PAINEWEBBER SERIES TRUST, 485APOS, 1995-04-28

PAINEWEBBER SERIES TRUST
485APOS, 1995-04-28

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<PAGE>

As filed with the Securities and Exchange Commission on April 28, 1995

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-lA

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [__X__]

Pre-Effective Amendment No. ______ [_____]

Post-Effective Amendment No.__20__ [__X__]

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

Amendment No. __19__

(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)

[__X___] 60 days after filing pursuant to Rule 485(a)(i)
[______] On _________________ pursuant to Rule 485(a)(i)

[______] 75 days after filing pursuant to Rule 485(a)(ii)
[______] 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.
<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
<PAGE>

PaineWebber Series Trust
Form N-1A Cross Reference Sheet

<TABLE>
<CAPTION>
================================================================================
Part A Item No. and Caption Prospectus Caption
--------------- ------------------
<S> <C>
- --------------------------------------------------------------------------------
1. Cover Page............. Cover Page
- --------------------------------------------------------------------------------
2 Synopsis............... Not Applicable
- --------------------------------------------------------------------------------
3. Condensed Financial
Information.
- --------------------------------------------------------------------------------
4. General Description of Financial Highlights
Registrant............. The Fund, Its Investment Objectives and
Policies; Description of Securities and
Investment Techniques; General Information
- --------------------------------------------------------------------------------
5. Management of the Management; General Information
Fund..................
- --------------------------------------------------------------------------------
6. Capital Stock and Other Cover Page; Dividends, Other Distributions
Securities............ and Federal Tax; General Information
- --------------------------------------------------------------------------------
7. Purchase of Securities Being Purchases, Redemptions and Exchanges;
Offered............... Valuation of Shares
- --------------------------------------------------------------------------------
8. Redemption or Purchases, Redemptions and Exchanges
Repurchase............
- --------------------------------------------------------------------------------
9. Pending Legal Not Applicable
Proceedings...........
================================================================================
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
================================================================================
Part B Item No. Statement of Additional
and Caption Information Caption
--------------- -----------------------
<S> <C>
10. Cover Page..... Cover Page
- --------------------------------------------------------------------------------
11. Table of Contents..... Table of Contents
- --------------------------------------------------------------------------------
12. General Information and Not Applicable
History......
- --------------------------------------------------------------------------------
13. Investment Objective Investment Policies and Restrictions;
and Policies..... Hedging and Option Income Strategies;
Portfolio Transactions
- --------------------------------------------------------------------------------
14. Management of the Trustees and Officers
Fund........................
- --------------------------------------------------------------------------------
15. Control Persons and Principal Trustees and Officers
Holders of Securities.......
- --------------------------------------------------------------------------------
16. Investment Advisory Investment Advisory Services; Other
and Other Services......... Information
- --------------------------------------------------------------------------------
17. Brokerage Allocation...... Portfolio Transactions
- --------------------------------------------------------------------------------
18. Capital Stock and Other Dividends and Other Distributions; Other
Securities............ Information
- --------------------------------------------------------------------------------
19. Purchase, Redemption Additional Purchase and Redemption
and Pricing of Securities Information; Valuation of Shares
Being Offered.........
- --------------------------------------------------------------------------------
20. Tax Status..... Taxes
- --------------------------------------------------------------------------------
21. Underwriters... Not Applicable
- --------------------------------------------------------------------------------
22. Calculation of Not Applicable
Performance Data...........
- --------------------------------------------------------------------------------
23. Financial State- Financial Statements
ments..........
================================================================================
</TABLE>

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.
<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. GE Investment
Management Incorporated serves as the sub-adviser to this Portfolio.

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 24
Dividends, Other Distributions and Federal Income Tax..................... PW 24
Valuation of Shares....................................................... PW 25
Management................................................................ PW 26
General Information....................................................... PW 29
Appendix A................................................................ PW 30
Appendix B................................................................ PW 33
</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, 1994, 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,
1994, have been audited by Ernst & Young LLP, independent auditors, whose
report thereon is also included in the Annual Report to Shareholders. Further
information about the performance of 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,
1990 also has been audited by Ernst & Young LLP, whose reports thereon were
unqualified.

The financial highlights information pertains to the Portfolios of the Fund
and does not reflect charges related to the separate account. You should refer
to the appropriate separate account prospectus for additional information
regarding such charges.

<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 $ 1.00
------- ------- ------- ------- ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.03 0.02 0.03 0.05 0.05 0.08 0.06 0.03
------- ------- ------- ------- ------ ------ ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. 0.03 0.02 0.03 0.05 0.05 0.08 0.06 0.03
------- ------- ------- ------- ------ ------ ------ ------
Less dividends from net
investment income...... (0.03) (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 $ 1.00
======= ======= ======= ======= ====== ====== ====== ======
Total return(1)......... 3.43% 2.45% 3.00% 5.00% 5.00% 8.00% 6.00% 3.40%
======= ======= ======= ======= ====== ====== ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)........ $25,042 $15,468 $19,383 $20,249 $8,720 $4,367 $3,278 $2,974
Expenses to average net
assets**.............. 0.88% 0.86% 0.81% 1.00% 2.02% 1.55% 1.56% 1.54%*
Net investment income
to average net
assets**.............. 3.56% 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 and capital gain
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 returns for
periods less than one year are not 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.... $ 11.93 $ 11.58 $ 11.61 $ 10.49 $10.17 $10.00
------- ------- ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.85 0.87 0.74 0.47 0.45 0.10
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (1.49) 0.48 0.05 1.12 0.32 0.17
------- ------- ------- ------- ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS.. (0.64) 1.35 0.79 1.59 0.77 0.27
------- ------- ------- ------- ------ ------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.. (0.85) (0.87) (0.74) (0.47) (0.45) (0.10)
Net realized gains on
investments........... (0.10) (0.13) (0.08) -- -- --
------- ------- ------- ------- ------ ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS.......... (0.95) (1.00) (0.82) (0.47) (0.45) (0.10)
------- ------- ------- ------- ------ ------
Net asset value, end of
period................. $ 10.34 $ 11.93 $ 11.58 $ 11.61 $10.49 $10.17
======= ======= ======= ======= ====== ======
Total return (1)........ (5.34)% 11.66% 6.76% 15.17% 7.58% 2.70%
======= ======= ======= ======= ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)........ $17,020 $22,354 $24,103 $15,690 $5,192 $1,294
Expenses to average net
assets**.............. 0.89% 0.79% 0.76% 1.25% 1.55% 1.55%*
Net investment income
to average net
assets**.............. 6.64% 6.13% 6.59% 6.43% 6.80% 6.17%*
Portfolio turnover...... 53.72% 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 capital gain
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 returns for
periods less than one year are not 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.... $ 11.72 $ 11.17 $ 11.65 $ 11.16 $ 10.19 $10.67 $10.00
------- ------- ------- ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.97 0.96 0.80 0.75 0.52 0.94 0.28
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (1.60) 0.90 (0.65) 0.40 1.00 (0.22) 0.39
------- ------- ------- ------- ------- ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS.. (0.63) 1.86 0.15 1.15 1.52 0.72 0.67
------- ------- ------- ------- ------- ------ ------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM/IN:
Net investment income.. (0.21) (0.94) (0.56) (0.65) (0.52) (1.06) --
Excess of net
investment income..... -- (0.16) -- -- -- -- --
Net realized gains on
investments........... -- (0.21) (0.07) (0.01) (0.03) (0.14) --
------- ------- ------- ------- ------- ------ ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS.......... (0.21) (1.31) (0.63) (0.66) (0.55) (1.20) --
------- ------- ------- ------- ------- ------ ------
Net asset value, end of
period................. $ 10.88 $ 11.72 $ 11.17 $ 11.65 $ 11.16 $10.19 $10.67
======= ======= ======= ======= ======= ====== ======
Total return(1)......... (5.56)% 16.65% 1.29% 10.30% 14.92% 6.80% 6.70%
======= ======= ======= ======= ======= ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)........ $52,688 $64,610 $63,172 $51,988 $30,778 $7,425 $7,298
Expenses to average net
assets**.............. 1.17% 0.98% 1.07% 1.20% 1.72% 1.86% 1.86%*
Net investment income
to average net
assets**.............. 7.23% 7.47% 7.20% 7.59% 8.64% 9.00% 6.35%*
Portfolio turnover rate. 97.45% 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 capital
gain 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 returns for
periods less than one year are not 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 YEARS
ENDED
DECEMBER 31,
-----------------
FOR THE
PERIOD FOR THE PERIOD
JUNE 1, JANUARY 2,
FOR THE YEARS ENDED DECEMBER 31, 1988+ TO 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.... $ 11.95 $ 11.63 $ 11.39 $ 9.99 $ 10.37 $ 10.54 $ 10.00 $ 9.87 $ 10.26 $ 10.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.30 0.33 0.35 0.47 0.65 0.66 0.28 0.10 0.16 0.08
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (1.44) 1.48 0.24 1.40 (0.38) 0.52 0.26 (0.71) (0.39) 0.26
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS.. (1.14) 1.81 0.59 1.87 0.27 1.18 0.54 (0.61) (0.23) 0.34
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.. (0.30) (0.33) (0.35) (0.47) (0.65) (0.94) -- (0.10) (0.16) (0.08)
Net realized gains on
investments........... (0.97) (1.16) -- -- -- (0.41) -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL DIVIDENDS AND
DISTRIBUTIONS.......... (1.27) (1.49) (0.35) (0.47) (0.65) (1.35) -- (0.10) (0.16) (0.08)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 9.54 $ 11.95 $ 11.63 $ 11.39 $ 9.99 $ 10.37 $ 10.54 $ 9.16 $ 9.87 $ 10.26
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return(1)......... (9.59)% 15.76% 5.18% 18.73% 2.63% 11.10% 5.40% (6.18)% (2.26)% 3.40%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)........ $23,263 $33,367 $38,583 $33,327 $25,681 $26,851 $22,845 $12,872 $16,281 $20,037
Expenses to average net
assets**.............. 1.03% 0.95% 0.93% 0.94% 1.48% 1.25% 1.24%* 1.35% 1.12% 1.29%*
Net investment income
to average net
assets**.............. 2.30% 2.27% 3.11% 4.64% 5.71% 6.54% 6.11%* 1.06% 1.37% 1.21%*
Portfolio turnover...... 112.32% 60.36% 30.74% 100.84% 168.87% 230.12% 69.86% 149.68% 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 capital gain
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 returns for
periods less than one year are not 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.... $ 18.06 $ 15.68 $ 14.92 $ 10.57 $ 11.66 $10.38 $ 8.76 $10.00
------- ------- ------- ------- ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.01 -- 0.11 0.10 0.14 0.09 0.21 0.09
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (2.13) 3.08 0.76 4.35 (1.09) 3.90 1.41 (1.24)
------- ------- ------- ------- ------- ------ ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS.. (2.12) 3.08 0.87 4.45 (0.95) 3.99 1.62 (1.15)
------- ------- ------- ------- ------- ------ ------ ------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.. (0.01) -- (0.11) (0.10) (0.14) (0.30) -- (0.09)
Net realized gains on
investments........... (1.37) (0.70) -- -- -- (2.41) -- --
------- ------- ------- ------- ------- ------ ------ ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS.......... (1.38) (0.70) (0.11) (0.10) (0.14) (2.71) -- (0.09)
------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of
period................. $ 14.56 $ 18.06 $ 15.68 $ 14.92 $ 10.57 $11.66 $10.38 $ 8.76
======= ======= ======= ======= ======= ====== ====== ======
Total return(1)......... (11.65)% 19.61% 5.83% 42.10% (8.15)% 38.44% 18.49% (11.52)%
======= ======= ======= ======= ======= ====== ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)........ $39,135 $51,696 $46,479 $37,470 $12,283 $4,264 $ 802 $3,891
Expenses to average net
assets**.............. 1.00% 0.92% 0.94% 1.13% 1.85% 1.76% 1.80% 1.79%*
Net investment income
to average net
assets**.............. 0.04% 0.00% 0.78% 1.07% 1.90% 1.53% 0.63% 3.00%*
Portfolio turnover...... 27.35% 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 capital gain
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 returns for
periods less than one year are not 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.... $ 14.97 $ 11.10 $ 12.06 $ 11.76 $ 11.43 $10.49 $ 8.35 $10.00
------- ------- ------- ------- ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)................ (0.03) 0.03 0.10 0.23 0.19 0.07 0.07 0.05
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (1.76) 4.42 (1.01) 0.35 0.67 1.94 2.07 (1.59)
------- ------- ------- ------- ------- ------ ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS.. (1.79) 4.45 (0.91) 0.58 0.86 2.01 2.14 (1.54)
------- ------- ------- ------- ------- ------ ------ ------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.. (0.01) -- (0.05) (0.23) (0.19) (0.07) -- (0.05)
Excess of net
investment income..... -- -- -- -- -- (0.19) -- --
Net realized gains on
investments........... (0.73) (0.58) -- (0.05) (0.34) (0.81) -- (0.06)
------- ------- ------- ------- ------- ------ ------ ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS.......... (0.74) (0.58) (0.05) (0.28) (0.53) (1.07) -- (0.11)
------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of
period................. $ 12.44 $ 14.97 $ 11.10 $ 12.06 $ 11.76 $11.43 $10.49 $ 8.35
======= ======= ======= ======= ======= ====== ====== ======
Total return(1)......... (11.94)% 40.02% (7.55)% 4.93% 7.53% 19.18% 25.63% (15.42)%
======= ======= ======= ======= ======= ====== ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)........ $40,493 $38,035 $21,493 $24,308 $16,149 $3,806 $3,250 $3,135
Expenses to average net
assets**.............. 1.48% 1.40% 1.46% 1.53% 2.07% 2.10% 2.08% 2.10%*
Net investment income
(loss) to average net
assets**.............. (0.13)% 0.38% 0.82% 2.12% 3.29% 0.71% 0.68% 1.09%*
Portfolio turnover...... 175.34% 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 capital
gain 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 returns for
periods less than one year are not 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.... $ 9.95 $10.00 $ 9.89 $10.00 $ 9.61 $10.00
------- ------ ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.01 0.01 0.09 0.01 0.26 0.02
Net realized and
unrealized losses from
investment
transactions.......... (0.30) (0.05) (0.42) (0.11) (0.89) (0.39)
------- ------ ------- ------ ------ ------
TOTAL LOSSES FROM
INVESTMENT OPERATIONS.. (0.29) (0.04) (0.33) (0.10) (0.63) (0.37)
------- ------ ------- ------ ------ ------
Less dividends from net
investment income...... (0.01) (0.01) (0.09) (0.01) (0.27) (0.02)
------- ------ ------- ------ ------ ------
Net asset value, end of
period................. $ 9.65 $ 9.95 $ 9.47 $ 9.89 $ 8.71 $ 9.61
======= ====== ======= ====== ====== ======
Total return(1)......... (2.90)% (0.36)% (3.31)% (0.97)% (6.56)% (3.73)%
======= ====== ======= ====== ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)........ $13,600 $2,814 $12,045 $2,262 $7,638 $1,480
Expenses to average net
assets**.............. 1.59% 0.00% 1.56% 0.00% 1.56% 0.00%
Net investment income
to average net
assets**.............. 0.07% 3.31%* 1.24% 2.92%* 4.61% 3.90%*
Portfolio turnover..... 90.42% 0.00% 35.56% 0.00% 35.86% 0.00%
</TABLE>
- --------
* Annualized.

** During the period ended December 31, 1993, Mitchell Hutchins agreed to
reimburse the Portfolios for all 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. 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 are not U.S. government securities. As long as the SEC staff
takes this position, securities such as Certificates of Accrual Treasury
Securities ("CATS") and Treasury Income Growth Receipts ("TIGRS") that are not
issued through the U.S. Treasury 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
International Bank for Reconstruction and Development ("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 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.

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

PW 12
<PAGE>

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, Inc. ("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 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 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

PW 13
<PAGE>

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 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 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 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

PW 14
<PAGE>

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 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 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. The Portfolio's sub-
adviser, GE Investment Management Incorporated ("GEIM"), seeks to identify
companies that have potential for growth and whose value has not been fully
recognized by the marketplace. GEIM concentrates primarily on medium to large-
size companies that it believes meet this undervalued growth criterion. 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 GEIM, prevailing market, economic or
political conditions warrant.

On March 22, 1995, the Fund's board of trustees approved for submission to
shareholders a sub-advisory contract between Mitchell Hutchins and GEIM with
respect to the Global Growth Portfolio. See "Management" in this Prospectus.

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- 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. Multi-class
pass-through securities and collateralized mortgage obligations are
collectively referred to herein as CMOs. U.S. government mortgage-backed
securities include mortgage-backed securities issued or guaranteed as to the
payment of principal and interest (but not as to market value) 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"). Payments of principal and interest (but not the market value) of
such private mortgage-backed securities may be supported by pools of mortgage
loans or other mortgage-backed securities that are guaranteed, directly or
indirectly, by the U.S. government or one of its agencies or instrumentalities,
or they may be issued without any government guarantee of the underlying
mortgage assets but with some form of non-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 sales contracts, other 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>

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- and asset-backed securities is smaller
and less liquid than the market for mortgage-backed securities of government
issuers.

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

The rate of interest payable on CMO classes may be set at levels that are
either above or below market rates at the time of issuance, so that the
securities will be sold at a substantial premium to, or at a discount from, par
value. 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 underlying 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). IOs and POs may also be created from mortgage-
backed securities that are not CMOs. The yields on IOs, POs and other mortgage-
backed securities that are purchased at a substantial premium or discount
generally are extremely sensitive to the rate of principal payments (including
prepayments) on the underlying mortgage assets. If the mortgage assets
underlying an IO experience greater than anticipated principal prepayments, an
investor may fail to recoup fully his or her initial investment even if the
security is government issued or guaranteed or is rated AAA or the equivalent.

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

During 1994, the value and liquidity of many mortgage-backed securities
declined sharply due primarily to increases in interest rates. There can be no
assurance that such declines will not recur. The market value of certain
mortgage-backed securities, including IO and PO classes of mortgage-backed
securities and inverse floating rate securities, can be extremely volatile and
these securities may become illiquid. Mitchell Hutchins or the applicable sub-
adviser seeks to manage each Portfolio so that its volatility, taken as a
whole, is consistent with the Portfolio's investment objective. If Mitchell
Hutchins or the applicable sub-adviser incorrectly forecasts interest rate
changes or other factors that may affect the volatility of securities held by
the Portfolio, the Portfolio's ability to meet its investment objective may be
reduced.

See Appendix A to this Prospectus for more information concerning the types of
mortgage-backed securities in which the Portfolios may invest.

PW 17
<PAGE>

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
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 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. 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. 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. 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.

PW 18
<PAGE>

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 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 Union. 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.

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

PW 19
<PAGE>

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 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,

PW 20
<PAGE>

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.

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

PW 21
<PAGE>

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 or the applicable sub-adviser 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 or the applicable sub-adviser 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.

PW 22
<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
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 transaction costs, which will be borne directly
by the affected Portfolio and may increase the potential for short-term capital
gains.

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.

PW 23
<PAGE>

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 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.

PW 24
<PAGE>

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

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.

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.

PW 25
<PAGE>

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 and Growth Portfolios. Mitchell Hutchins
supervises the activities of WWBC, PIC, Nicholas-Applegate and GEIM, the sub-
advisers for the Fixed Income, Balanced, Aggressive Growth and Global Growth
Portfolios, respectively, and supervises all other aspects of these Portfolios'
operations. WWBC, PIC, Nicholas-Applegate and GEIM, as sub-advisers for the
Fixed Income, Balanced, Aggressive Growth and Global 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.

On March 22, 1995, the Fund's board of trustees approved for submission to
shareholders a sub-advisory contract between Mitchell Hutchins and GEIM, with
respect to the Global Growth Portfolio. GEIM currently serves as sub-adviser
for the Global Growth Portfolio pursuant to an interim sub-advisory agreement
("Interim Agreement") between Mitchell Hutchins and GEIM that was approved by
the board of trustees of the Trust on March 22, 1995. Under the Interim
Agreement, GEIM makes and implements all investment decisions with respect to
the Global Growth Portfolio.

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>

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. For the fiscal
year ended December 31, 1994, total expenses stated as a percentage of average
net assets were .88% for the Money Market Portfolio, .89% for the Government
Portfolio, 1.17% for the Global Income Portfolio, 1.03% for the Asset
Allocation Portfolio, 1.35% for the Dividend Growth Portfolio, 1.00% for the
Growth Portfolio, 1.48% for the Global Growth Portfolio, 1.56% for the Fixed
Income Portfolio, 1.56% for the Balanced Portfolio and 1.59% for the Aggressive
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

PW 26
<PAGE>

Inc., a publicly owned financial services holding company. At March 31, 1995
Mitchell Hutchins was adviser or sub-adviser to 42 investment companies with 77
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, 1995, managed
approximately $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 March 31,
1995, managed approximately $15.2 billion in assets.

Mitchell Hutchins (not the Fund) pays GEIM a fee for its services as sub-
adviser for the Global Growth Portfolio at an annual rate of 0.29% of the
Fund's average daily net assets under the Interim Agreement. The Interim
Agreement will continue in effect for the shorter of 120 days from March 23,
1995 (the date of the Interim Agreement) or the date that a new sub-advisory
contract is approved by the Fund's shareholders. GEIM is located at 3003 Summer
Street, P.O. Box 7900, Stamford, Connecticut 06904 and is a wholly owned
subsidiary of General Electric Company. GEIM is a registered investment
adviser, and its principal officers and directors serve in similar capacities
with respect to General Electric Investment Corporation ("GEIC"), also a
registered investment adviser and a wholly owned subsidiary of General Electric
Company. GEIM and GEIC provide investment management services to various
institutional accounts with total assets exceeding $47 billion as of March 31,
1995.

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, 1995,
Nicholas-Applegate managed a total of approximately $ 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 Mitchell Hutchins Institutional Investors Inc.
("MHII") ( a wholly owned subsidiary of Mitchell Hutchins) 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 to 1990, Mr. Singh was with Shearson Lehman
Brothers. 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. Messrs. Singh and
Varrelman have held their Government Portfolio responsibilities since December
1994.

PW 27
<PAGE>

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. Messrs. Campbell and Munsch have held their Fixed
Income Portfolio responsibilities since its inception in November 1993.

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. Messrs. Condon and
Mitchell and Ms. Blacher have held their Balanced Portfolio responsibilities
since its inception in November 1993.

Mark A. Tincher is primarily responsible for the day-to-day management of the
Dividend Growth Portfolio. Mr. Tincher is a Managing Director and Chief
Investment Officer of Equity Investments for Mitchell Hutchins. Prior to
joining Mitchell Hutchins in March 1995, Mr. Tincher was a vice president of
Chase Manhattan Private Bank ("Chase") where he was head of the U.S. Funds
Management and Equity Research area. At Chase since 1988, Mr. Tincher oversaw
the management of all Chase U.S. equity funds (the Vista Funds and Trust
Investment Funds). Mr. Tincher has held his Dividend Growth Portfolio
responsibilities since April 1995.

Effective April 3, 1995, in connection with Mr. Tincher taking over the day-to-
day management of the Portfolio, a prior sub-advisory agreement between
Mitchell Hutchins and MHII was terminated.

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 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. The Research team
at Nicholas-Applegate has held its Aggressive Growth Portfolio responsibilities
since its inception in November 1993.

Ralph R. Layman is primarily responsible for the day-to-day management of the
Global Growth Portfolio. Mr. Layman is an executive vice president and a senior
investment manager of GEIM and GEIC. From 1989 to 1991, Mr. Layman served as
executive vice president, partner and portfolio manager of Northern Capital
Management Co. and, prior thereto, served as vice president and portfolio
manager of Templeton Investment Counsel. Mr. Layman has held his Global Growth
responsibilities since March 23, 1995.

PW 28
<PAGE>

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.

PW29
<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 (but not the market value of the security itself) 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 (but not the market value of the security
itself) 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. Freddie Mac
does not guarantee the market value of the security itself. 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 CMOs or
single class mortgage-backed securities 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." Such credit enhancements do not protect investors from changes in
market value.

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

PW 30
<PAGE>

mortgage-backed securities represent pro rata interests in pools of mortgage
loans that RTC holds 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 principal-
only or 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.

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 31
<PAGE>

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.

SPECIALLY STRUCTURED CMOS AND NEW TYPES OF MORTGAGE-BACKED SECURITIES

The Portfolios may invest in IOs, POs, inverse floating rate CMOs and other
specially structured CMO classes. See "Risk Factors and Other Investment
Policies--Risks of Mortgage- and Asset-Backed Securities."

New types of mortgage-backed securities are developed and marketed from time to
time and, consistent with their investment limitations, the Portfolios expect
to invest in those new types of mortgage-backed securities that Mitchell
Hutchins or the applicable sub-adviser believes may assist a Portfolio in
achieving its investment objective. Similarly, the Portfolios may invest in
mortgage-backed securities issued by new or existing governmental or private
issuers other than those identified above. The Fund's prospectus or statement
of additional information will be supplemented to the extent that new types of
mortgage-backed securities or those issued by issuers other than those
identified above involve materially different risks than the securities or
issuers described herein.

PW 32
<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 33
<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 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.

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.

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 22
Management................................................................ PW 22
General Information....................................................... PW 24
Appendix A................................................................ PW 26
Appendix B................................................................ PW 29
</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, 1994, 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,
1994 have been audited by Ernst & Young LLP, 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, 1990 also has been audited by Ernst & Young LLP, 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 $ 1.00
------- ------- ------- ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.03 0.02 0.03 0.05 0.05 0.08 0.06 0.03
------- ------- ------- ------- ------ ------ ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. 0.03 0.02 0.03 0.05 0.05 0.08 0.06 0.03
------- ------- ------- ------- ------ ------ ------ ------
Less dividends from net
investment income...... (0.03) (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 $ 1.00
======= ======= ======= ======= ====== ====== ====== ======
Total return(1)......... 3.43% 2.45% 3.00% 5.00% 5.00% 8.00% 6.00% 3.40%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $25,042 $15,468 $19,383 $20,249 $8,720 $4,367 $3,278 $2,974
Expenses to average net
assets**............... 0.88% 0.86% 0.81% 1.00% 2.02% 1.55% 1.56% 1.54%*
Net investment income to
average net assets**... 3.56% 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 and capital gain
distributions net asset value on the payable date, and a sale at net asset
value on the last day of each period reported. Total returns for periods
less than one year are not 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.... $ 18.06 $ 15.68 $ 14.92 $ 10.57 $ 11.66 $10.38 $ 8.76 $10.00
------- ------- ------- ------- ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.01 -- 0.11 0.10 0.14 0.09 0.21 0.09
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (2.13) 3.08 0.76 4.35 (1.09) 3.90 1.41 (1.24)
------- ------- ------- ------- ------- ------ ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS.. (2.12) 3.08 0.87 4.45 (0.95) 3.99 1.62 (1.15)
------- ------- ------- ------- ------- ------ ------ ------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.. (0.01) -- (0.11) (0.10) (0.14) (0.30) -- (0.09)
Net realized gains on
investments........... (1.37) (0.70) -- -- -- (2.41) -- --
------- ------- ------- ------- ------- ------ ------ ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS.......... (1.38) (0.70) (0.11) (0.10) (0.14) (2.71) -- (0.09)
------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of
period................. $ 14.56 $ 18.06 $ 15.68 $ 14.92 $ 10.57 $11.66 $10.38 $ 8.76
======= ======= ======= ======= ======= ====== ====== ======
Total return(1)......... (11.65)% 19.61% 5.83% 42.10% (8.15)% 38.44% 18.49% (11.52)%
======= ======= ======= ======= ======= ====== ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $39,135 $51,696 $46,479 $37,470 $12,283 $4,264 $ 802 $3,891
Expenses to average net
assets**............... 1.00% 0.92% 0.94% 1.13% 1.85% 1.76% 1.80% 1.79%*
Net investment income to
average net assets**... 0.04% 0.00% 0.78% 1.07% 1.90% 1.53% 0.63% 3.00%*
Portfolio turnover...... 27.35 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 capital gain
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 returns for
periods less than one year are 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.... $ 14.97 $ 11.10 $ 12.06 $ 11.76 $ 11.43 $10.49 $ 8.35 $10.00
------- ------- ------- ------- ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)................ (0.03) 0.03 0.10 0.23 0.19 0.07 0.07 0.05
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (1.76) 4.42 (1.01) 0.35 0.67 1.94 2.07 (1.59)
------- ------- ------- ------- ------- ------ ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS.. (1.79) 4.45 (0.91) 0.58 0.86 2.01 2.14 (1.54)
------- ------- ------- ------- ------- ------ ------ ------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.. (0.01) -- (0.05) (0.23) (0.19) (0.07) -- (0.05)
Excess of net
investment income..... -- -- -- -- -- (0.19) -- --
Net realized gains on
investments........... (0.73) (0.58) -- (0.05) (0.34) (0.81) -- (0.06)
------- ------- ------- ------- ------- ------ ------ ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS.......... (0.74) (0.58) (0.05) (0.28) (0.53) (1.07) -- (0.11)
------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of
period................. $ 12.44 $ 14.97 $ 11.10 $ 12.06 $ 11.76 $11.43 $10.49 $ 8.35
======= ======= ======= ======= ======= ====== ====== ======
Total return(1)......... (11.94%) 40.02% (7.55)% 4.93% 7.53% 19.18% 25.63% (15.42)%*
======= ======= ======= ======= ======= ====== ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $40,493 $38,035 $21,493 $24,308 $16,149 $3,806 $3,250 $3,135
Expenses to average net
assets**............... 1.48% 1.40% 1.46% 1.53% 2.07% 2.10% 2.08% 2.10%*
Net investment income
(loss) to average net
assets**............... (0.13)% 0.38% 0.82% 2.12% 3.29% 0.71% 0.68% 1.09%*
Portfolio turnover...... 175.34% 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 capital
gain 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 returns for
periods less than one year are not 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.... $ 11.72 $ 11.17 $ 11.65 $ 11.16 $ 10.19 $10.67 $10.00
------- ------- ------- ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.97 0.96 0.80 0.75 0.52 0.94 0.28
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (1.60) 0.90 (0.65) 0.40 1.00 (0.22) 0.39
------- ------- ------- ------- ------- ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. (0.63) 1.86 0.15 1.15 1.52 0.72 0.67
------- ------- ------- ------- ------- ------ ------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM/IN:
Net investment income.. (0.21) (0.94) (0.56) (0.65) (0.52) (1.06) --
Excess of current year
net investment income. -- (0.16) -- -- -- -- --
Net realized gains from
investments........... -- (0.21) (0.07) (0.01) (0.03) (0.14) --
------- ------- ------- ------- ------- ------ ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS.......... (0.21) (1.31) (0.63) (0.66) (0.55) (1.20) --
------- ------- ------- ------- ------- ------ ------
Net asset value, end of
period................. $ 10.88 $ 11.72 $ 11.17 $ 11.65 $ 11.16 $10.19 $10.67
======= ======= ======= ======= ======= ====== ======
Total return(1)......... (5.56%) 16.65% 1.29% 10.30% 14.92% 6.80% 6.70%
======= ======= ======= ======= ======= ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $52,688 $64,610 $63,172 $51,988 $30,778 $7,425 $7,298
Expenses to average net
assets**............... 1.17% 0.98% 1.07% 1.20% 1.72% 1.86% 1.86%*
Net investment income to
average net assets**... 7.23% 7.47% 7.20% 7.59% 8.64% 9.00% 6.35%*
Portfolio turnover rate. 97.45% 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 capital
gain 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 returns
information for periods less than one year are not 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.... $ 11.93 $ 11.58 $ 11.61 $ 10.49 $10.17 $10.00
------- ------- ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.85 0.87 0.74 0.47 0.45 0.10
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (1.49) 0.48 0.05 1.12 0.32 0.17
------- ------- ------- ------- ------ ------
TOTAL INCOME (LOSSES)
FROM INVESTMENT
OPERATIONS............. (0.64) 1.35 0.79 1.59 0.77 0.27
------- ------- ------- ------- ------ ------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.. (0.85) (0.87) (0.74) (0.47) (0.45) (0.10)
Net realized gains on
investments........... (0.10) (0.13) (0.08) -- -- --
------- ------- ------- ------- ------ ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS.......... (0.95) (1.00) (0.82) (0.47) (0.45) (0.10)
------- ------- ------- ------- ------ ------
Net asset value, end of
period................. $ 10.34 $ 11.93 $ 11.58 $ 11.61 $10.49 $10.17
======= ======= ======= ======= ====== ======
Total return(1)......... (5.34)% 11.66% 6.76% 15.17% 7.58% 2.70%
======= ======= ======= ======= ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)......... $17,020 $22,354 $24,103 $15,690 $5,192 $1,294
Expenses to average net
assets**............... 0.89% 0.79% 0.76% 1.25% 1.55% 1.55%*
Net investment income to
average net assets**... 6.64% 6.13% 6.59% 6.43% 6.80% 6.17%*
Portfolio turnover...... 53.72 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 capital gain
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 returns for
periods less than one year are not 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........... $ 11.95 $ 11.63 $ 11.39 $ 9.99 $ 10.37 $ 10.54 $ 10.00
------- ------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income.......... 0.30 0.33 0.35 0.47 0.65 0.66 0.28
Net realized and
unrealized gains
(losses) from
investment
transactions.... (1.44) 1.48 0.24 1.40 (0.38) 0.52 0.26
------- ------- ------- ------- ------- -------
TOTAL INCOME
(LOSS) FROM
INVESTMENT
OPERATIONS....... (1.14) 1.81 0.59 1.87 0.27 1.18 0.54
------- ------- ------- ------- ------- -------
LESS DIVIDENDS
AND DISTRIBUTIONS
FROM:
Net investment
income.......... (0.30) (0.33) (0.35) (0.47) (0.65) (0.94) --
Net realized
gains on
investments..... (0.97) (1.16) -- -- -- (0.41) --
------- ------- ------- ------- ------- -------
TOTAL DIVIDENDS
AND
DISTRIBUTIONS.... (1.27) (1.49) (0.35) (0.47) (0.65) (1.35) --
------- ------- ------- ------- ------- -------
Net asset value,
end of period.... $ 9.54 $ 11.95 $ 11.63 $ 11.39 $ 9.99 $ 10.37 $ 10.54
======= ======= ======= ======= ======= ======= =======
Total return(1).. (9.59)% 15.76% 5.18% 18.73% 2.63% 11.10% 5.40%
======= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(000's).......... $23,263 $33,367 $38,583 $33,327 $25,681 $26,851 $22,845
Expenses to
average net
assets**......... 1.03% 0.95% 0.93% 0.94% 1.48% 1.25% 1.24%*
Net investment
income to average
net assets**..... 2.30% 2.27% 3.11% 4.64% 5.71% 6.54% 6.11%*
Portfolio
turnover......... 112.32% 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> <C>
Net asset value,
beginning of
period........... $ 9.87 $ 10.26 $ 10.00
----------------- ----------------- -------------------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income.......... 0.10 0.16 0.08
Net realized and
unrealized gains
(losses) from
investment
transactions.... (0.71) (0.39) 0.26
----------------- ----------------- -------------------
TOTAL INCOME
(LOSS) FROM
INVESTMENT
OPERATIONS....... (0.61) (0.23) 0.34
----------------- ----------------- -------------------
LESS DIVIDENDS
AND DISTRIBUTIONS
FROM:
Net investment
income.......... (0.10) (0.16) (0.08)
Net realized
gains on
investments..... -- -- --
----------------- ----------------- -------------------
TOTAL DIVIDENDS
AND
DISTRIBUTIONS.... (0.10) (0.16) (0.08)
----------------- ----------------- -------------------
Net asset value,
end of period.... $ 9.16 $ 9.87 $ 10.26
================= ================= ===================
Total return(1).. 6.18% (2.26)% 3.40%
================= ================= ===================
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(000's).......... $12,872 $16,281 $20,037
Expenses to
average net
assets**......... 1.35% 1.12% 1.29%*
Net investment
income to average
net assets**..... 1.06% 1.37% 1.21%*
Portfolio
turnover......... 149.68% 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 capital gain
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 returns for
periods less than one year are 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
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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 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.

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. The Portfolio's sub-
adviser GE Investment Management Incorporated ("GEIM"), seeks to identify
companies that have potential for growth and whose value has not been fully
recognized by the marketplace. GEIM concentrates primarily on medium to large-
size companies that it believes meet this undervalued growth criterion. 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 GEIM, prevailing market, economic or
political conditions warrant.

PW 10
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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.

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

PW 11
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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. 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 are not U.S.
government securities. As long as the SEC staff takes this position, such as
Certificates of Accrual Treasury Securities ("CATS") and Treasury Income Growth
Receipts ("TIGRs") that are not issued through the U.S. Treasury 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 International Bank for Reconstruction and Development
("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.

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

PW 12
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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.

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.

MORTGAGE 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. Multi-class
pass-through securities and collateralized mortgage obligations are
collectively referred to herein as CMOs. U.S. government mortgage-backed
securities include mortgage-backed securities issued or guaranteed as to the
payment of principal and interest (but not as to market value) 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"). Payments of principal and interest (but not the market value) of
such private mortgage-backed securities may be supported by pools of mortgage
loans or other mortgage-backed securities that are guaranteed, directly or
indirectly, by the U.S. government or one of its agencies or instrumentalities,
or they may be issued without any government guarantee of the underlying
mortgage assets but with some form of non-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.

PW 13
<PAGE>

The yield characteristics of mortgage- and asset-backed securities differ from
those of traditional debt securities. Among the major differences are that
interest and principal payments are made more frequently on mortgage-backed and
asset-backed securities, 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- and asset-backed securities is smaller
and less liquid than the market for mortgage-backed securities of government
issuers.

PW 14
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as rates decrease--but may do so more rapidly or to a greater degree. The
market value of such securities generally is more volatile than that of a fixed
rate obligation. Such interest rate formulas may be combined with other CMO
characteristics. For example, a CMO class may be an "inverse IO," on which the
holders are entitled to receive no payments of principal and are entitled to
receive interest at a rate that will vary inversely with a specified index or a
multiple thereof.

During 1994, the value and liquidity of many mortgage-backed securities
declined sharply due primarily to increases in interest rates. There can be no
assurance that such declines will not recur. The market value of certain
mortgage-backed securities, including IO and PO classes of mortgage-backed
securities and inverse floating rate securities, can be extremely volatile and
these securities may become illiquid. Mitchell Hutchins seeks to manage each
Portfolio so that its volatility, taken as a whole, is consistent with the
Portfolio's investment objective. If Mitchell Hutchins incorrectly forecasts
interest rate changes or other factors that may affect the volatility of
securities held by the Portfolio the Portfolio's ability to meet its investment
objective may be reduced.

See Appendix A to this Prospectus for more information concerning the types of
mortgage-backed securities in which the Portfolios may invest.

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 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 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

PW 15
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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 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.
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. 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 16
<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 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.

PW 17
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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.

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.

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

PW 18
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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.

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.

PW 19
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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
transaction costs, which will be borne directly by the affected Portfolio and
may increase the potential for short-term capital gains.

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.

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

PW 20
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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.

PW 21
<PAGE>

in taxation of the insurance company issuing the Contracts and treatment of the
Contract holders other than as described in the applicable Contract prospectus.

VALUATION OF SHARES

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, Growth, Dividend Growth,
Global Income, Government and Asset Allocation Portfolio. Mitchell Hutchins
supervises the activities of GEIM, the sub-adviser for Global Growth Portfolio,
and supervises all other aspects of this Portfolio's operations. GEIM as sub-
adviser for the Global Growth Portfolio makes and implements all investment
decisions for this Portfolio. 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.

PW 22
<PAGE>

by the board of trustees of the Trust on March 22, 1995. Under the Interim
Agreement, GEIM makes and implements all investment decisions with respect to
the Global Growth Portfolio.

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 0.88% for the Money
Market Portfolio, 1.00% for the Growth Portfolio, 1.48% for the Global Growth
Portfolio, 1.17% for the Global Income Portfolio, 1.03% for the Asset
Allocation Portfolio, 0.89% for the Government Portfolio and 1.35% 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, 1995 Mitchell Hutchins was adviser or sub-
adviser to 47 investment companies with 77 separate portfolios and aggregate
assets of over $25 billion.

Mitchell Hutchins (not the Fund) pays GEIM a fee for its services as sub-
adviser for the Global Growth Portfolio at an annual rate of 0.29% of the
Fund's average daily net assets under the Interim Agreement. The Interim
Agreement will continue in effect for the shorter of 120 days from March 23,
1995 (the date of the Interim Agreement) or the date that a new sub-advisory
contract is approved by the Fund's shareholders. GEIM is located at 3008
Summer Street, P.O. Box 7900, Stamford, Connecticut 06904 and is a wholly
owned subsidiary of General Electric Company. GEIM is a registered investment
adviser, and its principal officers and directors serve in similar capacities
with respect to General Electric Investment Corporation ("GEIC"), also a
registered investment adviser and a wholly owned subsidiary of General
Electric Company. GEIM and GEIC provide investment management services to
various institutional accounts with total assets exceeding $47 billion as of
March 31, 1995.

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 Mitchell Hutchins Institutional Investors Inc.
("MHII") (a wholly owned subsidiary of Mitchell Hutchins) 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

PW 23
<PAGE>

Fund Management Corporation, where he was responsible for managing $3 billion
in mortgage assets. From 1987 to 1990, Mr. Singh was with Shearson Lehman
Brothers. 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. Messrs. Singh and
Varrellman have held their Government Portfolio responsibilities since
December 1994.

Effective April 8, 1995, in connection with Mr. Tincher taking over the day-
to-day management of the Portfolio, a prior sub-advisory agreement between
Mitchell Hutchins and MHII was terminated.

Ralph R. Layman is primarily responsible for the day-to-day management of
Global Growth Portfolio, Mr. Layman is an executive vice president and a
senior investment manager of GEIM and GEIC. From 1989 to 1991, Mr. Layman
served as executive vice president, partner and portfolio manager of Northern
Capital Management Co. and, prior thereto, served as vice president and
portfolio manager of Templeton Investment Counsel. Mr. Layman has held his
Global Growth responsibilities since March 23, 1995.

GENERAL INFORMATION

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.

PW 24
<PAGE>

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 25
<PAGE>

APPENDIX A

PW 26
<PAGE>

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS MORTGAGE PASS-THROUGHS.
CMOs are debt obligations that are collateralized either by mortgage loans,
mortgage pass-through securities or other CMOs (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 principal only or 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.

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

PW 27
<PAGE>

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.

SPECIALLY STRUCTURED CMOS AND NEW TYPE OF MORTGAGE-BACKED SECURITIES. The
Portfolios may invest in IOs, POs, inverse floating rate CMOs and other
specially structured CMO classes. See "Risk Factors and Other Investment
Policies--Risks of Mortgage- and Asset-Backed Securities."

New types of mortgage-backed securities are developed and marketed from time to
time and, consistent with their investment limitations, the Portfolios expect
to invest in those new types of mortgage-backed securities that Mitchell
Hutchins believes may assist a Portfolio in achieving its investment objective.
Similarly, the Portfolios may invest in mortgage-backed securities issued by
new or existing governmental or private issuers other than those identified
above. The Fund's prospectus or statement of additional information will be
supplemented to the extent that new types of mortgage-backed securities or
those issued by issuers other than those identified above involve materially
different risks than the securities or issuers described herein.

PW 28
<PAGE>

APPENDIX B

HEDGING AND OPTION INCOME INSTRUMENTS

Certain Portfolios may use the following hedging instruments:

PW 29
<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 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. GE Investment
Management Incorporated serves as the Sub-Adviser to this Portfolio.

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.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Limitations........................................ 3
Hedging and Related Income Strategies...................................... 11
Trustees and Officers...................................................... 19
Investment Advisory Services............................................... 22
Portfolio Transactions..................................................... 24
Additional Purchase and Redemption Information............................. 26
Valuation of Shares........................................................ 27
Taxes...................................................................... 28
Dividends.................................................................. 30
Other Information.......................................................... 30
Financial Statements....................................................... 31
Description of Commercial Paper and Bond Ratings........................... 31
</TABLE>

2
<PAGE>

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
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 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

3
<PAGE>

diminished. Political conditions, especially a sovereign entity's willingness
to meet the terms of its debt obligations, are of considerable significance.
Also, there can be no assurance that the holders of commercial bank debt issued
by the same sovereign entity may not contest payments to the holders of
Sovereign Debt in the event of default under commercial bank loan agreements.

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

The occurrence of political, social or diplomatic changes in one or more of
the countries issuing Sovereign Debt could adversely affect 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.

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.

In determining whether an issuer has met the growth in earnings criterion,
Mitchell Hutchins 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.

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

4
<PAGE>

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.

SELECTION OF INVESTMENTS BY ASSET ALLOCATION PORTFOLIO. As stated in the
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.

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 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.

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.

5
<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.

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 ("COFI"), 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.

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 AND ASSET-BACKED SECURITIES. 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 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.

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

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
Aggressive Growth Portfolio) 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-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
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.

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

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<PAGE>

Dealers, Inc. 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
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
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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<PAGE>

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 and Balanced Portfolios)
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." Neither the 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 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 or the
applicable Sub-Adviser 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 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.

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<PAGE>

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 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' 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

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<PAGE>

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
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 or
the applicable Sub-Adviser 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.

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<PAGE>

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 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.

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<PAGE>

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 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.

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. Writing covered put options serves as a limited
long hedge because increases in the value of the hedged instrument would be
offset to the extent of the premium received for writing the option. 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. The securities or other assets used as cover for OTC options written by
a Portfolio would be considered illiquid to the extent described under
"Investment Policies and Restrictions--Illiquid Securities."

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<PAGE>

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 premium paid by the Portfolio as well as the
loss of any expected benefits of the transaction. A Portfolio will enter into
OTC option transactions only with contra parties that have a net worth of at
least $20 million.

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.

(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 net assets.

14
<PAGE>

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.

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.

15
<PAGE>

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.

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 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 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.

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 or the applicable Sub-Adviser 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.

16
<PAGE>

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.

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.

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 or the
applicable Sub-Adviser 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 or the applicable Sub-Adviser 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 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.

17
<PAGE>

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. 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.

18
<PAGE>

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:

19
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH THE FUND;
BUSINESS EXPERIENCE
NAME AND ADDRESS* AND OTHER DIRECTORSHIPS
- ----------------- -----------------------

<S> <C>
Frederic V. Malek; 58 Trustee. Mr. Malek is Chairman of Thayer Capital Partners
901 15th Street, N.W. (investment bank) and a co-chairman and director of CB
Suite 300 Commercial Group Inc. (real estate). From January 1992
Washington, D.C. 20005 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 execu-
tive vice president and president of Marriott Hotels and
Resorts. Mr. Malek is also a director of American Man-
agement Systems, Inc., Automatic Data Processing, Inc.,
Avis, Inc., FPL Group, Inc., ICF International, Manor
Care, Inc. and National Education Corporation and a di-
rector or trustee of 16 other investment companies for
which Mitchell Hutchins or PaineWebber serves as invest-
ment adviser.
Judith Davidson Moyers; Trustee. Mrs. Moyers is president of Public Affairs Tele-
59 vision, Inc., an educational consultant and a home econ-
Public Affairs omist. Mrs. Moyers is also a director of Ogden Corpora-
Television tion and a director or trustee of 16 other investment
356 W. 58th Street companies for which Mitchell Hutchins or PaineWebber
New York, New York 10019 serves as investment adviser.
Thomas F. Murray; 84 Trustee. Mr. Murray is a real estate and financial con-
400 Park Avenue sultant. Mr. Murray is also a director and chairman of
New York, New York 10022 American Continental Properties, Inc., a trustee of Pru-
dential 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 advi-
sory 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 39 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 in-
vestment adviser.
Paul B. Guenther President. Mr. Guenther is a director of PaineWebber and
Mitchell Hutchins and president and a director of PW
Group. Mr. Guenther is also president of 26 and a direc-
tor or trustee of 17 other investment companies for
which Mitchell Hutchins or PaineWebber serves as invest-
ment adviser.
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
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 of-
ficer-domestic of Mitchell Hutchins. Ms. Harris is also
a vice president of 19 other investment companies for
which Mitchell Hutchins or PaineWebber serves as invest-
ment adviser.
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 39 other in-
vestment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
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 presi-
dent and secretary of 39 other investment companies for
which Mitchell Hutchins or PaineWebber serves as invest-
ment adviser.
Victoria E. Schonfeld; Vice President. Ms. Schonfeld is a managing director and
43 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 secre-
tary of 39 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 Finan-
cial Management L.P. Prior to August 1992, he was an au-
dit manager with Ernst & Young LLP. Mr. Schubert is also
a vice president and assistant secretary of 39 other in-
vestment 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 39 other in-
vestment 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 fi-
nance 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 39
other investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
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 secre-
tary of 39 other investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
</TABLE>

21
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH THE FUND;
BUSINESS EXPERIENCE
NAME AND ADDRESS* AND OTHER DIRECTORSHIPS
- ----------------- -----------------------

<S> <C>
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 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. The table below includes certain
information relating to the compensation of the Fund's trustees for the fiscal
year ended December 31, 1994.

COMPENSATION TABLE
<TABLE>
<CAPTION>
PREFERRED
OR TOTAL
RETIREMENT COMPENSATION
BENEFITS FROM THE
ACCRUED AS TRUST AND
AGGREGATE PART OF ESTIMATED THE
COMPENSATION THE ANNUAL FUND COMPLEX
FROM TRUST'S BENEFITS UPON PAID TO
NAME OF PERSON, POSITION THE TRUST* EXPENSES RETIREMENT TRUSTEES+
------------------------ ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C>
E. Garrett Bewkes, Jr.
Trustee and chairman of the
board of trustees......... -- -- -- --
Meyer Feldberg,
Trustee.................... $5,300 -- -- $86,050
George W. Gowen,
Trustee.................... $5,300 -- -- $71,425
Frederic V. Malek,
Trustee.................... $5,300 -- -- $77,875
Frank P.L. Minard,
Trustee.................... -- -- -- --
Judith Davidson Moyers,
Trustee.................... $5,000 -- -- $71,125
Thomas F. Murray,
Trustee.................... $5,050 -- -- $71,925
</TABLE>
- --------

* Represents fees paid to each trustee during the fiscal year ended December
31, 1994.

+ Represents total compensation paid to each trustee during the calendar year
ended December 31, 1994.

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.

22
<PAGE>

During the fiscal year ended December 31, 1994, Mitchell Hutchins earned
advisory fees in the amount of $103,328 for the Money Market Portfolio;
$105,843 for the Government Portfolio; $473,755 for the Global Income
Portfolio; $236,113 for the Asset Allocation Portfolio; $93,915 for the
Dividend Growth Portfolio; $355,689 for the Growth Portfolio; $332,624 for the
Global Growth Portfolio; $23,797 for the Fixed Income Portfolio, $63,634 for
the Balanced Portfolio and $79,623 for the Aggressive Growth Portfolio.

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; $373,942 for the 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 under
a Sub-Advisory Contract dated May 26, 1994 Mitchell Hutchins Institutional
Investors Inc. ("MHII") served as sub-adviser for the Dividend Growth
Portfolio. Pursuant to such Sub-Advisory Contracts, for the fiscal year ended
December 31, 1994, Mitchell Hutchins paid (or accrued) sub-advisory fees of
$14,277, $38,181, $49,765 and $27,400 to WWBC for the Fixed Income Portfolio,
PIC for the Balanced Portfolio, Nicholas-Applegate for the Aggressive Growth
Portfolio, and MHII for the Dividend Growth Portfolio, respectively. 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 their
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;
$304,396 for the Growth Portfolio; and $177,294 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

23
<PAGE>

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.

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; (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 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, 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. During the fiscal year
ended December 31, 1994, the Money

24
<PAGE>

Market, Government, Fixed Income, and Global Income Portfolios paid no
commissions, while the Asset Allocation, Balanced, Dividend Growth, Growth,
Global Growth and Aggressive Growth Portfolios paid aggregate commissions
totalling $63,641, $16,774, $45,863, $37,100, $397,060, and $49,178,
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, 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, Dividend Growth
Portfolio paid $2,283, Growth Portfolio paid $595 and Global Growth Portfolio
paid $720 in brokerage commissions to PaineWebber. During the fiscal year
ended December 31, 1994, Asset Allocation Portfolio paid $720 in brokerage
commissions to PaineWebber, representing 1.13% of the aggregate brokerage
commissions paid by that Portfolio and 1.61% of the aggregate dollar amount of
transactions involving the payment of commissions. During the fiscal year
ended December 31, 1994, Dividend Growth Portfolio paid $1,817 in commissions
to PaineWebber, representing 3.96% 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, 1994, Growth Portfolio paid $600 in brokerage commissions to PaineWebber,
representing 1.61% of the aggregate brokerage commissions paid by that
Portfolio and 1.03% of the aggregate dollar amount of transactions involving
the payment of commissions. During the fiscal year ended December 31, 1994,
Balanced Portfolio paid $288 in brokerage commissions to PaineWebber,
representing less than 1.0% of the aggregate brokerage commissions paid by
that Portfolio and less than 1.0% 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.

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 or the applicable Sub-Adviser determines in good faith that
such commission is reasonable in terms either of that particular transaction
or of the overall responsibility of Mitchell Hutchins or the 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. 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 applicable Sub-Adviser under the
Advisory Contract or Sub-Advisory Contract. During the fiscal year ended
December 31, 1994, the Asset Allocation, Balanced, Dividend Growth, Growth,
Global Growth and Aggressive Growth Portfolios directed $5,868,328,
$11,701,963, $6,851,516, $1,631,799, $4,817,215 and $ , respectively,
in portfolio transactions to brokers chosen because they provide research and
analysis, for which these Portfolios paid $9,241, $7,771, $8,767, $1,890,
$21,912 and $40,760, respectively, in commissions. During the same period, no
other Portfolio paid any brokerage commissions to brokers chosen because they
provide research and analysis.

25
<PAGE>

For purchases or sales with broker-dealer firms which act as principal,
Mitchell Hutchins seeks best execution. Although Mitchell Hutchins may receive
certain research or execution services in connection with these transactions,
Michell Hutchins will not purchase securities at a higher price or sell
securities at a lower price than would otherwise be paid if no weight was
attributed to the services provided by the executing dealer. Moreover, Mitchell
Hutchins will not enter into any explicit soft dollar arrangements relating to
principal transactions and will not receive in principal transactions the types
of services which could be purchased for hard dollars. Mitchell Hutchins may
engage in agency transactions in OTC equity and debt securities in return for
research and execution services. These transactions are entered into only in
compliance with procedures ensuring that the transaction (including
commissions) is at least as favorable as it would have been if effected
directly with a market-maker that did not provide research or execution
services. These procedures include Mitchell Hutchins receiving multiple quotes
from dealers before executing the transaction on an agency basis.

Research services furnished by brokers or dealers through which or with which
the Portfolios effect 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 in connection with these other funds or accounts may be used in
advising the Portfolios.

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.

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, 1994 and December 31, 1993,
respectively, the portfolio turnover rates were 53.72% and 7.93% for the
Government Portfolio, 97.45% and 68.60% for the Global Income Portfolio,
112.32% and 60.36% for the Asset Allocation Portfolio, 27.35% and 34.95% for
the Growth Portfolio, 175.34% and 266.96% for the Global Growth Portfolio and
149.68% and 51.68% 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%.
For the fiscal year ended December 31, 1994 the Portfolio turnover rate for the
Fixed Income Portfolio, Balanced Portfolio and Aggressive Growth Portfolio was
35.86%, 35.56% and 90.42%, respectively.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

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<PAGE>

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.

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 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 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.

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<PAGE>

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.

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.

28
<PAGE>

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 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
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

29
<PAGE>

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.

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 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

30
<PAGE>

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 LLP, 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, 1994 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.

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.

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<PAGE>

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.

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 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

32
<PAGE>

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.

33
<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 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 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 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 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 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. GE Investment
Management Incorporated serves as the Sub-adviser to this Portfolio.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Limitations........................................ 3
Hedging and Related Income Strategies...................................... 11
Trustees and Officers...................................................... 18
Investment Advisory Services............................................... 22
Portfolio Transactions..................................................... 23
Additional Purchase and Redemption Information............................. 26
Valuation of Shares........................................................ 26
Taxes...................................................................... 27
Dividends.................................................................. 29
Other Information.......................................................... 29
Financial Statements....................................................... 30
Description of Commercial Paper and Bond Ratings........................... 30
</TABLE>

2
<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.

3
<PAGE>

--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.

4
<PAGE>

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.

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.

5
<PAGE>

SPECIAL CHARACTERISTICS OF MORTGAGE- AND ASSET-BACKED SECURITIES. 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- 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.

6
<PAGE>

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

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-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.

7
<PAGE>

include automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. An
insufficient number of qualified 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 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

8
<PAGE>

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 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 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.

9
<PAGE>

INVESTMENT LIMITATIONS. Except as indicated otherwise, each Portfolio may
not:

(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;

(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 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.

10
<PAGE>

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

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.

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
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.

11
<PAGE>

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.

(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.

(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.

12
<PAGE>

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.

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. Writing covered put options serves as a limited
long hedge because increases in the value of the hedged instrument would be
offset to the extent of the premium received for writing the option. 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. The securities or other assets used as cover for OTC options written by
a Portfolio 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.

13
<PAGE>

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. A Portfolio will enter
into OTC option transactions only with contra parties that have a net worth of
at least $20 million.

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

14
<PAGE>

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.

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.

15
<PAGE>

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.

(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 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.

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.

16
<PAGE>

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.

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.

17
<PAGE>

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."

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 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:

18
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH THE FUND;
BUSINESS EXPERIENCE
NAME AND ADDRESS* AND OTHER DIRECTORSHIPS
----------------- -----------------------
<S> <C>
E. Garrett Bewkes, Jr.; Trustee and Chairman of the Board of Trustees. Mr. Bewkes
68** 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 of-
ficer of American Bakeries Company. Mr. Bewkes is also a
director of Interstate Bakeries Corporation, NaPro Bio
Therapeutics, Inc. 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 Professor of Management
Columbia University of the Graduate School of Business, Columbia University.
101 Uris Hall Prior to 1989, he was president of the Illinois Insti-
New York, New York 10027 tute of Technology. Dean Feldberg is also a director of
AMSCO International Inc., Federated Department Stores,
Inc., Inco Homes Corporation and New World Communica-
tions 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 the law firm of Dun-
666 Third Avenue nington, Bartholow & Miller. Prior to May 1994 he was a
New York, New York 10017 partner in the law firm of Fryer, Ross & Gowen. Mr.
Gowen is also a director of Columbia Real Estate Invest-
ments, Inc. and a director or trustee of 16 other in-
vestment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Frank P.L. Minard; 49** Trustee. Mr. Minard is chairman of Mitchell Hutchins,
chairman of the board of Mitchell Hutchins Institutional
Investors Inc. ("MHII") and a director of PaineWebber.
Prior to 1993, Mr. Minard was managing director of Op-
penheimer Capital in New York and Director of Oppen-
heimer Capital Ltd. in London. Mr. Minard is also a di-
rector or trustee of 39 other investment companies for
which Mitchell Hutchins or PaineWebber serves as invest-
ment adviser.
Frederic V. Malek; 58 Trustee. Mr. Malek is Chairman of Thayer Capital Partners
901 15th Street, N.W. (investment bank) and a co-chairman and director of CB
Suite 300 Commercial Group Inc. (real estate). From January 1992
Washington, D.C. 20005 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 execu-
tive vice president and president and president of
Marriott Hotels and Resorts. Mr. Malek is also a direc-
tor of American Management Systems, Inc., Automatic Data
Processing, Inc., Avis, Inc., FPL Group, Inc., ICF In-
ternational, Manor Care, Inc. and National Education
Corporation and a director or trustee of 16 other in-
vestment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH THE FUND;
BUSINESS EXPERIENCE
NAME AND ADDRESS* AND OTHER DIRECTORSHIPS
----------------- -----------------------
<S> <C>
Judith Davidson Moyers; Trustee. Mrs. Moyers is president of Public Affairs Tele-
59 vision, Inc., an educational consultant and a home econ-
Public Affairs Televi- omist. Mrs. Moyers is also a director of Ogden Corpora-
sion tion and a director or trustee of 16 other investment
356 W. 58th Street companies for which Mitchell Hutchins or PaineWebber
New York, New York 10019 serves as investment adviser.
Thomas F. Murray; 84 Trustee. Mr. Murray is a real estate and financial con-
400 Park Avenue sultant. Mr. Murray is also a director and chairman of
New York, New York 10022 American Continental Properties, Inc., a trustee of Pru-
dential 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 advi-
sory 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 39 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 in-
vestment adviser.
Paul B. Guenther President. Mr. Guenther is a director of PaineWebber and
Mitchell Hutchins and president and a director of PW
Group. Mr. Guenther is also president of 26 and a direc-
tor or trustee of 17 other investment companies for
which Mitchell Hutchins or PaineWebber serves as invest-
ment adviser.
Ellen R. Harris; 48 Vice President. Ms. Harris is chief domestic equity
strategist, a managing director and chief investment of-
ficer-domestic of Mitchell Hutchins. Ms. Harris is also
a vice president of 19 other investment companies for
which Mitchell Hutchins or PaineWebber serves as invest-
ment adviser.
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 in-
vestment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
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 presi-
dent and secretary of 39 other investment companies for
which Mitchell Hutchins or PaineWebber serves as invest-
ment adviser.
Victoria E. Schonfeld; Vice President. Ms. Schonfeld is a managing director and
43 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 secre-
tary of 39 other investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH THE FUND;
BUSINESS EXPERIENCE
NAME AND ADDRESS* AND OTHER DIRECTORSHIPS
----------------- -----------------------
<S> <C>
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 Finan-
cial Management LP. Prior to August 1992, he was an au-
dit manager with Ernst & Young LLP. Mr. Schubert is also
a vice president and assistant secretary of 39 other in-
vestment 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 39 other in-
vestment 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 fi-
nance 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 39
other investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
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 secre-
tary of 39 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.

21
<PAGE>

COMPENSATION TABLE
<TABLE>
<CAPTION>
PREFERRED
OR TOTAL
RETIREMENT COMPENSATION
BENEFITS FROM THE
AGGREGATE ACCRUED AS ESTIMATED TRUST AND THE
COMPENSATION PART OF ANNUAL FUND COMPLEX
FROM THE TRUST'S BENEFITS UPON PAID TO
NAME OF PERSONS, POSITION THE TRUST* EXPENSES RETIREMENT TRUSTEES+
------------------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
E. Garrett Bewkes, Jr.
Trustee and chairman of
the board of trustees.... -- -- -- --
Meyer Feldberg,
Trustee.................. $5,300 -- -- $86,050
George W. Gowen,
Trustee.................. $5,300 -- -- $71,425
Frederic V. Malek,
Trustee.................. $5,300 -- -- $77,375
Frank P.L. Minard,
Trustee.................. -- -- -- --
Judith Davidson Moyers,
Trustee.................. $5,000 -- -- $71,125
Thomas F. Murray,
Trustee.................. $5,050 -- -- $71,925
</TABLE>
- --------

* Represents fees paid to each trustee during the fiscal year ended December
31, 1994.

+ Represents total compensation paid to each trustee during the calendar year
ended December 31, 1994.

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 May 26, 1994 with Mitchell Hutchins, served as sub-
adviser for the Dividend Growth Portfolio. Pursuant to such sub-advisory
contract, during the period May 26, 1994 to December 31, 1994, MHII earned sub-
advisory fees of $27,400.

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

22
<PAGE>

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 the 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. 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 Mitchell Hutchins (1) upon material breach by the Sub-Adviser
of its representations and warranties; (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 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

23
<PAGE>

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, 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. During the
fiscal year ended December 31, 1994, 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 $63,641, $16,774, $37,100, and $397,060, 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, 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, Dividend Growth Portfolio paid $2,283, Growth
Portfolio paid $595 and Global Growth Portfolio paid $720 in brokerage
commissions to PaineWebber. During the fiscal year ended December 31, 1994,
Asset Allocation Portfolio paid $720 in brokerage commissions to PaineWebber,
representing 1.13% of the aggregate brokerage commissions paid by that
Portfolio and 1.61% of the aggregate dollar amount of transactions involving
the payment of commissions. During the fiscal year ended December 31, 1994,
Dividend Growth Portfolio paid $1,817 in commissions to PaineWebber,
representing 3.96% 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, 1994, Growth
Portfolio paid $600 in brokerage commissions to PaineWebber, representing 1.61%
of the aggregate brokerage commissions paid by that Portfolio and 1.03% 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.
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 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

24
<PAGE>

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
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, 1994, the Asset Allocation,
Dividend Growth, Growth and Global Growth Portfolios directed $5,868,328,
$6,851,516, $1,631,799 and $4,817,215, respectively, in portfolio transactions
to brokers chosen because they provide research and analysis for which these
Portfolios paid $9,241, $8,767, $1,890 and $21,912, respectively, in
commissions. During the same period, no other Portfolio paid any brokerage
commissions to brokers chosen because they provide research and analysis. For
purchases or sales with broker-dealer firms which act as principal, Mitchell
Hutchins seeks best execution. Although Mitchell Hutchins may receive certain
research or execution services in connection with these transactions. Mitchell
Hutchins will not purchase securities at a higher price or sell securities at a
lower price than would otherwise be paid if no weight was attributed to the
services provided by the executing dealer. Moreover, Mitchell Hutchins will not
enter into any explicit soft dollar arrangements relating to principal
transactions and will not receive in principal transactions the types of
services which could be purchased for hard dollars. Mitchell Hutchins may
engage in agency transactions in OTC equity and debt securities in return for
research and execution services. These transactions are entered into only a
compliance with procedures ensuring that the transaction (including
commissions) is at least as favorable as it would have been if effected
directly with a market-maker that did not provide research or execution
services. These procedures include Mitchell Hutchins receiving multiple quotes
from dealers before executing the transaction on any agency basis.

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 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.

25
<PAGE>

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, 1994 and December 31, 1993,
respectively, the portfolio turnover rates were 53.72% and 7.93% for the
Government Portfolio, 97.40% and 68.60% for the Global Income Portfolio,
112.32% and 60.36% for the Asset Allocation Portfolio, 27.35% and 34.95% for
the Growth Portfolio, 175.34% and 266.96% for the Global Growth Portfolio and
149.68% and 51.68% for the Dividend Growth Portfolio.

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.

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 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.

26
<PAGE>

TAXES

27
<PAGE>

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 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.

28
<PAGE>

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.

DIVIDENDS

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

29
<PAGE>

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 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. American Benefit Life Insurance Company is
a wholly owned subsidiary of American Republic Insurance Company.

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

FINANCIAL STATEMENTS

DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS

30
<PAGE>

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.

31
<PAGE>

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.

32
<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.

A-1
<PAGE>

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

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

(a) Financial Statements:

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, 1994 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, 1994 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, 1994 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, 1994 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, 1994 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 in Part B of this Registration Statement through incorporation by
reference from the Annual Report to Shareholders (previously filed with
the Securities and Exchange Commission through EDGAR:

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

<PAGE>

ended December 31, 1994 for the Money Market, Growth, Global
Growth, Global Income, Government and Asset Allocation
Portfolios; for the two years in the period 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 LLP, Independent Auditors, dated
February 9, 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/
(c) Amendment dated September 28, 1994 to By-Laws
(filed herewith)

(i) Interim Sub-Investment Advisory Agreement with
respect to the Global Growth Portfolio (filed
herewith)

(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
<PAGE>

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 (filed herewith)
(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.

/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 referenced 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 April 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

<PAGE>

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 the most recent Post-Effective
Amendment to the Registration Statement of American Republic Variable Annuity
Account, File No. 33-10417, 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 the most recent
Post-Effective Amendment to the Registration Statement of American Benefit
Variable Annuity Account, File No. 33-19254, 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 the most recent
Post-Effective Amendment to the Registration Statements of the PaineWebber Life
Separate Account, File No. 33-58808 and File No. 33-61488, and is hereby
incorporated by reference.

Item 26. Number of Holders of Securities
-------------------------------
<TABLE>
<CAPTION>
Title of Class of Shares Number of Record Holders
of Beneficial Interest as of April 15, 1995
------------------------ ------------------------
<S> <C>
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
</TABLE>

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 contracting with
or having a claim against the Trust or a partseries thereof; and that, provided
they have exercised reasonable carand 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.
<PAGE>

Article XI of the By-Laws provides that the Registrant may purchase and
maintain insurance on behalf of any person who is or was a trustee, officer or
employee of the Trust, or is or was serving at the request of the Trust as a
trustee, officer or employee of a corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity or arising out of his or her status
as such, whether or not the Registrant would have the power to indemnify him or
her against such liability, provided that the Registrant may not acquire
insurance protecting any trustee or officer against liability to the Registrant
or 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 December 19, 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

<PAGE>

advisory business 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 13, 1995 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 November 21, 1994 and amended on March 15, 1995 with the
Securities and Exchange Commission (registration number 801-47993) 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.

GE Investment Management Incorporated ("GEIM"), a Delaware corporation,
is a registered investment adviser and is wholly owned by General Electric
Company. GEIM is primarily engaged in the investment advisory business.
Information as to the officers and directors of GEIM is included in its Form ADV
filed on March 31, 1995 with the Securities and Exchange Commission
(registration number 801-31947) 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.
<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. 20 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 27th day of April, 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:
<PAGE>

Signature Title Date
- --------- ----- -----
<S> <C> <C>

/s/ Paul B. Guenther President April 27, 1995
-------------------------- (Chief Executive Officer)
Paul B. Guenther*

/s/ E. Garrett Bewkes, Jr. Trustee and Chairman April 27, 1995
-------------------------- of the Board of Trustees
E. Garrett Bewkes, Jr.**

/s/ Meyer Feldberg Trustee April 27, 1995
--------------------------
Meyer Feldberg***

/s/ George W. Gowen Trustee April 27, 1995
--------------------------
George W. Gowen****

/s/ Frederic V. Malek Trustee April 27, 1995
--------------------------
Frederic V. Malek****

/s/ Judith Davidson Moyers Trustee April 27, 1995
--------------------------
Judith Davidson Moyers****

Thomas F. Murray Trustee April 27, 1995
--------------------------
Thomas F. Murray****

/s/ Frank P. L. Minard Trustee April 27, 1995
--------------------------
Frank P. L. Minard*****

Vice President and April 27, 1995
/s/ Julian F. Sluyters Treasurer (Principal
-------------------------- Financial and Accounting
Julian F. Sluyters Officer)

</TABLE>
<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.
<PAGE>

Exhibit Index
-------------
Page
Exhibits Number
- -------- ------
(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/
(c) Amendment dated September 28, 1994 to By-Laws (filed
herewith)

(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/
(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/
(i) Interim Sub-Investment Advisory Agreement with respect
to the Global Growth Portfolio (filed herewith)
(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:

<PAGE>

(a) Independent Auditors' Consent (filed herewith)
(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.

/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 referenced to Post-Effective Amendment No. 17,
SEC File No. 33-10438, filed April 21, 1994.

<PAGE>

Exhibit 2(c)

AMENDMENT TO BY-LAWS

PAINEWEBBER SERIES TRUST

CERTIFICATE OF VICE PRESIDENT AND ASSISTANT SECRETARY

I, Joan L. Cohen, Vice President and Assistant Secretary of
PaineWebber Series Trust ("Trust"), hereby certify that, at a duly
convened meeting of the Board of Trustees of the Trust held on September
28, 1994, the Trustees adopted the following resolution:

RESOLVED, that the first sentence of Section 2.05
of the Trust's by-laws be revised as follows:

"Shareholders entitled to vote may vote
either in person or by proxy, provided
that such proxy is authorized to act by
(1) a written instrument dated not more
than eleven months prior to the meeting
and executed either by the Shareholder
or his or her duly authorized attorney
in fact (who may be so authorized by a
writing or by any non-written means
permitted by the laws of the
Commonwealth of Massachusetts) or (2)
such electronic, telephonic,
computerized or other alternative means
as may be approved by a resolution
adopted by the Trustees."

Dated: April 27, 1995

By:/s/ Joan L. Cohen
---------------------------------------
Joan L. Cohen
Vice President and Assistant Secretary
PaineWebber Series Trust

New York, New York (ss)

Subscribed and sworn before me this 27th day of April, 1995

/s/ Jennifer Farrell
--------------------
Jennifer Farrell
Notary Public

<PAGE>

Exhibit 5(i)

INTERIM
SUB-ADVISORY AGREEMENT
----------------------

Agreement made as of March 23, 1995, between MITCHELL HUTCHINS
ASSET MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation, and GE
Investment Management Incorporated ("Sub-Adviser"), a Delaware corporation
(the "Agreement").

RECITALS
--------
(1) Mitchell Hutchins has entered into a Investment Advisory
and Administration Contract dated April 21, 1988, ("Management Agreement")
with PaineWebber Series Trust ("Trust"), an open-end management investment
company registered under the Investment Company Act of 1940, as amended
("1940 Act") with respect to the Global Growth Portfolio ("Portfolio")
series of the Trust; and

(2) Mitchell Hutchins wishes to retain the Sub-Adviser to
furnish certain investment advisory services to Mitchell Hutchins and the
Portfolio, and the Sub-Adviser is willing to furnish those services;

(3) Mitchell Hutchins intends that this interim Agreement will
constitute the basis of a new sub-advisory agreement that will be submitted
to the board of trustees and shareholders for approval hereafter;

NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties agree as follows:

1. Appointment. Mitchell Hutchins hereby appoints the
-----------
Sub-Adviser as an investment sub-adviser with respect to the Portfolio for
the period and on the terms set forth in this Agreement. The Sub-Adviser
accepts that appointment and agrees to render the services herein set
forth, for the compensation herein provided.

2. Duties as Sub-Adviser.
---------------------
(a) Subject to the supervision of and any guidelines adopted
by the Trust's Board of Trustees (the "Board"), the Sub-Adviser will
provide a continuous investment program for the Portfolio, including
investment research and management. The Sub-Adviser will determine from
time to time what investments will be purchased,
<PAGE>

retained or sold by the Portfolio. The Sub-Adviser will be responsible for
placing purchase and sell orders for investments and for other related
transactions. The Sub-Adviser will provide services under this Agreement in
accordance with the Portfolio's investment objective, policies and
restrictions as stated in the Portfolio's Registration Statement.

(b) The Sub-Adviser agrees that, in placing orders with
brokers, it will obtain the best net result in terms of price and
execution; provided that, on behalf of the Portfolio, the Sub-Adviser may,
in its discretion, use brokers who provide the Portfolio with research,
analysis, advice and similar services to execute portfolio transactions on
behalf of the Portfolio, and the Sub-Adviser may pay to those brokers in
return for brokerage and research services a higher commission than may be
charged by other brokers, subject to the Sub-Adviser's determining in good
faith that such commission is reasonable in terms either of the particular
transaction or of the overall responsibility of the 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. In no instance will portfolio securities be purchased
from or sold to the Sub-Adviser, or any affiliated person thereof, except
in accordance with the federal securities laws and the rules and
regulations thereunder. Whenever the Sub-Adviser simultaneously places
orders to purchase or sell the same security on behalf of the Portfolio
and one or more other accounts advised by the Sub-Adviser, the orders will
be allocated as to price and amount among all such accounts in a manner
believed to be equitable by the Sub-Adviser over time to each account.
Mitchell Hutchins recognizes that in some cases this procedure may
adversely affect the results obtained for the Portfolio.

(c) The Sub-Adviser will maintain all books and records
required to be maintained by the Sub-Adviser pursuant to the 1940 Act and
the rules and regulations promulgated thereunder with respect to
transactions on behalf of the Portfolio, and will furnish the Board and
Mitchell Hutchins with such periodic and special reports as the Board or
Mitchell Hutchins reasonably may request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby
agrees that all records which it maintains for the Portfolio are the
property of the Trust, agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records which it maintains for the Trust
and which are required to be maintained by Rule 31a-1 under the 1940 Act,
and further agrees to surrender promptly to the Trust any records which it
maintains for the Trust upon request by the Trust.

(d) At such times as shall be reasonably requested by the
Board or Mitchell Hutchins, the Sub-Adviser will provide the Board and
Mitchell Hutchins with economic and investment analyses and reports as
well as quarterly reports setting forth the Portfolio's

- 2 -
<PAGE>

performance and make available to the Board and Mitchell Hutchins any
economic, statistical and investment services normally available to
institutional or other customers of the Sub-Adviser.

(e) In accordance with procedures adopted by the Board, as
amended from time to time, the Sub-Adviser is responsible for assisting in
the fair valuation of any illiquid portfolio securities and will assist in
providing independent sources of market value for all other portfolio
securities.

3. Further Duties. In all matters relating to the
---------------
performance of this Agreement, the Sub-Adviser will act in conformity with
the Trust's Trust Instrument, By-Laws and currently effective registration
statement under the 1940 Act and any amendments or supplements thereto
("Registration Statement") and with the written instructions and
directions of the Board and Mitchell Hutchins and will comply with the
requirements of the 1940 Act, the Investment Advisers Act of 1940, as
amended, ("Advisers Act"), the rules under each, and Subchapter M of the
Internal Revenue Code as applicable to regulated investment companies. In
addition, the Sub-Adviser will act in conformity with all other applicable
federal and state laws and regulations either as reflected in the
Registration Statement or otherwise provided in writing to the Sub-Adviser
by Mitchell Hutchins. Mitchell Hutchins agrees to provide to the
Sub-Adviser copies of the Trust's Trust Instrument, By-Laws, Registration
Statement, written instructions and directions of the Board and Mitchell
Hutchins, and any amendments or supplements to any of these materials as
soon as practicable after such materials become available.

4. Exclusivity. During the term of this Agreement, the Sub-
-----------
Adviser agrees that it will not provide investment advice on a
discretionary or non-discretionary basis for any global equity investment
products offered to retail customers in the United States by broker-
dealers listed on Schedule B. The Sub-Adviser shall deliver to Mitchell
Hutchins in writing prompt and regular reports of the Sub-Adviser's
investment advisory activities in sufficient detail to permit Mitchell
Hutchins to monitor the terms of this Agreement.

5. Expenses. During the term of this Agreement, the
--------
Sub-Adviser will bear all expenses incurred by it in connection with its
investment sub-advisory services under this Agreement.

6. Compensation.
------------
(a) For the services provided and the expenses assumed by the
Sub-Adviser pursuant to this Agreement, Mitchell Hutchins, not the
Portfolio, will pay to the Sub-Adviser a fee, computed daily and payable
monthly, as computed in the manner set forth in Schedule A, together with
a schedule showing the manner in which the fee was computed.

- 3 -
<PAGE>

(b) The fee shall be computed daily and payable monthly to
the Sub-Adviser on or before the fifteenth business day of the next
succeeding calendar month.

(c) If this Agreement becomes effective or terminates before
the end of any month, the fee for the period from the effective date to
the end of the month or from the beginning of such month to the date of
termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full month in which such
effectiveness or termination occurs.

7. Limitation Of Liability. The Sub-Adviser shall not be
------------------------
liable for any error of judgment or mistake of law or for any loss
suffered by the Portfolio, the Trust or its shareholders or by Mitchell
Hutchins in connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.

8. Indemnification.
---------------
(a) Mitchell Hutchins agrees to indemnify GEIM, its officers and
directors, and any person who controls GEIM within the meaning of Section
15 of the Securities Act of 1933 ("1933 Act") for any loss or expense
(including attorneys' fees) arising out of any claim, demand, action or
suit in the event that GEIM has been found to be without fault and
Mitchell Hutchins or its parent company, PaineWebber Incorporated
("PaineWebber"), has been found at fault (i) by the final judgment of a
court of competetent jurisdiction or (ii) in any order of settlement of
any claim, demand, action or suit that has been approved by the Board of
Directors of Mitchell Hutchins or PaineWebber.

(b) GEIM agrees to indemnify Mitchell Hutchins, its officers and
directors, and any person who controls Mitchell Hutchins within the
meaning of Section 15 of the 1933 Act for any loss or expense (including
attorneys' fees) arising out of any claim, demand, action or suit in the
event that Mitchell Hutchins has been found to be without fault and GEIM,
or its parent company, General Electric Company ("GE"), has been found at
fault (i) by the final judgment of a court of competetent jurisdiction or
(ii) in any order of settlement of any claim, demand, action or suit that
has been approved by the Board of Directors of GEIM or GE.

- 4 -
<PAGE>

9. Representations of Sub-Adviser. The Sub-Adviser
----------------------------------
represents, warrants and agrees as follows:

(a) The Sub-Adviser (i) is registered as an investment
adviser under the Advisers Act and will continue to be so registered for
so long as this Agreement remains in effect; (ii) is not prohibited by the
1940 Act or the Advisers Act from performing the services contemplated by
this Agreement; (iii) has met, and will seek to continue to meet for so
long as this Agreement remains in effect, any other applicable federal or
state requirements, or the applicable requirements of any regulatory or
industry self-regulatory agency, necessary to be met in order to perform
the services contemplated by this Agreement; (iv) has the authority to
enter into and perform the services contemplated by this Agreement; and
(v) will promptly notify Mitchell Hutchins of the occurrence of any event
that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act
or otherwise.

(b) The Sub-Adviser has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act and will
provide Mitchell Hutchins and the Board with a copy of that code of
ethics, together with evidence of its adoption. Within fifteen days of
the end of the last calendar quarter of each year that this Agreement is
in effect, the president or a vice-president of the Sub-Adviser shall
certify to Mitchell Hutchins that the Sub-Adviser has complied with the
requirements of Rule 17j-1 during the previous year and that there has
been no violation of the Sub-Adviser's code of ethics or, if such a
violation has occurred, that appropriate action was taken in response to
such violation. Upon the written request of Mitchell Hutchins, the
Sub-Adviser shall permit Mitchell Hutchins, its employees or its agents to
examine the reports required to be made to the Sub-Adviser by Rule 17j-
1(c)(1) and all other records relevant to the Sub-Adviser's code of
ethics.

(c) The Sub-Adviser has provided Mitchell Hutchins with a
copy of its Form ADV as most recently filed with the Securities and
Exchange Commission ("SEC") and promptly will furnish a copy of all
amendments to Mitchell Hutchins at least annually.

(d) The Sub-Adviser will notify Mitchell Hutchins of any
change of control of the Sub-Adviser, including any change of its general
partners or 25% shareholders, as applicable, and any changes in the key
personnel of the Sub-Adviser, in each case prior to or promptly after such
change.

- 5 -
<PAGE>

10. Representations and Warranties of Mitchell Hutchins.
---------------------------------------------------------
Mitchell Hutchins represents, warrants and agrees as follows:

(a) Mitchell Hutchins (i) is registered as an investment adviser
under the Advisers Act and will continue to be so registered for so long
as this Agreement remains in effect; (ii) is not prohibited by the 1940
Act from performing the services contemplated by this Agreement; (iii) has
met, and will seek to continue to meet for so long as this Agreement
remains in effect, any other applicable federal or state requirements, or
the applicable requirements of any regulatory or industry self-regulatory
agency, necessary to be met in order to perform the services contemplated
by this agreement; (iv) has the authority to enter into and perform the
services contemplated by this Agreement; and (v) will promptly notify the
Sub-Adviser of the occurrence of any event that would disqualify Mitchell
Hutchins from serving as an investment adviser of an investment company
pursuant to Section 9(a) of the 1940 Act or otherwise.

(b) Mitchell Hutchins agrees that it will notify GEIM, to the
extent possible, within a reasonable period of time prior to any
termination of this Agreement by Mitchell Hutchins pursuant to Section
11(c) (including any termination by assignment resulting from a
foreseeable change in control of Mitchell Hutchins that is a matter of
public information), and that it will notify GEIM promptly following any
other termination of this Agreement pursuant to Section 11(c).

11. Duration and Termination.
------------------------
(a) This Agreement shall become effective upon the date first
above written, provided that this Agreement shall not take effect unless
it has first been approved by a vote of a majority of those trustees of
the Trust who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of
voting on such approval.

(b) Unless sooner terminated as provided herein, this
Agreement shall continue in effect for the shorter of (i) a period of 120
days from its effective date or (ii) a period ending on the date that a
new sub-advisory agreement is approved by vote of a majority of the
outstanding voting securities of the Portfolio.

(c) Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, by vote of the
Board or by a vote of a majority of the outstanding voting securities of
the Portfolio on 60 days' written notice to the Sub-Adviser. This
Agreement may also be terminated, without the payment of any penalty, by
Mitchell Hutchins: (i) upon 60 days' written notice to the Sub-Adviser;
(ii) upon material breach by the Sub-Adviser of any of the representations
and warranties set forth in Paragraph 9 of this Agreement; or (iii) if the
Sub-Adviser

- 6 -
<PAGE>

becomes unable to discharge its duties and obligations under this
Agreement, including circumstances such as financial insolvency of the Sub-
Adviser or other circumstances that could adversely affect the Portfolio.
The Sub-Adviser may terminate this Agreement at any time, without the
payment of any penalty, on 60 days' written notice to Mitchell Hutchins.
This Agreement will terminate automatically in the event of its assignment
or upon termination of the Management Agreement.

12. Amendment of this Agreement. No provision of this
------------------------------
Agreement may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought, and
no amendment to the terms of this Agreement shall be effective until
approved by vote of a majority of the Portfolio's outstanding voting
securities (unless the Trust receives an SEC order permitting it to modify
the Agreement without such vote).

13. Governing Law. This Agreement shall be construed in
--------------
accordance with the 1940 Act and the laws of the State of Delaware,
without giving effect to the conflicts of laws principles thereof. To the
extent that the applicable laws of the State of Delaware conflict with the
applicable provisions of the 1940 Act, the latter shall control.

14. Miscellaneous. The captions in this Agreement are
-------------
included for convenience of reference only and in no way define or delimit
any of the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors. As used in this Agreement, the terms "majority of
the outstanding voting securities," "affiliated person," "interested
person," "assignment," "broker," "investment adviser," "net assets,"
"sale," "sell" and "security" shall have the same meaning as such terms
have in the 1940 Act, subject to such exemption as may be granted by the
SEC by any rule, regulation or order. Where the effect of a requirement of
the federal securities laws reflected in any provision of this Agreement
is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. This
Agreement may be signed in counterpart.

- 7 -
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized signatories as of the
date and year first above written.

Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.

By:____________________________________
Name:
Title:

Attest: GE INVESTMENT MANAGEMENT INCORPORATED

By:____________________________________
Name:
Title:

- 8 -
<PAGE>

SCHEDULE A

Fund Annual Fee Rate
---- ---------------

PaineWebber Series Trust - 0.29% of average daily net assets
Global Growth Portfolio
<PAGE>

SCHEDULE B

Retail Broker Dealers
---------------------

Alex. Brown & Sons Incorporated
A.G. Edwards & Sons, Inc.
Dean Witter Reynolds, Inc.
E.D. Jones
Kemper Financial Services, Kemper Securities Group, Inc.
Legg Mason Wood Walker Incorporated
Merrill Lynch Pierce Fenner & Smith Incorporated
Prudential Securities Incorporated
Raymond James & Associates, Inc.
Smith Barney Inc.

<PAGE>

Exhibit 11(a)

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
information and to the incorporation by reference therein of our report dated
February 9, 1995, in this Registration Statement (Form N-1A No. 33-10438) of
PaineWebber Series Trust.

ERNST & YOUNG LLP

New York, New York
April 25, 1995