hutchins to do so. Under
separate Sub-Advisory Contracts dated September 1, 1993 with Mitchell Hutchins,
Wolf, Webb, Burk & Campbell ("WWBC") served as Sub-Adviser for the Fixed Income
Portfolio, Provident Investment Counsel, Inc. ("PIC") served as Sub-Adviser for
the Balanced Portfolio, Nicholas-Applegate Capital Management ("Nicholas-
Applegate") served as Sub-Adviser for the Aggressive Growth Portfolio and
Mitchell Hutchins Institutional Investors Inc. ("MHII") served as Sub-adviser
for the Dividend Growth Portfolio. Pursuant to such Sub-Advisory Contracts,
during the period November 8, 1993 (commencement of operations) to December 31,
1993 for the Fixed Income Portfolio, during the period November 2, 1993
(commencement of operations) to December 31, 1993 for the Balanced and
Aggressive Growth Portfolios, WWBC, PIC and Nicholas-Applegate, respectively,
waived all its sub-advisory fees.

During the fiscal year ended December 31, 1992, Mitchell Hutchins
earned advisory fees in the amount of $109,037 for the Money Market Portfolio;
$115,977 for the Government Portfolio; $482,680 for the Global Income Portfolio;
$281,117 for the Asset Allocation Portfolio; $86,189 for the Dividend Growth
Portfolio;

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<PAGE>

$304,396 for the Growth Portfolio; and $177,294 for the Global Growth
Portfolio.

During the fiscal year ended December 31, 1991, Mitchell Hutchins
earned advisory fees in the amount of $55,446 for the Money Market Portfolio;
$42,754 (of which $2,318 was waived) for the Government Portfolio; $318,033 for
the Global Income Portfolio; $218,642 for the Asset Allocation Portfolio;
$159,502 for the Growth Portfolio; and $162,035 for the Global Growth Portfolio.

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

-40-
<PAGE>

officers; and (18) costs of mailing, stationery and communications equipment.

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

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

PORTFOLIO TRANSACTIONS

Subject to policies established by the Fund's board of trustees,
Mitchell Hutchins or the applicable Sub-Adviser is responsible for the execution
of portfolio transactions and the allocation of brokerage transactions for each
Portfolio. In executing portfolio transactions, Mitchell Hutchins or the
applicable Sub-Adviser seeks to obtain the best net results for each Portfolio
taking into account such factors as the price (including the applicable
brokerage commission or dealer spread), size of the order, difficulty of
execution and operational

-41-
<PAGE>

facilities of the firm involved. Prices paid to dealers in principal
transactions through which most debt securities and some equity securities are
traded generally include a "spread," which is the difference between the prices
at which the dealer is willing to purchase and sell a specific security at that
time. Each Portfolio may invest in securities traded in the OTC markets and will
engage primarily in transactions with the dealers who make markets in such
securities, unless a better price or execution could be obtained by using a
broker. While Mitchell Hutchins or the applicable Sub-Adviser generally seeks
reasonably competitive commission rates, payment of the lowest commission is not
necessarily consistent with obtaining the best net results. During the fiscal
year ended December 31, 1991, the Money Market, Government, and Global Income
Portfolios paid no commissions, while the Asset Allocation, Growth, and Global
Growth Portfolios paid aggregate commissions totalling $49,572, $98,786, and
$41,540, respectively. During the fiscal year ended December 31, 1992, the Money
Market, Government, and Global Income Portfolios paid no commissions, while the
Asset Allocation, Dividend Growth, Growth, and Global Growth Portfolios paid
aggregate commissions totalling $40,643, $34,551, $281,467, and $44,608,
respectively. During the fiscal year ended December 31, 1993, the Money Market,
Government, Global Income, Fixed Income, Balanced and Aggressive Growth
Portfolios paid no commissions, while the Asset Allocation, Dividend Growth,
Growth and Global Growth Portfolios paid aggregate commissions totalling
$74,851, $32,158, $32,332 and $442,008, respectively.

The Fund has no obligation to deal with any broker or group of brokers
in the execution of portfolio transactions. The Fund contemplates that,
consistent with the policy of obtaining the best net results, a substantial
amount of the Portfolios' brokerage transactions may be conducted through
Mitchell Hutchins or its affiliates, including PaineWebber. The Fund's board of
trustees has adopted procedures in conformity with Rule 17e-1 under the 1940 Act
to ensure that all brokerage commissions paid to Mitchell Hutchins or its
affiliates are fair and reasonable. Specific provisions included in the
Advisory Contract authorize Mitchell Hutchins and any of its affiliates that is
a member of a national securities exchange to effect securities transactions for
the Portfolios on such exchange and to retain compensation in connection with
such transactions. Any such transactions will be effected and related
compensation paid in accordance with applicable SEC regulations. During the
fiscal year ended December 31, 1991, Asset Allocation Portfolio paid $7,906 and
Growth Portfolio paid $12,905 in brokerage commissions to PaineWebber. During
the fiscal year ended December 31, 1992, Asset Allocation Portfolio paid $420,
Dividend Growth Portfolio paid $966 and Growth Portfolio paid $1,509 in
brokerage commissions to PaineWebber. During the fiscal year ended December 31,
1993, AWsset Allocation Portfolio paid $1,274 in brokerage commissions to
PaineWebber, representing 1.7% of the aggregate brokerage commission paid by
that Portfolio and 3.7% of the aggregate dollar amount of transactions involving
the payment of commissions. During the fiscal year ended December 31, 1993,
Dividend Growth Portfolio paid $2,283 in brokerage commissions to PaineWebber,
representing 7.0% of the

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<PAGE>

aggregate brokerage commissions paid by that Portfolio and 3.7% of the aggregate
dollar amount of transactions involving the payment of commissions. During the
fiscal year ended December 31, 1993, Dividend Growth Portfolio paid $2,283 in
brokerage commissions to PaineWebber, representing 7.0% of the aggregate
brokerage commissions paid by that Portfolio and 5.2% of the aggregate dollar
amount of transactions involving the payment of commissions. During the fiscal
year ended December 31, 1993, Growth Portfolio paid $595 in brokerage
commissions to PaineWebber, representing 1.8% of the aggregate brokerage
commissions paid by that Portfolio and 2.1% of the aggregate dollar amount of
transactions involving the payment of commissions. During the fiscal year ended
December 31, 1993, Global Growth Portfolio paid $720 in brokerage commisssions
to PaineWebber, representing 0.16% of the aggregate brokerage commissions paid
by that Portfolio and 0.31% of the aggregate dollar amount of transactions
invloving the payment of commissions. The other Portfolios did not pay any
brokerage commissions to PaineWebber or any other affiliate of Mitchell Hutchins
during the last three fiscal years.

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

Consistent with the interest of each Portfolio and subject to the
review of the Fund's board of trustees, Mitchell Hutchins or the applicable Sub-
Adviser may cause a Portfolio to purchase and sell portfolio securities from and
to brokers who provide the Portfolio with research, analysis, advice and similar
services. In return for such services, the Portfolio may pay to those brokers a
higher commission than may be charged by other brokers, provided that Mitchell
Hutchins determines in good faith that such commission is reasonable in terms
either of that particular transaction or of the overall responsibility of
Mitchell Hutchins or the applicable Sub-Adviser to the Portfolio and its other
clients and that the total commissions paid by the Portfolio will be reasonable
in relation to the benefits to the Portfolio over the long term. Research
services furnished by brokers through which a Portfolio effects securities
transactions may be used by Mitchell Hutchins or the applicable Sub-Adviser in
advising other funds or accounts and, conversely, research services furnished to
Mitchell Hutchins or the applicable Sub-Adviser by brokers in connection with
other funds or accounts Mitchell Hutchins or the applicable Sub-Adviser advises
may be used by Mitchell Hutchins in advising such Portfolio. Information and
research received from such brokers will be in addition to, and not in lieu of,
the services required to be performed by Mitchell Hutchins or the

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<PAGE>

applicable Sub-Adviser under the Advisory Contract or Sub-Advisory Contract.
During the fiscal year ended December 31, 1993, the Asset Allocation, Dividend
Growth, Growth and Global Growth Portfolios directed $8,471,583, $9,357,187,
$1,152,799 and $12,657,153, respectively, in portfolio transactions to brokers
chosen because they provide research and analysis for which these Portfolios
paid $12,914, $15,169, $2,424 and $10,901, respectively, in commissions. During
the same period, no other Portfolio paid any brokerage commissions to brokers
chosen because they provide research and analysis. The Portfolios may purchase
and sell portfolio securities to and from dealers who provide the Portfolios
with research services. Portfolio transactions will not be directed by the
Portfolios to dealers solely on the basis of research services provided. The
Portfolios will not purchase portfolio securities at a higher price or sell such
securities at a lower price in connection with transactions effected with a
dealer, acting as principal, who furnishes research services to Mitchell
Hutchins or the applicable Sub-Adviser than would be the case if no weight were
given by Mitchell Hutchins or the applicable Sub-Adviser to the dealer's
furnishing of such services.

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

The Portfolios will not purchase securities that are offered in
underwritings in which Mitchell Hutchins, the applicable Sub-Adviser or any of
their affiliates is a member of the underwriting or selling group, except
pursuant to procedures adopted by the Fund's board of trustees pursuant to Rule
10f-3 under the 1940 Act. Among other things, these procedures require that the
commission or spread paid in connection with such a purchase be reasonable and
fair, that the purchase be at not more than the public offering price prior to
the end of the first business day after the date of the public offering and that
Mitchell Hutchins, the applicable Sub-Adviser or any affiliate thereof not
participate in or benefit from the sale to the Fund.

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Portfolio Turnover. The turnover rate may vary greatly from year to
------------------
year for any Portfolio and will not be a limiting factor when Mitchell Hutchins
or the applicable Sub-Adviser deems portfolio changes appropriate. The annual
portfolio turnover rate is calculated by dividing the lesser of a Portfolio's
annual sales or purchases of portfolio securities (exclusive of purchases or
sales of securities whose maturities at the time of acquisition were one year or
less) by the monthly average value of the securities in the Portfolio during the
year. For the fiscal years ended December 31, 1993 and December 31, 1992,
respectively, the portfolio turnover rates were 7.93% and 23.13% for the
Government Portfolio, 68.60% and 75.44% % for the Global Income Portfolio,
60.36% and 30.74% for the Asset Allocation Portfolio, 34.95% and 29.36% for the
Growth Portfolio, 266.96% and 127.06% for the Global Growth Portfolio and 51.68%
and 13.74% for the Dividend Growth Portfolio. For the fiscal period ended
December 31, 1993, the portfolio turnover rate for each of the Fixed Income
Portfolio, Balanced Portfolio and Aggressive Growth Portfolio was 0.0%.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The insurance company separate accounts purchase and redeem shares of
each Portfolio on each day on which the New York Stock Exchange, Inc. ("NYSE")
is open for trading ("Business Day") based on, among other things, the amount of
premium payments to be invested and surrendered and transfer requests to be
effected on that day pursuant to the variable contracts. Currently, the NYSE is
closed on the observance of New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Such purchases and redemptions of the shares of each Portfolio are effected at
their respective net asset values per share determined as of the close of
trading (currently 4:00 p.m., eastern time) on that Business Day. Payment for
redemptions are made by the Fund within seven days thereafter. No fee is
charged the separate accounts when they purchase or redeem Portfolio shares.

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

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VALUATION OF SHARES

Each Portfolio determines its net asset value as of the close of
regular trading (currently 4:00 p.m., eastern time) on the NYSE on each Monday
through Friday when the NYSE is open.

Securities that are listed on U.S. and foreign stock exchanges are
valued at the last sale price on the day the securities are being valued or,
lacking any sales on such day, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are generally
valued on the exchange considered by Mitchell Hutchins as the primary market.
Securities traded in the OTC market and listed on the National Association of
Securities Dealers Automatic Quotation System ("NASDAQ") are valued at the last
available sale price listed on NASDAQ at 4:00 p.m., eastern time; other OTC
securities are valued at the last available bid price prior to the time of
valuation.

When market quotations are readily available, the debt securities of
the Portfolios (with the exception of the Money Market Portfolio) are valued
based upon market quotations, provided such quotations adequately reflect, in
the judgment of Mitchell Hutchins, the fair value of the securities. The
amortized cost method of valuation generally is used with respect to debt
obligations with 60 days or less remaining to maturity unless the Fund's board
of trustees determines that this does not represent fair value. When market
quotations for options and futures positions held by the Portfolios are readily
available, those positions are valued based upon such quotations. Market
quotations are not generally available for options traded in the OTC market.
When market quotations for options and futures positions, or any other
securities or assets of the Portfolios, are not available, they are valued at
fair value as determined in good faith by or under the direction of the Fund's
board of trustees. When practicable, such determinations are based upon
appraisals received from a pricing service using a computerized matrix system or
appraisals derived from information concerning the security or similar
securities received from recognized dealers in those securities.

All securities quoted in foreign currencies are valued daily in U.S.
dollars on the basis of the foreign currency exchange rates prevailing at the
time such valuation is determined. Foreign currency exchange rates generally
are determined prior to the close of the NYSE. Occasionally, events affecting
the value of foreign securities and such exchange rates occur between the time
at which they are determined and the close of the NYSE, which events would not
be reflected in the computation of a Portfolio's net asset value. If events
materially affecting the value of such securities or currency exchange rates
occurred during such time period, the securities will be valued at their

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<PAGE>

fair value as determined in good faith by or under the direction of the board of
trustees. The foreign currency exchange transactions of the Government, Global
Income and Global Growth Portfolios conducted on a spot (that is, cash) basis
are valued at the spot rate for purchasing or selling currency prevailing on the
foreign exchange market. This rate under normal market conditions differs from
the prevailing exchange rate in an amount generally less than one-tenth of one
percent due to the costs of converting from one currency to another.

The Money Market Portfolio values its portfolio securities in
accordance with the amortized cost method of valuation under Rule 2a-7 under the
1940 Act. To use amortized cost to value its portfolio securities, the
Portfolio must adhere to certain conditions under that Rule relating to its
investments, some of which are discussed in the Prospectus. Amortized cost is
an approximation of market value, whereby the difference between acquisition
cost and value at maturity is amortized on a straight-line basis over the
remaining life of the instrument. The effect of changes in the market value of
a security as a result of fluctuating interest rates is not taken into account
and thus the amortized cost method of valuation may result in the value of a
security being higher or lower than its actual market value. In the event that
a large number of redemptions takes place at a time when interest rates have
increased, the Portfolio might have to sell portfolio securities prior to
maturity and at a price that might not be as desirable as the value at maturity.

The Fund's board of trustees has established procedures for the
purpose of maintaining a constant net asset value of $1.00 per share for the
Money Market Portfolio, which include a review of the extent of any deviation of
net asset value per share, based on available market quotations, from the $1.00
amortized cost per share. Should that deviation exceed 1/2 of 1%, the trustees
will promptly consider whether any action should be initiated to eliminate or
reduce material dilution or other unfair results to shareholders. Such action
may include redeeming shares in kind, selling portfolio securities prior to
maturity, reducing or withholding dividends and utilizing a net asset value per
share as determined by using available market quotations. The Money Market
Portfolio will maintain a dollar-weighted average portfolio maturity of 90 days
or less and will not purchase any instrument with a remaining maturity greater
than 13 months, will limit portfolio investments, including repurchase
agreements, to those U.S. dollar-denominated instruments that are of high
quality and that the trustees determine present minimal credit risks as advised
by Mitchell Hutchins and will comply with certain reporting and recordkeeping
procedures. There is no assurance that constant net asset per share value will
be maintained. In the event amortized cost ceases to represent fair value, the
board will take appropriate action.

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<PAGE>

In determining the approximate market value of portfolio investments,
the Fund may employ outside organizations, which may use a matrix or formula
method that takes into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried at their face value. Other assets, if any, are valued at fair value as
determined in good faith by or under the direction of the board of trustees.

TAXES

Shares of the Portfolios are offered only to insurance company
separate accounts that fund certain variable annuity and life insurance
contracts ("Contracts"). See the applicable Contract prospectus for a
-------------
discussion of the special taxation of insurance companies with respect to such
accounts and of the Contract holders.

Each Portfolio is treated as a separate corporation for federal income
tax purposes. In order to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code, each Portfolio must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain and, for certain Portfolios, and net gains
from certain foreign currency transactions) ("Distribution Requirement") and
must meet several additional requirements. With respect to each Portfolio,
these requirements include the following: (1) the Portfolio must derive at least
90% of its gross income each taxable year from dividends, interest, payments
with respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures or forward currency contracts) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); (2) the
Portfolio must derive less than 30% of its gross income each taxable year from
the sale or other disposition of securities, or any of the following, that were
held for less than three months -- options or futures (other than those on
foreign currencies), or foreign currencies (or options, futures or forward
contracts thereon) that are not directly related to the Portfolio's principal
business of investing in securities (or options and futures with respect to
securities) ("Short-Short Limitation"); (3) at the close of each quarter of the
Portfolio's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities, with these other securities limited, in respect
of any one issuer, to an amount that does not exceed 5% of the value of the
Portfolio's total assets and that does not represent more than 10% of the

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<PAGE>

issuer's outstanding voting securities; and (4) at the close of each quarter of
the Portfolio's taxable year, not more than 25% of the value of its total assets
may be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer.

As noted in the Prospectus, each Portfolio must, and intends to
continue to, comply with the diversification requirements imposed by section
817(h) of the Internal Revenue Code and the regulations thereunder. These
requirements, which are in addition to the diversification requirements
mentioned above, place certain limitations on the proportion of each Portfolio's
assets that may be represented by any single investment (which includes all
securities of the same issuer). For these purposes, each U.S. government agency
or instrumentality is treated as a separate issuer, while a particular foreign
government and its agencies, instrumentalities and political subdivisions all
are considered the same issuer.

The use of hedging and related income strategies, such as selling
(writing) and purchasing options and futures contracts and entering into forward
currency contracts, involves complex rules that will determine for income tax
purposes the character and timing of recognition of the gains and losses a
Portfolio realizes in connection therewith. Income from the disposition of
foreign currencies (except certain gains therefrom that may be excluded by
future regulations), and income from transactions in options, futures and
forward currency contracts derived by a Portfolio with respect to its business
of investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement. However, income from the disposition of
options and futures contracts (other than those on foreign currencies) will be
subject to the Short-Short Limitation if they are held for less than three
months. Income from the disposition of foreign currencies, and options, futures
and forward contracts on foreign currencies, that are not directly related to a
Portfolio's principal business of investing in securities (or options and
futures with respect to securities) also will be subject to the Short-Short
Limitation if they are held for less than three months.

If a Portfolio satisfies certain requirements, any increase in value
of a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging position
during the period of the hedge for purposes of determining whether the Portfolio
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from the
designated hedge will be included in gross income for purposes of that
limitation. Each Portfolio will consider whether it should seek to qualify for
this treatment for its hedging transactions. To the extent a Portfolio does not
qualify for this treatment, it may be forced to defer the closing out of

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<PAGE>

certain options, futures and forward contracts beyond the time when it
otherwise would be advantageous to do so, in order for the Portfolio to
continue to qualify as a RIC.

Dividends and interest received by a Portfolio may be subject to
income, withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on that Portfolio's securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these foreign taxes, however, and many foreign countries do not impose
taxes on capital gains in respect of investments by foreign investors.

Any Portfolio that may purchase or hold equity securities may invest
in "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under
certain circumstances, a Portfolio that holds stock of a PFIC will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock or of any gain on disposition of the stock (collectively "PFIC income"),
plus interest thereon, even if the Portfolio distributes the PFIC income as a
taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Portfolio's investment company taxable income and, accordingly,
will not be taxable to it to the extent that income is distributed to its
shareholders.

If a Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Portfolio will be required to include in income each year its
pro rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), even if they are not distributed to the Portfolio; those amounts
most most likely would have to be distributed to the Portfolio's shareholders to
satisfy the Distribution Requirement. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.

Three bills passed by Congress in 1991 and 1992 and vetoed by
President Bush would have substantially modified the taxation of U.S.
shareholders of foreign corporations, including eliminating the provisions
described above dealing with PFICS and replacing them (and other provisions)
with a regulatory scheme involving entities called "passive foreign
corporations." The "Tax Simplification and Technical Corrections Bill of 1993,"
approved in November 1993 by the House Ways and Means Committee, contains the
same modifications. It is unclear at this time

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<PAGE>

whether, and in what form, the proposed modifications may be enacted into law.

Pursuant to proposed regulations, open-end RICs, such as the
Portfolios, would be entitled to elect to "mark-to-market" their stock in
certain PFICs. "Marking-to-market," in this context, means recognizing as gain
for each taxable year the excess, as of the end of that year, of the fair market
value of each such PFIC's stock over the owner's adjusted basis in that stock
(including mark-to-market gain for each prior year for which an election was
in effect).

The foregoing is only a general summary of some of the important
federal income tax considerations generally affecting the Portfolios and their
shareholders. No attempt is made to present a complete explanation of the
federal tax treatment of the Portfolios' activities, and this discussion is not
intended as a substitute for careful tax planning. Accordingly, potential
investors are urged to consult their own tax advisers for more detailed
information and for information regarding any state, local or foreign taxes
applicable to the Portfolios and to dividends and other distributions therefrom.

DIVIDENDS

Money Market Portfolio. Shares begin earning dividends on the day
----------------------
of purchase; dividends are accrued to shareholder accounts daily and are
automatically reinvested in Portfolio shares monthly. The Portfolio does not
expect to realize net capital gain. In the event of a redemption of all of the
shares held by a shareholder, all accrued dividends declared on the shares up to
the date of redemption are credited to the shareholder's account.

The Fund's board of trustees may revise the above dividend policy, or
postpone the payment of dividends, if the Portfolio should have or anticipate
any large unexpected expense, loss or fluctuation in net assets that, in the
opinion of the board, might have a significant adverse effect on shareholders.
To date, no situation has arisen to cause the board of trustees to take any such
action.

OTHER INFORMATION

The Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund or a
Portfolio. However, the Fund's Declaration of Trust disclaims shareholder
liability for acts or obligations of the Fund or any Portfolio and requires that
notice of such disclaimer be given in each note, bond, contract, instrument,
certificate or undertaking made

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<PAGE>

or issued by the trustees or by any officers or officer by or on behalf of the
Fund, the trustees or any of them in connection with the Fund. The Declaration
of Trust provides for indemnification from Fund or Portfolio property, as
appropriate, for all losses and expenses of any shareholder held personally
liable for the obligations of the Fund or Portfolio. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund or Portfolio itself would be unable
to meet its obligations, a possibility that Mitchell Hutchins believes is remote
and not material. Upon payment of any liability incurred by a shareholder of a
Portfolio, the shareholder paying such liability will be entitled to
reimbursement from the general assets of the Portfolio. The trustees intend to
conduct the operations of the Fund so as to avoid, as far as possible, ultimate
liability of the shareholders for liabilities of the Fund and the Portfolios.

More than 99% of the outstanding shares of beneficial interest of the
Money Market, Government, Global Income, Asset Allocation, Dividend Growth,
Growth and Global Growth Portfolios is, at the date of this Prospectus, owned by
American Republic Variable Annuity Account, a segregated investment account of
American Republic Insurance Company, American Benefit Variable Annuity Account,
a segregated investment account of American Benefit Life Insurance Company, and
PaineWebber Life Variable Annuity Account, a segregated investment account of
PaineWebber Life Insurance Company. More than 99% of the outstanding shares of
beneficial interest of the Fixed Income, Balanced and Aggressive Growth
Portfolio is, at the date of this Prospectus, owned by PaineWebber Life Variable
Annuity Account. American Benefit Life Insurance Company is a wholly owned
subsidiary of American Republic Insurance Company.

Counsel. The law firm of Kirkpatrick & Lockhart, 1800 M Street, N.W.,
-------
Washington, D.C. 20036-5891, counsel to the Fund, has passed upon the legality
of the shares offered by the Fund's Prospectus. Kirkpatrick & Lockhart also
acts as counsel to Mitchell Hutchins and PaineWebber in connection with other
matters.

Auditors. Ernst & Young, 787 Seventh Avenue, New York, New York
--------
10019, serves as independent auditors for the Fund.

FINANCIAL STATEMENTS

The Fund's Annual Report to shareholders for the fiscal year ended
December 31, 1993 is a separate document supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing therein are incorporated by reference
in this Statement of Additional Information.

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<PAGE>

DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS

Commercial Paper Ratings. Moody's employs the designation "Prime-1,"
"Prime-2" and "Prime-3" to indicate the repayment capacity of issuers of
commercial paper. Issuers rated Prime-1 have a superior capacity for repayment
of short-term promissory obligations. Prime-1 repayment capacity will normally
be evidenced by the following characteristics: leading market positions in
well-established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earnings coverage of fixed financial charges
and high internal cash generation; well-established access to a range of
financial markets and assured sources of alternate liquidity. Issuers rated
Prime-2 have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained. Issuers rated Prime-3 have an acceptable capacity for
repayment of short-term promissory obligations. The effect of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and the requirement for relatively high financial leverage.
Adequate alternate liquidity is maintained. Not Prime. Issuers assigned this
rating do not fall within any of the Prime rating categories.

S&P's ratings of commercial paper are graded into four categories
ranging from "A" for the highest quality obligations to "D" for the lowest.
A -- Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with
numbers 1, 2, and 3 to indicate the relative degree of safety. A-1 -- This
designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics are denoted with a plus (+) sign
designation. A-2 -- Capacity for timely payments on issues with this
designation is strong. However, the relative degree of safety is not as high as
for issues designated "A-1." A-3 -- Issues carrying this designation have a
satisfactory capacity for timely payment. They are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations. B -- Issues rated B are regarded as having
only an adequate capacity for timely payment. However, such capacity may be
damaged by changing conditions or short-term adversities. C -- This rating is
assigned to short-term debt obligations with a doubtful capacity for payment.
D -- This rating indicates that the issue is either in default or is expected
to be in default upon maturity.

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<PAGE>

Corporate Debt Securities. Moody's rates the long-term debt
securities issued by various entities from "Aaa" to "D". Aaa --Best quality.
These securities carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues. Aa --
High quality by all standards. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities. A -- Upper medium grade obligations. These bonds possess many
favorable investment attributes. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future. Baa - Medium grade
obligations. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics as well. Ba -- Judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class. B -- Generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small. Caa -- Poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Ca --
Obligations which are speculative in a high degree. Such issues are often in
default or have other marked shortcomings. C -- Lowest rated class of bonds;
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Note: Moody's may apply numerical modifiers, 1, 2 and 3 in each
generic rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.

S&P also rates the long-term debt securities of various entities in
categories ranging from "AAA" to "D" according to quality. AAA -- Highest
grade. Capacity to pay interest and repay principal extremely strong. AA --
High grade. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in a small degree. A -- Have a

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strong capacity to pay interest and repay principal, although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions. BBB --Regarded as having adequate capacity to pay interest and
repay principal. Whereas these bonds normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal than
for debt in higher rated categories. BB, B, CCC, CC, C -- Regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. CI -- Reserved for income bonds on which no interest is being paid.
D -- In default, and payment of interest and/or repayment of principal is in
arrears.

Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.

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RULE NO.497(C)
REGISTRATION NO. 33-10438

May 1, 1995

PaineWebber Series Trust
1285 Avenue of the Americas
New York, New York 10019

STATEMENT OF ADDITIONAL INFORMATION

PaineWebber Series Trust ("Fund") is a professionally managed mutual fund
that offers the seven series of shares ("Portfolios") listed below. All the
Portfolios except the Global Income Portfolio are diversified and each has its
own investment objective and policies. Shares of each Portfolio are offered
only to insurance company separate accounts that fund certain variable contracts
("Contracts"). Advisory and administrative services are provided to the Fund by
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned
subsidiary of PaineWebber Incorporated ("PaineWebber").

*The Global Income Portfolio primarily seeks high current income and
-----------------------
secondarily seeks capital appreciation. This Portfolio invests principally
in high quality debt securities of foreign and U.S. issuers.

<PAGE>

This Statement of Additional Information is not a prospectus and
should be read only in conjunction with the Fund's current Prospectus, dated
May 1, 1995. A copy of the Prospectus may be obtained by contacting the Fund or
your PaineWebber investment executive.

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<PAGE>

TABLE OF CONTENTS

Page

Investment Policies and Limitations....................................... 4
Hedging and Related Income Strategies..................................... 18
Trustees and Officers..................................................... 30
Investment Advisory Services.............................................. 39
Portfolio Transactions.................................................... 41
Additional Purchase and Redemption Information............................ 44
Valuation of Shares....................................................... 45
Taxes..................................................................... 47
Dividends................................................................. 50
Other Information......................................................... 50
Financial Statements...................................................... 51
Description of Commercial Paper and Bond Ratings.......................... 52

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<PAGE>

INVESTMENT POLICIES AND LIMITATIONS

The following supplements the information contained in the Fund's
Prospectus concerning the investment policies and limitations of the above-
referenced seven Portfolios.

Special Considerations Relating to Foreign Securities. As noted in the
-----------------------------------------------------
Prospectus, the Global Income Portfolio and Global Growth Portfolio each invests
a substantial portion of its assets in securities of foreign issuers and the
Government Portfolio may invest up to 35% of its total assets in foreign
government securities. In addition, the Asset Allocation Portfolio, Dividend
Growth Portfolio and Growth Portfolio each may invest in U.S. dollar-denominated
securities of foreign issuers. Many of the foreign securities held by these
Portfolios are not registered with the Securities and Exchange Commission
("SEC"), nor are the issuers thereof subject to its reporting requirements.
Accordingly, there may be less publicly available information concerning foreign
issuers of securities held by those Portfolios than is available concerning U.S.
companies. Foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory requirements
comparable to those applicable to U.S. companies.

In addition to purchasing securities of foreign issuers in foreign markets,
the Global Income and Global Growth Portfolios may invest in American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") or other securities
convertible into securities of companies based in foreign countries. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Generally, ADRs, in registered
form, are denominated in U.S. dollars and are designed for use in the U.S.
securities markets and EDRs, in bearer form, may be denominated in other
currencies and are designed for use in European securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs are European receipts evidencing a similar
arrangement. The Asset Allocation, Dividend Growth and Growth Portfolios
generally invest in securities of foreign companies only if such securities are
traded in the U.S. securities markets directly or through ADRs. For purposes of
the Fund's investment policies, ADRs and EDRs are deemed to have the same
classification as the underlying securities they represent. Thus, an ADR or EDR
evidencing ownership of common stock will be treated as common stock.

The Global Growth Portfolio anticipates that its brokerage transactions
involving securities of companies headquartered in countries other than the
United States will be conducted primarily on the principal exchanges of such
countries. Foreign security trading practices, including those involving
securities

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<PAGE>

settlement where Portfolio assets may be released prior to receipt of payment,
may expose the Portfolio to increased risk in the event of a failed trade or the
insolvency of a foreign broker-dealer. Transactions on foreign exchanges are
usually subject to fixed commissions that are generally higher than negotiated
commissions on U.S. transactions, although the Portfolio will endeavor to
achieve the best net results in effecting portfolio transactions. There is
generally less government supervision and regulation of exchanges and brokers in
foreign countries than in the United States.

- 5 -
<PAGE>

The Global Income and the Global Growth Portfolios may invest in securities
of issuers located in emerging market countries. The risks of investing in
foreign securities may be greater with respect to securities of issuers in, or
denominated in the currencies of, emerging market countries. The economies of
emerging market countries generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be adversely affected by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
adversely affected by economic conditions in the countries with which they
trade. Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain emerging market
countries. The securities markets of emerging market countries are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of the U.S. and other developed countries. Disclosure and regulatory
standards in many respects are less stringent in emerging market countries than
in the U.S. and other major markets. There also may be a lower level of
monitoring and regulation of emerging markets and the activities of investors in
such markets, and enforcement of existing regulations may be extremely limited.
Investing in local markets, particularly in emerging market countries, may
require the Global Income and Global Growth Portfolios to adopt special
procedures, seek local government approvals or take other actions, each of which
may involve additional costs to the Portfolios. Certain emerging market
countries may also restrict investment opportunities in issuers in industries
deemed important to national interests.

-at least 5% compound annual growth in earnings per share over the past
five years;

-at least 5% compound annual growth in dividends per common share over the
past five years; and

-an increased dividend per common share in each of the past 5 years.

In determining whether an issuer has met the growth in earnings criterion,
MHII may adjust an issuer's reported earnings to disregard the effects of
extraordinary, unusual or non-recurring items, such as disaster losses, gains or
losses from the disposition of a segment of a business or other significant
asset, or the proceeds or costs of litigation. Such an adjustment could increase
or decrease earnings per share for purposes of determining whether an issuer
qualifies under the growth in earnings criterion.

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<PAGE>

Mitchell Hutchins will determine whether to disregard the effects on
reported income of such items based upon its evaluation of whether the items are
isolated or extraordinary occurrences that are unlikely to have a material and
continuing effect on earnings per share. Mitchell Hutchins' determination will
not necessarily accord with an issuer's classification of an item for financial
reporting purposes, and an item that is not classified as "extraordinary" on an
issuer's income statement might nonetheless be disregarded for purposes of the
growth in earnings criterion if Mitchell Hutchins believes the item to be an
isolated occurrence. Conversely, Mitchell Hutchins might take into account the
effect of an item classified as "extraordinary" if it believes that the item
could have a material and continuing effect on earnings per share. In making
adjustments for items not classified as extraordinary, Mitchell Hutchins will
estimate the change in income taxes payable resulting from its adjustments.

In determining whether an issuer has met the two criteria relating to
growth in dividends, Mitchell Hutchins may disregard a dividend classified by
the issuer as an "extraordinary" or "special" dividend.

The PWAM Equity Valuation Discipline, which Mitchell Hutchins uses to
select individual equity securities for the Portfolio, analyzes historical
operating performance of industries across the equity universe; similarly, it
appraises the historical performance of individual companies relative to
competitors within the industry. This analysis develops an "Operating Index,"
comprised of 15 fundamental variables determining growth, profitability,
financial strength and management performance. The PWAM Equity Valuation
Discipline assesses the future for industry groups and individual companies in
terms of the earnings forecast for the coming year and yearly changes in
earnings estimates. The price to be paid for the combination of historical
performance and earnings outlook is

- 7 -
<PAGE>

taken into account by use of the price/earnings ratios for industry groups and
individual issuers. The historical operating performance, earnings outlook and
price/earnings ratio are compared to derive a "Relative Attraction Index," which
is used to develop a list of equity securities for purchase that are ranked as
the most undervalued. Under the Equity Valuation Discipline, equity securities
will be sold, for example, if they become overvalued relative to the universe;
the asset allocation guidelines shift away from equity securities; or a change
in the fundamentals of an issuer will result in future deterioration in its
value.

The commercial paper and other short-term corporate obligations purchased
by the Portfolio will consist only of obligations of U.S. corporations that are
(1) rated at least Prime-2 by Moody's Investors Service ("Moody's") or A-2 by
Standard & Poor's Ratings Group ("S&P") (2) comparably rated by another
nationally recognized statistical rating organization ("NRSRO") or (3) unrated
and determined by Mitchell Hutchins to be of comparable quality. These
obligations may include variable amount master demand notes, which are unsecured
obligations redeemable upon notice that permit investment of fluctuating amounts
at varying rates of interest pursuant to direct arrangements with the issuer of
the instrument. Such obligations are usually unrated by a rating agency.

The Portfolio may purchase variable rate securities with remaining
maturities of one year or more issued by U.S. government agencies or
instrumentalities or guaranteed by the U.S. government. The Portfolio may also
acquire certain variable and floating rate instruments issued by U.S. companies.
The yield of these securities varies in relation to changes in specific money
market rates such as the prime rate. These changes are reflected in adjustments
to the yields of the variable rate securities at least semi-annually, and
different securities may have different adjustment rates.

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<PAGE>

Adjustable Rate and Floating Rate Mortgage-Backed Securities. Certain
------------------------------------------------------------
Portfolios may invest in adjustable rate mortgage ("ARM") and floating rate
mortgage-backed securities. Because the interest rates on ARM and floating rate
mortgage-backed securities are reset in response to changes in a specified
market index, the values of such securities tend to be less sensitive to
interest rate fluctuations than the values of fixed-rate securities. As a
result, during periods of rising interest rates, ARMs generally do not decrease
in value as much as fixed rate securities. Conversely, during periods of
declining interest rates, ARMs generally do not increase in value as much as
fixed rate securities. ARM mortgage-backed securities represent a right to
receive interest payments at a rate that is adjusted to reflect the interest
earned on a pool of ARMs. ARMs generally provide that the borrower's mortgage
interest rate may not be adjusted above a specified lifetime maximum rate or, in
some cases, below a minimum lifetime rate. In addition, certain ARMs provide
for limitations on the maximum amount by which the mortgage interest rate may
adjust for any single adjustment period. ARMs also may provide for limitations
on changes in the maximum amount by which the borrower's monthly payment may
adjust for any single adjustment period. In the event that a monthly payment is
not sufficient to pay the interest accruing on the ARM, any such excess interest
is added to the mortgage loan ("negative amortization"), which is repaid through
future monthly payments. If the monthly payment exceeds the sum of the interest
accrued at the applicable mortgage interest rate and the principal payment that
would have been necessary to amortize the outstanding principal balance over the
remaining term of the loan, the excess reduces the principal balance of the ARM.
Borrowers under ARMs experiencing negative amortization may take longer to build
up their equity in the underlying property and may be more likely to default.

- 9 -
<PAGE>

pools comprised of fixed-rate mortgage loans. As with ARM mortgage-backed
securities, interest rate adjustments on Floating Rate mortgage-backed
securities may be based on indices that lag behind market interest rates.
Interest rates on floating rate mortgage-backed securities generally are
adjusted monthly. Floating rate mortgage-backed securities are subject to
lifetime interest rate caps, but they generally are not subject to limitations
on monthly or other periodic changes in interest rates or monthly payments.

Illiquid Securities. Each Portfolio may invest up to 10% of its net assets
-------------------
in illiquid securities. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which a Portfolio has valued the
securities and includes, among other things, purchased over-the-

- 10 -
<PAGE>

counter ("OTC") options, repurchase agreements maturing in more than seven days
and restricted securities other than those securities Mitchell Hutchins has
determined are liquid pursuant to guidelines established by the Fund's board of
trustees. The assets used as cover for OTC options written by a Portfolio will
be considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Portfolio may repurchase any OTC option it writes at a maximum
price to be calculated by a formula set forth in the option agreement. The
cover for an OTC option written subject to this procedure will be considered
illiquid only to the extent that the maximum repurchase price under the option
formula exceeds the intrinsic value of the option. Illiquid restricted
securities may be sold only in privately negotiated transactions or in public
offerings with respect to which a registration statement is in effect under the
Securities Act of 1933 ("1933 Act"). Restricted securities acquired by the
Government, Global Income and Global Growth Portfolios include those that are
subject to restrictions contained in the securities laws of other countries.
For these Portfolios, securities that are freely marketable in the country where
they are principally traded, but would not be freely marketable in the United
States, will not be considered illiquid. Where registration is required, a
Portfolio may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time it may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
the Portfolio might obtain a less favorable price than prevailed when it decided
to sell.

Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the 1933 Act, including private placements, repurchase
agreements, commercial paper, foreign securities and corporate bonds and notes.
These instruments are often restricted securities because the securities are
sold in transactions not requiring registration. Institutional investors
generally will not seek to sell these instruments to the general public, but
instead will often depend either on an efficient institutional market in which
such unregistered securities can be readily resold or on an issuer's ability to
honor a demand for repayment. Therefore, the fact that there are contractual or
legal restrictions on resale to the general public or certain institutions is
not dispositive of the liquidity of such investments.

- 11 -
<PAGE>

values for restricted securities and the ability to liquidate an investment to
satisfy share redemption orders. Such markets might include automated systems
for the trading, clearance and settlement of unregistered securities of domestic
and foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc. ("NASD"). An insufficient number of
qualified buyers interested in purchasing Rule 144A-eligible restricted
securities held by a Portfolio, however, could affect adversely the
marketability of such portfolio securities and a Portfolio might be unable to
dispose of such securities promptly or at favorable prices.

The board of trustees has delegated the function of making day-to-day
determinations of liquidity to Mitchell Hutchins, pursuant to guidelines
approved by the board. Mitchell Hutchins takes into account a number of factors
in reaching liquidity decisions, including but not limited to (1) the frequency
of trades for the security, (2) the number of dealers that make quotes for the
security, (3) the number of dealers that have undertaken to make a market in the
security, (4) the number of other potential purchasers and (5) the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how bids are solicited and the mechanics of transfer). Mitchell
Hutchins monitors the liquidity of restricted securities in each Portfolio and
reports periodically on such decisions to the board of trustees.

Section 4(2) Paper. Commercial paper issues in which the Portfolios may
------------------
invest include securities issued by major corporations without registration
under the 1933 Act in reliance on the exemption from such registration afforded
by Section 3(a)(3) thereof, and commercial paper issued in reliance on the so-
called "private placement" exemption from registration which is afforded by
Section 4(2) of the 1933 Act ("Section 4(2) paper"). Section 4(2) paper is
restricted as to disposition under the federal securities laws in that any
resale must similarly be made in an exempt transaction. Section 4(2) paper is
normally resold to other institutional investors through or with the assistance
of investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Section 4(2) paper that is issued by a company that files reports
under the Securities Exchange Act of 1934 is generally eligible to be sold in
reliance on the safe harbor of Rule 144A described under "Illiquid Securities"
above. The Portfolios' 10% limitation on investments in illiquid securities
includes Section 4(2) paper other than Section 4(2) paper that Mitchell Hutchins
has determined to be liquid pursuant to guidelines established by the Fund's
board of trustees. The board has delegated to Mitchell Hutchins the function of
making day-to-day determinations of liquidity with respect to Section 4(2)
paper, pursuant to guidelines approved by the board that require Mitchell
Hutchins to take into account the same factors

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<PAGE>

described under "Illiquid Securities" above for other restricted securities and
require Mitchell Hutchins to perform the same monitoring and reporting
functions.

Repurchase agreements carry certain risks not associated with direct
investments in securities, including possible declines in the market value of
the underlying securities and delays and costs to a Portfolio if the other party
to a repurchase agreement becomes insolvent. Each Portfolio intends to enter
into repurchase agreements only with banks and dealers in transactions believed
by Mitchell Hutchins to present minimum credit risks in accordance with
guidelines established by the Fund's board of trustees. Mitchell Hutchins will
review and monitor the creditworthiness of those institutions under the board's
general supervision.

Reverse Repurchase Agreements. Each Portfolio may enter into reverse
-----------------------------
repurchase agreements with banks and securities dealers up to an aggregate value
of not more than 5% (10% for the Global Income Portfolio) of its total assets.
Such agreements involve the sale of securities held by the Portfolio subject to
the Portfolio's agreement to repurchase the securities at an agreed-upon date
and price reflecting a market rate of interest. Such agreements are considered
to be borrowings and may be entered into only for temporary purposes. While a
reverse repurchase agreement is outstanding, a Portfolio's custodian segregates
assets to cover the amount of the Portfolio's obligations under the reverse
repurchase agreement. See "Investment Policies and Limitations -- Segregated
Accounts." The Global Income Portfolio will not purchase securities while
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding. No other Portfolio has

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<PAGE>

any intention of entering into reverse repurchase agreements during the coming
year.

Lending of Portfolio Securities. Although they have no intention of doing
-------------------------------
so during the coming year, the Government Portfolio is authorized to lend up to
33 1/3% of the total value of its portfolio securities and each other Portfolio
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, but only when the borrower maintains with the Portfolio's custodian
bank collateral either in cash or money market instruments, marked to market
daily, in an amount at least equal to the market value of the securities loaned,
plus accrued interest and dividends. In determining whether to lend securities
to a particular broker-dealer or institutional investor, Mitchell Hutchins will
consider, and during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. The Portfolios
will retain authority to terminate any loans at any time. A Portfolio may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or money market
instruments held as collateral to the borrower or placing broker. A Portfolio
will receive reasonable interest on the loan or a flat fee from the borrower and
amounts equivalent to any dividends, interest or other distributions on the
securities loaned. A Portfolio will regain record ownership of loaned
securities to exercise beneficial rights, such as voting and subscription rights
and rights to dividends, interest or other distributions, when regaining such
rights is considered to be in the Portfolio's interest.

Segregated Accounts. When a Portfolio enters into certain transactions
-------------------
that involve obligations to make future payments to third parties, including
reverse repurchase agreements or the purchase of securities on a when-issued or
delayed delivery

- 14 -
<PAGE>

basis, the Portfolio will maintain with an approved custodian in a segregated
account cash, U.S. government securities or other liquid high grade debt
securities, marked to market daily, in an amount at least equal to the
Portfolio's obligation or commitment under such transactions. As described
below under "Hedging and Related Income Strategies," segregated accounts may
also be required in connection with certain transactions involving options or
futures contracts, interest rate protection transactions or forward currency
contracts.

Investment Limitations. Except as indicated otherwise, each Portfolio may
----------------------
not:

(2) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that
a Portfolio that may use options or futures strategies may make
margin deposits in connection with its use of options, futures
contracts and options on futures contracts;

(3) mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the
Portfolio, except

- 15 -
<PAGE>

as may be necessary in connection with permitted borrowings and
then not in excess of 5% of the Portfolio's total assets taken at
cost, provided that this does not prohibit escrow, collateral or
margin arrangements in connection with the use of options,
futures contracts and options on futures contracts by a Portfolio
that may use options or futures strategies;

(4) make short sales of securities or maintain a short position,
except that a Portfolio that may use options or futures
strategies may make short sales and may maintain short positions
in connection with its use of options, futures contracts and
options on futures contracts and the Dividend Growth Portfolio
may sell short "against the box";

(7) invest in oil, gas or mineral-related programs or leases;

- 16 -
<PAGE>

the aggregate do not represent more than 10% of the total assets
of the Portfolio, and except in connection with the merger,
consolidation or acquisition of all the securities or assets of
another investment company; or

(10) issue senior securities or borrow money, except from banks for
temporary purposes and except for reverse repurchase agreements
and provided that the aggregate amount of all such borrowing does
not exceed 10% of the total asset value of the Portfolio at the
time of such borrowing; provided further that the Portfolio will
not purchase securities while borrowings (including reverse
repurchase agreements) in excess of 5% of the total asset value
of the Portfolio are outstanding.

The following investment restrictions may be changed by the vote of the
Fund's board of trustees without shareholder approval:

(1) No Portfolio will hold assets of any issuers, at the end of any
calendar quarter (or within 30 days thereafter), to the extent
such holdings would cause the Portfolio to fail to comply with
the diversification requirements imposed by section 817(h) of the
Internal Revenue Code and the Treasury regulations issued
thereunder on segregated asset accounts used to fund variable
annuity contracts; and

- 17 -
<PAGE>

HEDGING AND RELATED INCOME STRATEGIES

As discussed in the Prospectus, Mitchell Hutchins may use a variety of
financial instruments ("Hedging Instruments"), including certain options,
futures contracts (sometimes referred to as "futures") and options on futures
contracts, to attempt to hedge the Portfolios' investments or attempt to enhance
the Portfolios' income. For the Government, Global Income and Global Growth
Portfolios, Mitchell Hutchins also may use forward currency contracts, foreign
currency options and futures and options thereon. Global Income Portfolio also
may enter into interest rate protection transactions. The particular Hedging
Instruments are described in Appendix B to the Prospectus. The Money Market and
Asset Allocation Portfolios are not authorized to engage in hedging or related
income strategies.

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

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

A Portfolio may purchase and write (sell) covered straddles on
securities and stock indices. A long straddle is a

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<PAGE>

combination of a call and a put option purchased on the same security or on the
same futures contract, where the exercise price of the put is less than or equal
to the exercise price of the call. A Portfolio might enter into a long straddle
when Mitchell Hutchins believes it likely that interest rates will be more
volatile during the term of the option than the option pricing implies. A short
straddle is a combination of a call and a put written on the same security where
the exercise price of the put is less than or equal to the exercise price of the
call. A Portfolio might enter into a short straddle when Mitchell Hutchins
believes it unlikely that interest rates will be as volatile during the term of
the option as the option pricing implies.

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

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

In addition to the products, strategies and risks described below and
in the Prospectus, Mitchell Hutchins expects to discover additional
opportunities in connection with options, future contracts, forward currency
contracts and other hedging techniques. These new opportunities may become
available as Mitchell Hutchins develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new options,
futures contracts, forward currency contracts or other techniques are developed.
Mitchell Hutchins may utilize these opportunities to the extent that they are
consistent with the Portfolios' investment objectives and permitted by the
Portfolios' investment limitations and applicable regulatory authorities. The
Fund's Prospectus or Statement of Additional Information will be supplemented to
the extent that new products or techniques involve materially different risks
than those described below or in the Prospectus.

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<PAGE>

(1) Successful use of most Hedging Instruments depends upon Mitchell
Hutchins' ability to predict movements of the overall securities, currency and
interest rate markets, which requires different skills than predicting changes
in the prices of individual securities. While Mitchell Hutchins is experienced
in the use of Hedging Instruments, there can be no assurance that any particular
hedging strategy adopted will succeed.

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

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

(4) As described below, a Portfolio might be required to maintain
assets as "cover," maintain segregated accounts or make margin payments when it
takes positions in Hedging Instruments involving obligations to third parties
(i.e., Hedging Instruments other than purchased options). If a Portfolio were
unable to close out its positions in such Hedging Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the position expired or matured. These requirements might impair a
Portfolio's ability to sell a portfolio security or make an investment at a time
when it would otherwise be favorable to do so, or require that a Portfolio sell
a portfolio security at a disadvantageous time. A Portfolio's ability to close
out a position in a Hedging Instrument prior to expiration or maturity depends
on the existence of a liquid secondary market or, in the absence of such a
market, the ability

- 20 -
<PAGE>

and willingness of a contra party to enter into a transaction closing out the
position. Therefore, there is no assurance that any hedging position can be
closed out at a time and price that is favorable to the Portfolio.

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

Options. Each Portfolio that may use options may purchase put and
call options, and write (sell) covered put and call options on equity and debt
securities and, in the case of Government, Global Income and Global Growth
Portfolios, on foreign currencies. Each Portfolio that may use options may
purchase put and call options and write (sell) covered call options on stock
indices. The purchase of call options serves as a long hedge, and the purchase
of put options serves as a short hedge. Writing covered put or call options can
enable a Portfolio to enhance income by reason of the premiums paid by the
purchasers of such options. However, if the market price of the security
underlying a covered put option declines to less than the exercise price of the
option, minus the premium received, the Portfolio would expect to suffer a loss.
Writing covered call options serves as a limited short hedge, because declines
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the security appreciates
to a price higher than the exercise price of the call option, it can be expected
that the option will be exercised and the Portfolio will be obligated to sell
the security at less than its market value. If the covered call option is an
OTC option, the securities or other assets used as cover would be considered
illiquid to the extent described under "Investment Policies and Restrictions --
Illiquid Securities."

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<PAGE>

The Portfolios may purchase or write both exchange-traded and OTC
options. Currently, many options on equity securities are exchange-traded.
Exchange markets for options on debt securities and foreign currencies exist but
are relatively new, and these instruments are primarily traded on the OTC
market. Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed which,
in effect, guarantees completion of every exchange-traded option transaction.
In contrast, OTC options are contracts between the Portfolio and its contra
party (usually a securities dealer or a bank) with no clearing organization
guarantee. Thus, when the Portfolio purchases or writes an OTC option, it
relies on the contra party to make or take delivery of the underlying investment
upon exercise of the option. Failure by the contra party to do so would result
in the loss of any premium paid by the Portfolio as well as the loss of any
expected benefits of the transaction.

Generally, the OTC debt and foreign currency options used by the
Portfolios are European-style options. This means that the option is only
exercisable immediately prior to its expiration. This is in contrast to
American-style options, which are exercisable at any time prior to the
expiration date of the option.

- 22 -
<PAGE>

options only with contra parties that are expected to be capable of entering
into closing transactions with the Portfolio, there is no assurance that the
Portfolio will in fact be able to close out an OTC option position at a
favorable price prior to expiration. In the event of insolvency of the contra
party, the Portfolio might be unable to close out an OTC option position at any
time prior to its expiration.

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

Limitations on the Use of Options. The Portfolios' use of options is
governed by the following guidelines, which can be changed by the Fund's board
of trustees without shareholder vote:

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

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

Futures strategies also can be used to manage the average duration of a
Portfolio. If Mitchell Hutchins wishes to shorten the average duration of a
Portfolio, the Portfolio may sell a futures contract or a call option thereon,
or purchase a put option on that futures contract. If Mitchell Hutchins wishes
to

- 23 -
<PAGE>

lengthen the average duration of a Portfolio, the Portfolio may buy a futures
contract or a call option thereon.

- 24 -
<PAGE>

secondary market. Each Portfolio intends to enter into futures transactions
only on exchanges or boards of trade where there appears to be a liquid
secondary market. However, there can be no assurance that such a market will
exist for a particular contract at a particular time.

Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or related options might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the futures and related options
markets are subject to daily variation margin calls and might be compelled to
liquidate futures or related options positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.

Limitations on the Use of Futures. The Portfolios' use of futures is
governed by the following guidelines, which can be changed by the Fund's board
of trustees without shareholder vote.

(1) To the extent a Portfolio enters into futures contracts, options
on futures positions and

- 25 -
<PAGE>

options on foreign currencies trade on a commodities exchange
that are not for bona fide hedging purposes (as defined by the
CFTC), the aggregate initial margin and premiums on those
positions (excluding the amount by which options are "in-the-
money") may not exceed 5% of the Portfolio's net assets.

(2) The aggregate premiums on all options (including options on
securities, foreign currencies and stock or bond indices and
options on futures contracts) purchased by a Portfolio that are
held at any time will not exceed 20% of the Portfolio's total net
assets.

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

- 26 -
<PAGE>

lot market (generally consisting of transactions of less than $1 million) for
the underlying foreign currencies at prices that are less favorable than for
round lots.

Forward Currency Contracts. The Government, Global Income and Global
Growth Portfolios may enter into forward currency contracts to purchase or sell
foreign currencies for a fixed amount of U.S. dollars or another foreign
currency. Such transactions may serve as long hedges -- for example, a
Portfolio may purchase a forward currency contract to lock in the U.S. dollar
price of a security denominated in a foreign currency that the Portfolio intends
to acquire. Forward currency contract transactions may also serve as short
hedges -- for example, a Portfolio may sell a forward currency contract to lock
in the U.S. dollar equivalent of the proceeds from the anticipated sale of a
security denominated in a foreign currency.

- 27 -
<PAGE>

the first foreign currency, with payment to be made in the second foreign
currency. Transactions that use two foreign currencies are sometimes referred
to as "cross hedging." Use of a different foreign currency magnifies the risk
that movements in the price of the Hedging Instrument will not correlate or will
correlate unfavorably with the foreign currency being hedged.

- 28 -
<PAGE>

would not obligate the Portfolio to deliver an amount of foreign currency in
excess of the value of the position being hedged by such contracts or (2) the
Portfolio maintains appropriate assets in a segregated account in an amount not
less than the value of its total assets committed to the consummation of the
contract and not covered as provided in (1) above, as described above in
"Investment Policies and Limitations - Segregated Accounts."

- 29 -
<PAGE>

accrued on a daily basis and appropriate Portfolio assets having an aggregate
net asset value at least equal to the accrued excess will be maintained in a
segregated account, as described above in "Investment Policies and Limitations -
- - Segregated Accounts." The Portfolio also will establish and maintain such
segregated accounts with respect to its total obligations under any interest
rate swaps that are not entered into on a net basis and with respect to any
interest rate caps, collars and floors that are written by the Portfolio.

TRUSTEES AND OFFICERS

The trustees and executive officers of the Fund, their business addresses
and principal occupations during the past five years are:
<TABLE>
<CAPTION>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------
<S> <C>
E. Garrett Bewkes, Jr.; 68** Trustee and Chairman of the Board of
Trustees. Mr. Bewkes is a director
of Paine Webber Group Inc. ("PW
Group") (holding company of
PaineWebber and Mitchell Hutchins)
and a consultant to PW Group.
Prior to 1988, he was Chairman of the
board, president and chief executive
officer of American Bakeries Company.
Mr. Bewkes is also a director of
Interstate Bakeries Corporation and a
director or trustee of 26 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.

</TABLE>

- 30 -
<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------
<S> <C>
Meyer Feldberg; 52 Trustee. Mr. Feldberg is Dean and
Columbia University Professor of Management of the
101 Uris Hall Graduate School of Business, Columbia
New York, New York 10027 University. Prior to 1989, he was
president of the Illinois Institute
of Technology. Dean Feldberg is also
a director of AMSCO International
Inc., Federated Department Stores,
Inc., Inco Homes Corporation and New
World Communications Group
Incorporated and a director or
trustee of 18 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.

George W. Gowen; 65 Trustee. Mr. Gowen is a partner in
666 Third Avenue the law firm of Dunnington, Bartholow
New York, New York 10017 & Miller. Prior to May 1994 he was a
partner in the law firm of Fryer,
Ross & Gowen. Mr. Gowen is also a
director of Columbia Real Estate
Investments, Inc. and a director or
trustee of 16 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.

</TABLE>

- 31 -
<PAGE>

<TABLE>
<CAPTION>
Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------
<S> <C>
Frank P.L. Minard; 49** Trustee. Mr. Minard is chairman
of Mitchell Hutchins, chairman of the
board of MHII and a director of
PaineWebber. Prior to 1993, Mr. Minard
was managing director of Oppenheimer
Capital in New York and Director of
Oppenheimer Capital Ltd. in London. Mr.
Minard is also a director or trustee of
26 other investment companies for which
Mitchell Hutchins or PaineWebber serves
as investment adviser.

</TABLE>

- 32 -
<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------
<S> <C>
Frederic V. Malek; 58 Trustee. Mr. Malek is Chairman of
901 15th Street, N.W. Thayer Capital Partners (investment
Suite 300 bank) and a co-chairman and director
Washington, D.C. 20005 of CB Commercial Group Inc. (real
estate). From January 1992 to
November 1992 he was campaign manager
of Bush-Quayle '92. From 1990 to
1992, he was vice chairman and, from
1989 to 1990, he was president of
Northwest Airlines Inc., NWA Inc.
(holding company of Northwest
Airlines Inc.) and Wings Holdings
Inc. (holding company of NWA Inc.).
Prior to 1989, he was employed by the
Marriott Corporation (hotels,
restaurants, airline catering and
contract feeding), where he most
recently was an executive vice
president and president of Marriott
Hotels and Resorts. Mr. Malek is
also a director of American
Management Systems, Inc., Automatic
Data Processing, Inc., Avis, Inc.,
FPL Group, Inc., ICF International,
Manor Care, Inc. and National
Education Corporation and a director
or trustee of 16 other investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.

</TABLE>

- 33 -
<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------
<S> <C>
Thomas F. Murray; 84 Trustee. Mr. Murray is a real
400 Park Avenue estate and financial consultant. Mr.
New York, New York 10022 Murray is also a director and
chairman of American Continental
Properties, Inc., a trustee of
Prudential Realty Trust, and a
director or trustee of 16 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.

Teresa M. Boyle; 36 Vice President. Ms. Boyle is a first
vice president and manager -advisory
administration of Mitchell Hutchins.
Prior to November 1993, she was
compliance manager of Hyperion
Capital Management, Inc., an
investment advisory firm. Prior to
April 1993, Ms. Boyle was a vice
president and manager - legal
administration of Mitchell Hutchins.
Ms. Boyle is also a vice president of 26
other investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.

</TABLE>

- 34 -
<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------
<S> <C>
Ellen R. Harris; 48 Vice President. Ms. Harris is
chief domestic equity strategist, a
managing director and chief
investment officer-domestic of
Mitchell Hutchins. Ms. Harris is
also a vice president of 19 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.

</TABLE>

- 35 -
<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------
<S> <C>
Ann E. Moran; 37 Vice President and Assistant
Treasurer. Ms. Moran is a vice
president of Mitchell Hutchins. Ms.
Moran is also a vice president and
assistant treasurer of 26 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.

</TABLE>

- 36 -
<PAGE>

Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------
<S> <C>
Dianne E. O'Donnell; 42 Vice President and Secretary. Ms.
O'Donnell is a senior vice president
and senior associate general counsel
of Mitchell Hutchins. Ms. O'Donnell
is also a vice president and
secretary of 26 other investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.

Paul H. Schubert; 31 Vice President and Assistant Treasurer.
Mr. Schubert is a vice president of
Mitchell Hutchins. From August 1992 to
August 1994, he was a vice president at
BlackRock Financial Management LP. Prior
to August 1992, he was an audit manager
with Ernst & Young LLP. Mr. Schubert is
also a vice president and assistant
secretary of 26 other investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.

- 37 -
<PAGE>

<TABLE>
<CAPTION>
Position with the Fund;
Business Experience
Name and Address* and Other Directorships
- ---------------- -----------------------
<S> <C>
Gregory K. Todd; 34 Vice President and Assistant
Secretary. Mr. Todd is a first vice
president and associate general
counsel of Mitchell Hutchins. Prior
to 1993, he was a partner with the
law firm of Shereff, Friedman,
Hoffman & Goodman. Mr. Todd is also
a vice president and assistant
secretary of 26 other investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.

Stuart Waugh; 39 Vice President. Mr. Waugh is a
managing director and a portfolio
manager of Mitchell Hutchins
responsible for global fixed income
investments and currency trading.
Mr. Waugh is also a vice president of 5
other investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>
- ------------------
*Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.

**Messrs. Bewkes, Grano and Minard are "interested
persons" of the Fund as defined in the Investment Company Act of 1940 ("1940
Act") by virtue of their positions with PW Group, PaineWebber and/or Mitchell
Hutchins.

- 38 -
<PAGE>

INVESTMENT ADVISORY SERVICES

The Advisory Contract authorizes Mitchell Hutchins to retain one or
more sub-advisers but does not require Mitchell Hutchins to do so. Under a
separate sub-advisory contract dated ______ with Mitchell Hutchins, MHII serves
as sub-adviser for the Dividend Growth Portfolio. Pursuant to such sub-advisory
contract, during the period ________ to December 31, 1994, MHII earned
sub-advisory fees of ______.

- 39 -
<PAGE>

(including brokerage commissions, if any) of securities purchased or sold by the
Portfolio and any losses incurred in connection therewith; (2) fees payable to
and expenses incurred on behalf of the Portfolio by Mitchell Hutchins; (3)
organizational expenses; (4) filing fees and expenses relating to the
registration and qualification of the Fund or the shares of a Portfolio under
federal and state securities laws and maintenance of such registrations and
qualifications; (5) fees and salaries payable to the trustees who are not
"interested persons" of the Fund or Mitchell Hutchins; (6) all expenses incurred
in connection with the trustees' services, including travel expenses; (7) taxes
(including any income or franchise taxes) and governmental fees; (8) costs of
any liability, uncollectible items of deposit and other insurance and fidelity
bonds; (9) any costs, expenses or losses arising out of a liability of or claim
for damages or other relief asserted against the Fund or Portfolio for violation
of any law; (10) legal, accounting and auditing expenses, including legal fees
of special counsel for the trustees who are not interested persons of the Fund;
(11) charges of custodians, transfer agents and other agents; (12) costs of
preparing share certificates, if any; (13) expenses of setting in type and
printing prospectuses and supplements thereto, statements of additional
information and supplements thereto, reports and proxy materials for existing
shareholders and costs of mailing such materials to shareholders; (14) any
extraordinary expenses (including fees and disbursements of counsel) incurred by
the Fund or Portfolio; (15) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (16)
costs of mailing and tabulating proxies and costs of meetings of shareholders,
the board and any committees thereof; (17) the cost of investment company
literature and other publications provided to the trustees and officers; and
(18) costs of mailing, stationery and communications equipment.

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

- 40 -
<PAGE>

PORTFOLIO TRANSACTIONS

Subject to policies established by the Fund's board of trustees,
Mitchell Hutchins is responsible for the execution of portfolio transactions and
the allocation of brokerage transactions for each Portfolio. In executing
portfolio transactions, Mitchell Hutchins seeks to obtain the best net results
for each Portfolio taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Prices paid to
dealers in principal transactions through which most debt securities and some
equity securities are traded generally include a "spread," which is the
difference between the prices at which the dealer is willing to purchase and
sell a specific security at that time. Each Portfolio may invest in securities
traded in the OTC markets and will engage primarily in transactions with the
dealers who make markets in such securities, unless a better price or execution
could be obtained by using a broker. While Mitchell Hutchins generally seeks
reasonably competitive commission rates, payment of the lowest commission is not
necessarily consistent with obtaining the best net results. During the fiscal
year ended December 31, 1991, the Money Market, Government, and Global Income
Portfolios paid no commissions, while the Asset Allocation, Growth, and Global
Growth Portfolios paid aggregate commissions totalling $49,572, $98,786, and
$41,540, respectively. During the fiscal year ended December 31, 1992, the
Money Market, Government, and Global Income Portfolios paid no commissions,
while the Asset Allocation, Dividend Growth, Growth, and Global Growth
Portfolios paid aggregate commissions totalling $40,643, $34,551, $281,467, and
$44,608, respectively. During the fiscal year ended December 31, 1993, the
Money Market, Government, and Global Income Portfolios paid no commissions,
while the Asset Allocation, Dividend Growth, Growth and Global Growth Portfolios
paid aggregate commissions totalling $74,851, $32,158, $32,332 and $442,008,
respectively.

- 41 -
<PAGE>

effected and related compensation paid in accordance with applicable SEC
regulations. During the fiscal year ended December 31, 1991, Asset Allocation
Portfolio paid $7,906 and Growth Portfolio paid $12,905 in brokerage commissions
to PaineWebber. During the fiscal year ended December 31, 1992, Asset
Allocation Portfolio paid $420, Dividend Growth Portfolio paid $966 and Growth
Portfolio paid $1,509 in brokerage commissions to PaineWebber. During the
fiscal year ended December 31, 1993, Asset Allocation Portfolio paid $1,274 in
brokerage commissions to PaineWebber, representing 1.7% of the aggregate
brokerage commissions paid by that Portfolio and 3.7% of the aggregate dollar
amount of transactions involving the payment of commissions. During the fiscal
year ended December 31, 1993, Dividend Growth Portfolio paid $2,283 in brokerage
commissions to PaineWebber, representing 7.0% of the aggregate brokerage
commissions paid by that Portfolio and 5.2% of the aggregate dollar amount of
transactions involving the payment of commissions. During the fiscal year ended
December 31, 1993, Growth Portfolio paid $595 in brokerage commissions to
PaineWebber, representing 1.8% of the aggregate brokerage commissions paid by
that Portfolio and 2.1% of the aggregate dollar amount of transactions involving
the payment of commissions. During the fiscal year ended December 31, 1993,
Global Growth Portfolio paid $720 in brokerage commissions to PaineWebber,
representing 0.16% of the aggregate brokerage commissions paid by that Portfolio
and 0.31% of the aggregate dollar amount of transactions involving the payment
of commissions. The other Portfolios did not pay any brokerage commissions to
PaineWebber or any other affiliate of Mitchell Hutchins during the last three
fiscal years.

Consistent with the interest of each Portfolio and subject to the
review of the Fund's board of trustees, Mitchell Hutchins may cause a Portfolio
to purchase and sell portfolio securities from and to brokers who provide the
Portfolio with research, analysis, advice and similar services. In return for
such services, the Portfolio may pay to those brokers a higher commission than
may be charged by other brokers, provided that Mitchell Hutchins determines in
good faith that such commission is reasonable in terms either of that particular
transaction or of the overall responsibility of Mitchell Hutchins to the
Portfolio and its other clients and that the total commissions paid by the
Portfolio will be reasonable in relation to the benefits to the Portfolio over
the long term. Research services

- 42 -
<PAGE>

furnished by brokers through which a Portfolio effects securities transactions
may be used by Mitchell Hutchins in advising other funds or accounts and,
conversely, research services furnished to Mitchell Hutchins by brokers in
connection with other funds or accounts Mitchell Hutchins advises may be used by
Mitchell Hutchins in advising such Portfolio. Information and research received
from such brokers will be in addition to, and not in lieu of, the services
required to be performed by Mitchell Hutchins under the Advisory Contract.
During the fiscal year ended December 31, 1993, the Asset Allocation, Dividend
Growth, Growth and Global Growth Portfolios directed $8,471,583, $9,357,187,
$1,152,779 and $12,657,153, respectively, in portfolio transactions to brokers
chosen because they provide research and analysis for which these Portfolios
paid $12,914, $15,169, $2,424 and $10,901, respectively, in commissions. During
the same period, no other Portfolio paid any brokerage commissions to brokers
chosen because they provide research and analysis. The Portfolios may purchase
and sell portfolio securities to and from dealers who provide the Portfolios
with research services. Portfolio transactions will not be directed by the
Portfolios to dealers solely on the basis of research services provided. The
Portfolios will not purchase portfolio securities at a higher price or sell such
securities at a lower price in connection with transactions effected with a
dealer, acting as principal, who furnishes research services to Mitchell
Hutchins than would be the case if no weight were given by Mitchell Hutchins to
the dealer's furnishing of such services.

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

The Portfolios will not purchase securities that are offered in
underwritings in which Mitchell Hutchins or any of its affiliates is a member of
the underwriting or selling group, except pursuant to procedures adopted by the
Fund's board of trustees pursuant to Rule 10f-3 under the 1940 Act. Among other
things, these procedures require that the commission or spread paid in
connection with such a purchase be reasonable and fair, that the purchase be at
not more than the public offering price

- 43 -
<PAGE>

prior to the end of the first business day after the date of the public offering
and that Mitchell Hutchins or any affiliate thereof not participate in or
benefit from the sale to the Fund.

Portfolio Turnover. The turnover rate may vary greatly from year to
------------------
year for any Portfolio and will not be a limiting factor when Mitchell Hutchins
or the applicable Sub-Adviser deems portfolio changes appropriate. The annual
portfolio turnover rate is calculated by dividing the lesser of a Portfolio's
annual sales or purchases of portfolio securities (exclusive of purchases or
sales of securities whose maturities at the time of acquisition were one year or
less) by the monthly average value of the securities in the Portfolio during the
year. For the fiscal years ended December 31, 1993 and December 31, 1992,
respectively, the portfolio turnover rates were 7.93% and 23.13% for the
Government Portfolio, 68.60% and 75.44% for the Global Income Portfolio, 60.36%
and 30.74% for the Asset Allocation Portfolio, 34.95% and 29.36% for the Growth
Portfolio, 266.96% and 127.06% for the Global Growth Portfolio and 51.68% and
13.74% for the Dividend Growth Portfolio.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

- 44 -
<PAGE>

VALUATION OF SHARES

Each Portfolio determines its net asset value as of the close of
regular trading (currently 4:00 p.m., eastern time) on the NYSE on each Monday
through Friday when the NYSE is open.

- 45 -
<PAGE>

- 46 -
<PAGE>

TAXES

Shares of the Portfolios are offered only to insurance company
separate accounts that fund certain variable annuity and life insurance
contracts ("Contracts"). See the applicable Contract prospectus for a
discussion of the special taxation of insurance companies with respect to such
accounts and of the Contract holders.

Each Portfolio is treated as a separate corporation for federal income
tax purposes. In order to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code, each Portfolio must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain and, for certain Portfolios, net gains from
certain foreign currency transactions) ("Distribution Requirement") and must
meet several additional requirements. With respect to each Portfolio, these
requirements include the following: (1) the Portfolio must derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures or forward currency contracts) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); (2) the
Portfolio must derive less than 30% of its gross income each taxable year from
the sale or other disposition of securities, or any of the following, that were
held for less than three months -- options or futures (other than those on
foreign currencies), or foreign currencies (or options, futures or thereon) that
are not directly related to the Portfolio's principal business of investing in
securities (or options and futures with respect to securities) ("Short-Short
Limitation"); (3) at the close of each quarter of the Portfolio's taxable year,
at least 50% of the value of its total assets must be represented by cash and
cash items, U.S. government securities, securities of other RICs and other
securities, with these other securities limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the Portfolio's total
assets and that does not represent more than 10% of the issuer's outstanding

- 47 -
<PAGE>

voting securities; and (4) at the close of each quarter of the Portfolio's
taxable year, not more than 25% of the value of its total assets may be invested
in securities (other than U.S. government securities or the securities of other
RICs) of any one issuer.

- 48 -
<PAGE>

certain options, futures and forward contracts beyond the time when it otherwise
would be advantageous to do so, in order for the Portfolio to continue to
qualify as a RIC.

If a Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Portfolio will be required to include in income each year its
pro rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), even if they are not distributed to the Portfolio; those amounts
most likely would have to be distributed to the Portfolio's shareholders to
satisfy the Distribution Requirements. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.

- 49 -
<PAGE>

whether, and in what form, the proposed modifications may be enacted into law.

DIVIDENDS

Money Market Portfolio. Shares begin earning dividends on the day of
----------------------
purchase; dividends are accrued to shareholder accounts daily and are
automatically reinvested in Portfolio shares monthly. The Portfolio does not
expect to realize net capital gain. In the event of a redemption of all of the
shares held by a shareholder, all accrued dividends declared on the shares up to
the date of redemption are credited to the shareholder's account.

OTHER INFORMATION

- 50 -
<PAGE>

More than 99% of the outstanding shares of beneficial interest of the
Money Market, Government, Global Income, Asset Allocation, Dividend Growth,
Growth and Global Growth Portfolios is, at the date of this Prospectus, owned by
American Republic Variable Annuity Account, a segregated investment account of
American Republic Insurance Company, American Benefit Variable Annuity Account,
a segregated investment account of American Benefit Life Insurance Company, and
PaineWebber Life Variable Annuity Account, a segregated investment account of
PaineWebber Life Insurance Company. American Benefit Life Insurance Company is
a wholly owned subsidiary of American Republic Insurance Company.

Auditors. Ernst & Young, 787 Seventh Avenue, New York, New York 10019,
--------
serves as independent auditors for the Fund.

FINANCIAL STATEMENTS

- 51 -
<PAGE>

DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS

S&P's ratings of commercial paper are graded into four categories
ranging from "A" for the highest quality obligations to "D" for the lowest. A -
- - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with
numbers 1, 2, and 3 to indicate the relative degree of safety. A-1 -- This
designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics are denoted with a plus (+) sign
designation. A-2 -- Capacity for timely payments on issues with this
designation is strong. However, the relative degree of safety is not as high as
for issues designated "A-1." A-3 -- Issues carrying this designation have a
satisfactory capacity for timely payment. They are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations. B -- Issues rated B are regarded as having
only an adequate capacity for timely payment. However, such capacity may be
damaged by changing conditions or short-term adversities. C -- This rating is
assigned to short-term debt obligations with a doubtful capacity for payment. D
- -- This rating indicates that

- 52 -
<PAGE>

the issue is either in default or is expected to be in default upon maturity.

S&P also rates the long-term debt securities of various entities in
categories ranging from "AAA" to "D" according to quality. AAA -- Highest
grade. Capacity to pay interest and

- 53 -
<PAGE>

repay principal extremely strong. AA -- High grade. Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from AAA issues
only in a small degree. A -- Have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions. BBB --Regarded as having
adequate capacity to pay interest and repay principal. Whereas these bonds
normally exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal than for debt in higher rated categories. BB, B,
CCC, CC, C -- Regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions. CI -- Reserved for income bonds on which
no interest is being paid. D -- In default, and payment of interest and/or
repayment of principal is in arrears.

Plus (+) or Minus (-): The ratings from "AA to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.

- 54 -
<PAGE>

DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS

A - 1
<PAGE>

PART C. OTHER INFORMATION
--------------------------

Item 24. Financial Statements and Exhibits
---------------------------------

(a) Financial Statements: (to be filed)

Included in Part A of this Registration Statement:
- --------------------------------------------------

Financial Highlights for each of the Money Market, Growth and Global
Growth Portfolios for each of the seven years in the period ended December
31, 1993 and for the period May 4, 1987 (commencement of operations) to
December 31, 1987.

Financial Highlights for the Global Income Portfolio for each of the six
years in the period ended December 31, 1993 and for the period May 1, 1988
(commencement of operations) to December 31, 1988.

Financial Highlights for the Asset Allocation Portfolio for each of the
six years in the period ended December 31, 1993 and for the period June 1,
1988 (commencement of operations) to December 31, 1988.

Financial Highlights for the Government Portfolio for each of the five
years in the period ended December 31, 1993 and for the period July 5,
1989 (commencement of operations) to December 31, 1989.

Financial Highlights for the Dividend Growth Portfolio for the two years
in the period ended December 31, 1993 and for the period January 2, 1992
(commencement of operations) to December 31, 1992.

Financial Highlights for each of the Aggressive Growth and Balanced
Portfolios for the year ended December 31, 1994 and for the period
November 2, 1993 (commencement of operations) to December 31, 1993.

Financial Highlights for the Fixed Income Portfolio for the year ended
December 31, 1994 and for the period November 8, 1993 (commencement of
operations) to December 31, 1993.

Included through incorporation by reference in Part B of this Registration
- --------------------------------------------------------------------------
Statement:
- ----------

Portfolio of Investments at December 31, 1994

Statement of Assets and Liabilities at December 31, 1994

Statement of Operations for the year ended December 31, 1994

Statement of Changes in Net Assets for the years ended December 31, 1994
and December 31, 1993 for the Money Market, Growth, Global Growth, Global
Income, Asset Allocation, Government and Dividend Growth Portfolios.

Statement of Changes in Net Assets for the year ended December 31, 1994
and for the

-1-
<PAGE>

period November 2, 1993 to December 31, 1993 for the Aggressive Growth and
Balanced Portfolios.

Statement of Changes in Net Assets for the year ended December 31, 1994
and for the period November 8, 1993 to December 31, 1993 for the Fixed
Income Portfolio.

Notes to Financial Statements

Financial Highlights for each of the five years in the period ended
December 31, 1994 for the Money Market, Growth, Global Growth, Global
Income, Government and Asset Allocation Portfolios; for the two years
ended December 31, 1994 and for the period January 2, 1992 (commencement
of operations) to December 31, 1992 for the Dividend Growth Portfolio; for
the year ended December 31, 1994 and for the period November 2, 1993
(commencement of operations) to December 31, 1993 for the Aggressive
Growth and Balanced Portfolios; and for the year ended December 31, 1994
and for the period November 8, 1993 (commencement of operations) to
December 31, 1993 for the Fixed Income Portfolio.

Report of Ernst & Young, Independent Auditors, dated February ____, 1995.

(b) Exhibits:

(1) (a) Declaration of Trust 1/
-
(b) Amendment effective January 28, 1988 to Declaration of Trust 3/
-
(c) Amendment effective February 24, 1989 to Declaration of Trust 5/
-
(d) Amendment effective December 31, 1990 to Declaration of Trust 7/
-
(e) Amendment effective October 15, 1991 to Declaration of Trust 8/
-
(f) Amendment effective May 25, 1993 to Declaration of Trust 10/
--
(2) (a) By-laws, as amended 1/
-
(b) Amendments effective March 19, 1991 to By-Laws 7/
-

(3) Voting trust agreement - none
(4) Specimen security - none
(5) Investment Advisory and Administration Contract 4/
-
(a) Investment Advisory and Administration Fee Agreement with
respect to the Government Portfolio 6/
-
(b) Investment Advisory and Administration Fee Agreement with
respect to the Dividend Growth Portfolio 9/
-

(c) Investment Advisory and Administration Fee Agreement with
respect to the Fixed Income Portfolio 12/
--
(d) Investment Advisory and Administration Fee Agreement with
respect to the Balanced Portfolio 12/
--
(e) Investment Advisory and Administration Fee Agreement with
respect to the

-2-
<PAGE>

Aggressive Growth Portfolio 12/
--

(f) Sub-Investment Advisory Contract with respect to the Fixed
Income Portfolio 11/
--
(g) Sub-Investment Advisory Contract with respect to the Balanced
Portfolio 11/
--
(h) Sub-Investment Advisory Contract with respect to the Aggressive
Growth Portfolio 11/
--
(6) Underwriting Contract - none
(7) Bonus, profit sharing or pension plans - none
(8) Custodian Agreement
(a) Custodian Agreement with State Street Bank and Trust Company
with respect to the assets of the Money Market and Growth
Portfolios 2/
-
(i) Addendum to Custodian Agreement with State Street Bank and
Trust Company for addition of the Asset Allocation
Portfolio 5/
-
(ii) Amendment to Custodian Agreement with State Street Bank
and Trust Company for addition of the Government Portfolio
6/
-
(iii) Addendum to Custodian Agreement with State Street Bank and
Trust Company for addition of the Dividend Growth
Portfolio 9/
-
(b) Custodian Agreement with Brown Brothers Harriman & Co. with
respect to the assets of the Global Growth Portfolio 2/
-
(c) Custodian Agreement with Brown Brothers Harriman & Co. with
respect to the assets of the Global Income Portfolio 5/
-
(9) Transfer Agency Services and Shareholder Services Agreement 9/
-
(10) (a) Opinion and consent of Kirkpatrick & Lockhart, counsel to the
Registrant 1/
-
(b) Opinion and Consent of Kirkpatrick & Lockhart with respect to
the Dividend Growth Portfolio 8/
-
(c) Opinion and Consent of Kirkpatrick & Lockhart with respect to
the Fixed Income Portfolio, Balanced Portfolio and Aggressive
Growth Portfolio 10/
--
(11) Other opinions, appraisals, rulings and consents:

(a) Independent Auditors' Consent (to be filed)

(12) Financial statements omitted from prospectus-none
(13) Letter of investment intent 1/
-
(14) Prototype Retirement Plan - none
(15) Plan pursuant to Rule 12b-1 - none

______________________

1/ Incorporated by reference to Pre-Effective Amendment No. 1, SEC File No.
- -
33-10438, filed April 1, 1987.

2/ Incorporated by reference to Post-Effective Amendment No. 1, SEC File No.
- -
33-10438, filed September 30, 1987.

3/ Incorporated by reference to Post-Effective Amendment No. 3, SEC File No.
- -
33-10438, filed March 3, 1988.

-3-
<PAGE>

4/ Incorporated by reference to Post-Effective Amendment No. 4, SEC File No.
- -
33-10438, filed April 29, 1988.

5/ Incorporated by reference to Post-Effective Amendment No. 6, SEC File No.
- -
33-10438, filed April 28, 1989.

6/ Incorporated by reference to Post-Effective Amendment No. 8, SEC File No.
- -
33-10438, filed March 2, 1990.

7/ Incorporated by reference to Post-Effective Amendment No. 10, SEC File No.
- -
33-10438, filed May 1, 1991.

8/ Incorporated by reference to Post-Effective Amendment No. 11, SEC File No.
- -
33-10438, filed November 1, 1991.

9/ Incorporated by reference to Post-Effective Amendment No. 14, SEC File No.
- -
33-10438, filed April 30, 1993.

10/ Incorporated by reference to Post-Effective Amendment No. 15, SEC File No.
- --
33-10438, filed July 2, 1993.

11/ Incorporated by reference to Post-Effective Amendment No. 16, SEC File No.
- --
33-10438, filed March 2, 1994.

12/ Incorporated by reference to Post-Effective Amendment No. 17, SEC File No.
- --
33-10438, filed April 21, 1994.

Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------

As of February 15, 1995, more than 99% of the outstanding shares of beneficial
interest of each of the ten operating portfolios of the Trust were owned by
American Republic Variable Annuity Account, a segregated investment account of
American Republic Insurance Company, American Benefit Variable Annuity Account,
a segregated investment account of American Benefit Life Insurance Company and
PaineWebber Life Variable Annuity Account, a segregated investment account of
PaineWebber Life Insurance Company. More than 99% of the outstanding shares of
beneficial interest of each of the Fixed Income, Balanced and Aggressive Growth
Portfolios is, at the date of this Prospectus, owned by PaineWebber Life
Variable Annuity Account. Information about persons controlled by or under
common control of American Republic Insurance Company is set forth under Item 26
of Post-Effective Amendment No. 10 to the Registration Statement of American
Republic Variable Annuity Account, File No. 33-10417, filed April 28, 1993, and
is hereby incorporated herein by reference. Information about persons
controlled by or under common control of American Benefit Life Insurance Company
is set forth under Item 26 of Post-Effective Amendment No. 8 to the Registration
Statement of American Benefit Variable Annuity Account, File No. 33-19254, filed
April 28, 1993, and is hereby incorporated herein by reference. Information
about persons controlled by or under common control of PaineWebber Life
Insurance Company is set forth under Item 26 of Pre-Effective Amendment No. 2 to
the Registration Statements of the PaineWebber Life Separate Account, File No.
33-58808 and File No. 33-61488, filed August 10, 1993, and is hereby
incorporated by reference.

-4-
<PAGE>

Item 26. Number of Holders of Securities
-------------------------------

Title of Class of Shares Number of Record Holders
of Beneficial Interest as of February 15, 1995
------------------------ ------------------------

Money Market Portfolio 4
Global Growth Portfolio 4
Growth Portfolio 4
Asset Allocation Portfolio 4
Global Income Portfolio 4
Government Portfolio 4
Dividend Growth Portfolio 4
Fixed Income Portfolio 2
Balanced Portfolio 2
Aggressive Growth Portfolio 2

Item 27. Indemnification
---------------

Section 2 of "Indemnification" in Article X of the Declaration of Trust
provides that the appropriate series of the Registrant will indemnify its
trustees and officers to the fullest extent permitted by law against claims and
expenses asserted against or incurred by them by virtue of being or having been
a trustee or officer; provided that no such person shall be indemnified where
there has been an adjudication or other determination, as described in Article
X, that such person is liable to the Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office or did not act in good faith
in the reasonable belief that his action was in the best interest of the
Registrant. Section 2 of "Indemnification" in Article X also provides that the
Registrant may maintain insurance policies covering such rights of
indemnification.

Additionally, "Limitation of Liability" in Article X of the Declaration of
Trust provides that the trustees or officers of the Registrant shall not be
personally liable to any person extending credit to, contracting with or having
a claim against the Trust or a particular series thereof; and that, provided
they have exercised reasonable care and have acted under the reasonable belief
that their actions are in the best interest of the Registrant, the trustees and
officers shall not be liable for neglect or wrongdoing by them or any officer,
agent, employee or investment adviser of the Registrant.

Section 2 of Article XI of the Declaration of Trust additionally provides that,
subject to the provisions of Section 1 of Article XI and to Article X, trustees
shall not be liable for errors of judgment or mistakes of fact or law, or for
any act or omission in accordance with the advice of counsel or other experts,
or failing to follow such advice, with respect to the meaning and operation of
the Declaration of Trust.

Article XI of the By-Laws provides that the Registrant may purchase and
maintain insurance on behalf of any person who is or was a trustee, officer or
employee of the Trust, or is or was serving at the request of the Trust as a
trustee, officer or employee of a corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity or arising out of his or her status
as such, whether or not the Registrant would have the power to

-5-
<PAGE>

indemnify him or her against such liability, provided that the Registrant may
not acquire insurance protecting any trustee or officer against liability to the
Registrant or the Registrant or its shareholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.

Section 9 of the Investment Advisory and Administration Contract between
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") provides that
Mitchell Hutchins shall not be liable for any error of judgment or mistake of
law or for any loss suffered by Registrant in connection with the matters to
which the Contract relates, except for a loss resulting from the willful
misfeasance, bad faith, or gross negligence of Mitchell Hutchins in the
performance of its duties or from its reckless disregard of its obligations and
duties under the Contract. Section 10 of the Contract provides that the
trustees shall not be liable for any obligations of Trust or any series under
the Contract and that Mitchell Hutchins shall look only to the assets and
property of the Registrant in settlement of such right or claim and not to the
assets and property of the trustees.

Section 7 of each Sub-Advisory Agreement provides that the applicable sub-
adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the applicable Portfolio, the Registrant or its
shareholders or by Mitchell Hutchins in connection with the matters to which the
Sub-Advisory Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the sub-adviser's part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under the Sub-Advisory Agreement.

Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be provided to trustees, officers and controlling persons
of the Trust, pursuant to the foregoing provisions or otherwise, the Trust has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Trust of expenses incurred or
paid by a trustee, officer or controlling person of the Trust in connection with
the successful defense of any action, suit or proceeding or payment pursuant to
any insurance policy) is asserted against the Trust by such trustee, officer or
controlling person in connection with the securities being registered, the Trust
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------

Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a Delaware
corporation, is a registered investment adviser and is wholly owned by
PaineWebber Incorporated ("PaineWebber"), which is, in turn, a wholly owned
subsidiary of Paine Webber Group Inc. Mitchell Hutchins is primarily engaged in
the investment advisory business. Information as to the officers and directors
of Mitchell Hutchins is included in its Form ADV filed on August 22, 1994, with
the Securities and Exchange Commission (registration number 801-13219) and is
incorporated herein by reference.

Wolf, Webb, Burk & Campbell, Inc. ("WWB&C"), a Pennsylvania corporation, is a
registered investment adviser and is controlled by its four principals (H. Jerry
Wolf, H. St. John Webb, III, Rodney L. Burk and William J. Campbell). WWB&C is
primarily engaged in the investment advisory business

-6-
<PAGE>

and provides investment advisory services to corporate, institutional and
individual clients as well as serving as sub-adviser to another investment
company. Information as to the officers and directors of WWB&C is included in
its Form ADV filed on March 11, 1994 with the Securities and Exchange Commission
(registration number 801-15571) and is incorporated herein by reference.

Provident Investment Counsel, Inc. ("PIC"), a Massachusetts corporation, is a
registered investment adviser and is an indirect wholly owned subsidiary of
United Asset Management Corporation, a New York Stock Exchange listed holding
company principally engaged, through affiliated firms, in providing
institutional investment management services. PIC is primarily engaged in the
investment advisory business and provides investment advisory services to
corporate, institutional and individual clients, as well as serving as
investment adviser or sub-adviser to a number of registered investment
companies. Information as to the officers and directors of PIC is included in
its Form ADV filed on December __, 1994 with the Securities and Exchange
Commission (registration number 801-47943) and is incorporated herein by
reference.

Nicholas-Applegate Capital Management ("Nicholas-Applegate"), a California
limited partnership, is a registered investment adviser. Nicholas-Applegate's
general partner is Nicholas-Applegate Capital Management Inc., a California
corporation owned by Arthur E. Nicholas, its director and sole shareholder.
Nicholas-Applegate is primarily engaged in the investment advisory business and
provides investment advisory services to corporate, institutional and individual
clients as well as serving as adviser or sub-adviser to a number of registered
investment companies. Information as to the officers and directors of Nicholas-
Applegate is included in its Form ADV filed on September 30, 1994 with the
Securities and Exchange Commission (registration number 801-21442) and is
incorporated herein by reference.

Item 29. Principal Underwriters
----------------------

Not applicable

Item 30. Location of Accounts and Records
--------------------------------

The books and other documents required by paragraphs (b)(4), (c) and (d) of
Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Registrant's investment adviser and administrator,
Mitchell Hutchins, 1285 Avenue of the Americas, New York, New York 10019. All
other accounts, books and documents required by Rule 31a-1 are maintained in the
physical possession of Registrant's transfer agent and custodians.

Item 31. Management Services
-------------------

Not applicable.

Item 32. Undertakings
------------

Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders
upon request and without charge.

-7-
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment No. 19 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in this City of New York
and State of New York, on the 28th day of February , 1995.
---- ---------

PAINEWEBBER SERIES TRUST

By: s/Dianne E. O'Donnell
-------------------------------
Dianne E. O'Donnell
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated:

Signature Title Date
--------- ----- ----

s/Paul B. Guenther * President February 28, 1995
- ------------------------------ (Chief Executive
Paul B. Guenther Officer)

s/E. Garrett Bewkes, Jr. ** Trustee and Chairman February 28, 1995
- ------------------------------ of the Board of
E. Garrett Bewkes, Jr. Trustees

s/Meyer Feldberg *** Trustee February 28, 1995
- ------------------------------
Meyer Feldberg

s/George W. Gowen **** Trustee February 28, 1995
- ------------------------------
George W. Gowen

s/Frederic V. Malek **** Trustee February 28, 1995
- ------------------------------
Frederic V. Malek

s/Judith Davidson Moyers **** Trustee February 28, 1995
- ------------------------------
Judith Davidson Moyers

s/Thomas F. Murray **** Trustee February 28, 1995
- ------------------------------
Thomas F. Murray

s/Frank P. L. Minard ***** Trustee February 28, 1995
- ------------------------------
Frank P. L. Minard

s/Julian F. Sluyters Vice President and February 28, 1995
- ------------------------------ Treasurer (Principal
Julian F. Sluyters Financial and
Accounting Officer)

<PAGE>

SIGNATURES (Continued)

* Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
August 29, 1994 and incorporated by reference from Post-Effective Amendment No.
28 to the registration statement of PaineWebber Managed Municipal Trust, SEC
File No. 2-89016, filed August 29, 1994.

** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
January 3, 1994 and incorporated by reference from Post-Effective Amendment No.
25 to the registration statement of PaineWebber Investment Series, SEC File
No. 33-11025 filed March 1, 1994.

*** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
March 28, 1991 and incorporated by reference from Post-Effective Amendment No.
16 to the registration statement of PaineWebber Fixed Income Portfolios, SEC
File No. 2-91362, filed March 28, 1991.

**** Signatures affixed by Elinor W. Gammon pursuant to powers of attorney
dated March 27, 1990 and incorporated by reference from Post-Effective Amendment
No. 7 to the registration statement of PaineWebber Municipal Series, SEC File
No. 33-11611, filed June 29, 1990.

***** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
November 17, 1993 and incorporated by reference from Post-Effective Amendment
No. 28 to the registration statement of PaineWebber America Fund, SEC File
No. 2-78626, filed December 29, 1993.

2
<PAGE>

Exhibit Index
-------------

Page
Exhibits Number
- -------- ------

(3) Voting trust agreement - none
(4) Specimen security - none
(5) Investment Advisory and Administration Contract 4/
-
(a) Investment Advisory and Administration Fee Agreement with respect to
the Government Portfolio 6/
-
(b) Investment Advisory and Administration Fee Agreement with respect to
the Dividend Growth Portfolio 9/
-

(c) Investment Advisory and Administration Fee Agreement with respect to
the Fixed Income Portfolio 12/
--
(d) Investment Advisory and Administration Fee Agreement with respect to
the Balanced Portfolio 12/
--
(e) Investment Advisory and Administration Fee Agreement with respect to
the Aggressive Growth Portfolio 12/
--

-13-
<PAGE>

(c) Custodian Agreement with Brown Brothers Harriman & Co. with respect to
the assets of the Global Income Portfolio 5/
-
(9) Transfer Agency Services and Shareholder Services Agreement 9/
-
(10) (a) Opinion and consent of Kirkpatrick & Lockhart, counsel to the
Registrant 1/
-
(b) Opinion and Consent of Kirkpatrick & Lockhart with respect to the
Dividend Growth Portfolio 8/
-
(c) Opinion and Consent of Kirkpatrick & Lockhart with respect to the
Fixed Income Portfolio, Balanced Portfolio and Aggressive Growth
Portfolio 10/
--
(11) Other opinions, appraisals, rulings and consents: