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PAINEWEBBER GLOBAL INCOME FUND
SUPPLEMENT TO PROSPECTUS DATED MARCH 1, 1997
June 24, 1997
Dear Investor,
This is a supplement to the Prospectus of PaineWebber Global Income
Fund dated March 1, 1997. The purpose of this supplement is to notify investors
of a change to a non-fundamental investment policy of the Fund.
Your Fund first began investing in the world's debt markets more than
ten years ago. Much has changed since then. Among the more significant changes
are increased opportunities to benefit from limited investments in lower-rated
debt obligations around the world. Your Fund has been able to make investments
in non-investment grade debt for some time, subject to certain limits. Those
limits have recently been changed. Initially, Mitchell Hutchins anticipates that
this added flexibility will allow it to invest a greater percentage of the
Fund's assets in emerging market debt. Mitchell Hutchins hopes that this change
will increase the potential to enhance performance; however, whenever a fund
attempts to take advantage of greater opportunities, it must also accept
increased risks. Because of this policy change, we are revising the Prospectus
as described below.
The last paragraph on page 15 of the Prospectus (page 10 of the Class Y
Prospectus) under "INVESTMENT OBJECTIVES & POLICIES" in the section captioned
"Global Income Fund" is replaced by the following:
The Fund may invest up to 35% of its total assets in debt securities
rated below the two highest grades assigned by a nationally recognized
statistical rating organization ("NRSRO"). Except as noted below, these
securities must be rated at least BBB by Standard & Poor's, a division
of The McGraw-Hill Companies, Inc. ("S&P"), Baa by Moody's Investors
Service, Inc. ("Moody's") or comparably rated by another NRSRO or, if
unrated, determined by Mitchell Hutchins to be of comparable quality.
Within this 35% limitation, the Fund may invest up to 20% of its total
assets in debt securities rated as low as D by S&P, C by Moody's or
comparably rated by another NRSRO or, in the case of such securities
assigned a short-term debt rating, as low as D by S&P or comparably
rated by another NRSRO or, if not so rated, determined by Mitchell
Hutchins to be of comparable quality. Mitchell Hutchins will purchase
such securities for the Fund only when it concludes that the
anticipated return to the Fund on such investments warrants exposure to
the additional level of risks.
Up to 20% of the Fund's total assets may be invested in debt securities
that are not paying current income. The Fund may purchase these
securities if Mitchell Hutchins believes that they have a potential for
capital appreciation.
Similarly, the paragraph captioned "Bonds; Lower-Rated Bonds" on page
22 of the Prospectus (page 17 of the Class Y Prospectus) is replaced by the
following:
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BONDS; LOWER-RATED BONDS. Global Income Fund is permitted to invest up
to 35% of its total assets in securities rated below the two highest
grades assigned by an NRSRO. Except as noted below, these securities
must be rated at least BBB by S&P, Baa by Moody's or comparatively
rated by another NRSRO or, if unrated, determined by Mitchell Hutchins
to be of comparable quality. These securities are investment grade, but
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-rated
securities. Within this 35% limitation, the Fund may invest up to 20%
of its total assets in debt securities rated as low as D by S&P, C by
Moody's or comparably rated by another NRSRO or, in the case of such
securities assigned a short-term debt rating, as low as D by S&P or
comparably rated by another NRSRO or, if not so rated, determined by
Mitchell Hutchins to be of comparable quality. These securities,
commonly referred to as "junk bonds," are deemed by those NRSROs to be
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal and may involve major risk exposure to
adverse conditions. Debt rated D by S&P is in payment default or such
rating is assigned upon the filing of a bankruptcy petition or the
taking of a similar action if payments on an obligation are
jeopardized. Debt rated C by Moody's is in the lowest rated class and
can be regarded as having extremely poor prospects of attaining any
real investment standing. Debt securities that are not rated by an
NRSRO but that Mitchell Hutchins determines to be of comparable quality
to that of rated securities in which the Fund may invest are included
in the computation of any percentage limitations applicable to the
comparatively rated securities. In the event that, due to a downgrade
of one or more debt securities, an amount in excess of 20% of the
Fund's total assets is held in securities rated below investment grade
and comparatively unrated securities, Mitchell Hutchins will engage in
an orderly disposition of such securities to the extent necessary to
ensure that the Fund's holdings of such securities do not exceed 20% of
the Fund's total assets.
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RISKS OF EMERGING MARKET DEBT. As detailed in the Prospectus,
investment in securities issued by companies located in emerging markets
involves additional risks, in that these countries have economic and political
systems that are relatively less mature, and can be expected to be less stable,
than those of developed countries. Emerging market countries may have policies
that restrict investment by foreigners in those countries, and there is a risk
of government expropriation or nationalization of private property. Similarly,
for debt issued by governments of emerging market countries, there is the risk
that the issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to pay interest or repay
principal when due in accordance with the terms of the debt, and the Fund may
have limited legal recourse in the event of default. The Fund may also invest in
emerging market debt that is rated investment grade. Therefore, the Fund's total
investment in emerging market debt may exceed the 20% noted above.
If you have any questions regarding PaineWebber Global Income Fund,
please call your investment executive at PaineWebber or one of its correspondent
firms.
