PAINEWEBBER INVESTMENT SERIES, 485APOS, 1997-12-31

PAINEWEBBER INVESTMENT SERIES
485APOS, 1997-12-31

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<PAGE>

As filed with the Securities and Exchange Commission on December 31, 1997

1933 Act: Registration No. 33-11025
1940 Act: Registration No. 811-5259

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 36 [ X ]

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940 [ X ]

Amendment No. 33

PAINEWEBBER INVESTMENT SERIES
(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:

ROBERT A. WITTIE, Esq.
ELINOR W. GAMMON, Esq.
Kirkpatrick & Lockhart LLP
Second Floor
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Telephone: (202) 778-9000

Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment.

[ ] Immediately upon filing pursuant to Rule 485(b)
[ ] On pursuant to Rule 485(b)

[ X ] 60 days after filing pursuant to Rule 485(a)(1)

[ ] On pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On pursuant to Rule 485(a)(2)

Title of Securities Being Registered: Shares of Beneficial Interest.

<PAGE>

PaineWebber Investment Series

Contents of Registration Statement

This registration statement consists of the following papers and documents:

Cover Sheet

Contents of Registration Statement

Cross Reference Sheets

PaineWebber Global Income Fund

Part A - Prospectus

Part B - Statement of Additional Information

Part C - Other Information

Signature Page

Exhibits

<PAGE>

PaineWebber Investment Series

PaineWebber Global Income Fund

Form N-1A Cross Reference Sheet

Part A Item No.and Caption Prospectus Caption
-------------------------- ------------------
1. Cover Page Cover Page
2. Synopsis The Funds at a Glance; Expense Table
3. Condensed Financial Information Financial Highlights; Performance
4. General Description of Registrant The Funds at a Glance; Investment Objectives &
Policies; Investment Philosophy & Process; The Funds'
Investments; General Information
5. Management of the Fund Management; General Information
5A. Management's Discussion of Fund Performance Financial Highlights
6. Capital Stock and Other Securities Cover Page; Flexible Pricing; Dividends & Taxes;
General Information
7. Purchase of Securities Being Offered Flexible Pricing; How to Buy Shares; Other Services;
Management; Determining the Shares' Net Asset Value
8. Redemption or Repurchase How to Sell Shares; Other Services
9. Pending Legal Proceedings Not Applicable

Part B Item No. and Caption Statement of Additional Information Caption
--------------------------- -------------------------------------------
10. Cover page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Other Information

13. Investment Objective and Policies Investment Policies and Restrictions; Hedging and
Other Strategies Using Derivative Instruments;
Portfolio Transactions

14. Management of the Fund Trustees and Officers; Principal Holders of
Securities
15. Control Persons and Principal Holders of Trustees and Officers; Principal Holders of
Securities Securities
16. Investment Advisory and Other Services Investment Advisory and Distribution Arrangements
17. Brokerage Allocation Portfolio Transactions

<PAGE>

</TABLE>
<TABLE>
<CAPTION>

Part B Item No. and Caption Statement of Additional Information Caption
--------------------------- -------------------------------------------
<S> <C> <C>
18. Capital Stock and Other Securities Conversion of Class B Shares; Other Information
19. Purchase, Redemption and Pricing of Securities Reduced Sales Charges, Additional Exchange and
Being Offered Redemption Information and Other Services;
Valuation of Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory and Distribution Arrangements
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements

Part C

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

<PAGE>

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

PAINEWEBBER ASIA PACIFIC GROWTH FUND
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND

1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019
PROSPECTUS -- MARCH 1, 1998

PaineWebber Global Funds are designed for investors generally seeking
long-term growth by investing mainly in foreign stocks or high current
income by investing mainly in global debt instruments. PaineWebber Asia
Pacific Growth Fund seeks long-term capital appreciation by investing
primarily in equity securities of companies in the Asia Pacific Region,
excluding Japan. PaineWebber Emerging Markets Equity Fund seeks long-term
capital appreciation by investing primarily in equity securities of
companies in newly industrializing countries. PaineWebber Global Equity
Fund seeks long-term growth of capital by investing primarily in U.S. and
foreign equity securities. PaineWebber Global Income Fund seeks high
current income and, secondarily, capital appreciation by investing
primarily in high-quality foreign and U.S. bonds.

This Prospectus concisely sets forth information that a prospective
investor should know about the Funds before investing. Please read this
Prospectus carefully and retain a copy for future reference.

A Statement of Additional Information dated March 1, 1998, has been filed
with the Securities and Exchange Commission and is legally part of this
Prospectus. The Statement of Additional Information can be obtained
without charge, and further inquiries can be made, by contacting an
individual Fund, your investment executive at PaineWebber or one of its
correspondent firms or by calling toll-free 1-800-647-1568.

THE PAINEWEBBER FAMILY OF MUTUAL FUNDS

The PaineWebber Family of Mutual Funds consists of six broad
categories, which are presented here. Generally, investors seeking to
maximize return must assume greater risk. The Funds offered by this
Prospectus are all in the GLOBAL category.

</TABLE>
<TABLE>
<S> <C>
/ / MONEY MARKET FUND for income and stability by / / ASSET ALLOCATION FUNDS for high total return by in-
investing in high-quality, short-term investments. vesting in stocks and bonds.

/ / BOND FUNDS for income by investing mainly in bonds. / / STOCK FUNDS for long-term growth by investing mainly
in equity securities.

/ / TAX-FREE BOND FUNDS for income exempt from federal / / GLOBAL FUNDS for long-term growth by investing mainly
income tax and, in some cases, state and local income in foreign stocks or high current income by investing
taxes, by investing in municipal bonds. mainly in global debt instruments.
</TABLE>

A complete listing of the PaineWebber Family of Mutual Funds is found on
the back cover of this Prospectus.

INVESTORS SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN
THIS PROSPECTUS. THE FUNDS AND THEIR DISTRIBUTOR HAVE NOT AUTHORIZED
ANYONE TO PROVIDE INVESTORS WITH INFORMATION THAT IS DIFFERENT. THIS
PROSPECTUS IS NOT AN OFFER TO SELL SHARES OF THE FUNDS IN ANY JURISDICTION
WHERE THE FUNDS OR THEIR DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE SHARES.

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.

---------------------
Prospectus Page 1

<PAGE>

------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
The Funds at a Glance................... 3

Expense Table........................... 6

Financial Highlights.................... 9

Investment Objectives & Policies........ 21

Investment Philosophy & Process......... 23

Performance............................. 25

The Funds' Investments.................. 29

Flexible Pricing(Service Mark).......... 36

How to Buy Shares....................... 39

How to Sell Shares...................... 41

Other Services.......................... 41

Management.............................. 42

Determining the Shares' Net Asset
Value................................. 45

Dividends & Taxes....................... 45

General Information..................... 48
</TABLE>

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Prospectus Page 2

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

THE FUNDS AT A GLANCE

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

The Funds offered by this Prospectus are not intended to provide a complete or
balanced investment program, but one or more of them may be appropriate as a
component of an investor's overall portfolio. Some common reasons to invest in
the Funds are to finance college educations, plan for retirement or diversify a
portfolio. When selling shares, investors should be aware that they may get more
or less for their shares than they originally paid for them. As with any mutual
fund, there is no assurance that the Funds will achieve their goals.

ASIA PACIFIC GROWTH FUND

GOAL: To increase the value of your investment by investing primarily in equity
securities of Asia Pacific Region companies (as described below).

INVESTMENT OBJECTIVE: Long-term capital apprecia-
tion.

SIZE: On January 31, 1998, the Fund had approximately $ million in net
assets.

WHO SHOULD INVEST: Asia Pacific Growth Fund is for investors who want long-term
capital appreciation and who can withstand short-term market fluctuations. Asia
Pacific Region countries have experienced among the highest real economic growth
rates in the world during most of the past 15 years. Schroder Capital believes
that existing economic conditions in the Asia Pacific Region may provide for
high levels of economic activity in the long term, offering the potential for
long-term capital appreciation from investment in equity securities of Asia
Pacific Region companies. However, because the value of these securities tends
to be more volatile than that of U.S. stocks, investors must be willing to
tolerate greater fluctuations in the value of the Fund's investments. These
fluctuations may be caused by events affecting the companies' businesses, as
well as market conditions, currency fluctuations, interest rate changes,
liquidity concerns, and adverse changes in economic, political and social
conditions.

EMERGING MARKETS EQUITY FUND

GOAL: To increase the value of your investment by investing primarily in equity
securities of companies in newly industrializing countries.

INVESTMENT OBJECTIVE: Long-term capital apprecia-
tion.

SIZE: On January 31, 1998, the Fund had approximately $ million in net assets.

WHO SHOULD INVEST: Emerging Markets Equity Fund is for investors who want
long-term capital appreciation. The Fund seeks to achieve this by investing
primarily in equity securities of companies in emerging market countries. Over
time, foreign stocks have shown greater growth potential than many other types
of securities. However, because their value tends to fluctuate more than that of
U.S. stocks, investors must be willing to tolerate volatility in the value of
the Fund's investments. These risks are greater with respect to securities
of issuers located in emerging markets. Accordingly, Emerging Markets Equity
Fund is designed for investors who are able to bear the risk that comes with
investment in equity securities of emerging market issuers.

GLOBAL EQUITY FUND

GOAL: To increase the value of your investment by investing primarily in equity
securities of U.S. and foreign companies.

INVESTMENT OBJECTIVE: Long-term growth of capital.

SIZE: On January 31, 1998, the Fund had approximately $ million in net assets.

WHO SHOULD INVEST: Global Equity Fund is for investors who want long-term growth
of capital. The Fund seeks to achieve this by investing primarily in equity
securities of U.S. and foreign companies. Over time, foreign stocks have shown
greater growth potential than many other types of securities. However, because
their value tends to fluctuate more than that of U.S. stocks, investors must be
willing to tolerate volatility in the value of the Fund's investments.
Accordingly, Global Equity Fund is designed for investors who are able to bear
the risk that comes with investments in foreign equity securities.

GLOBAL INCOME FUND

GOAL: To provide high current income and, secondarily, capital appreciation by

investing primarily in high-quality foreign and U.S. bonds.

INVESTMENT OBJECTIVE: The primary investment objective is high current income
consistent with prudent investment risk; capital appreciation is a secondary
objective.

--------------------
Prospectus Page 3

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

THE FUNDS AT A GLANCE
(Continued)
- --------------------------------------------------------------------------------

SIZE: On January 31, 1998, the Fund had approximately $ million in net assets.

WHO SHOULD INVEST: Global Income Fund is for investors who want high current
income consistent with prudent investment risk and, secondarily, capital
appreciation. The Fund seeks to achieve this by investing primarily in high
quality bonds of foreign and U.S. issuers. The Fund also may invest in bonds
rated below investment grade, including bonds of issuers in emerging market
countries. Global Income Fund is designed for investors who are able to bear the
special risks that come with investments in foreign securities.

MANAGEMENT

Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), an asset
management subsidiary of PaineWebber Incorporated ('PaineWebber'), is the
investment adviser and administrator of Asia Pacific Growth Fund, Emerging
Markets Equity Fund, Global Equity Fund and Global Income Fund (each a 'Fund'
and, collectively, the 'Funds'). Mitchell Hutchins has appointed Schroder
Capital Management International Inc. ('Schroder Capital') as the investment
sub-adviser for Asia Pacific Growth Fund and Emerging Markets Equity Fund, and
GE Investment Management Incorporated ('GE Investment Management') as the
investment sub-adviser for Global Equity Fund.

MINIMUM INVESTMENT

To open an account, investors need $1,000; to add to an account, investors need
only $100.

RISKS

EACH FUND invests in foreign securities, including emerging market securities.
Investors in any of the Funds should be able to assume the special risks of
investing in these securities. These include possible adverse political, social
and economic developments abroad and differing characteristics of foreign
economies and markets. These risks are greater with respect to securities of
issuers located in emerging markets. Most of the Funds' foreign securities are
denominated in foreign currencies, and the value of these investments can be
adversely affected by fluctuations in foreign currency values. Foreign currency
values and securities prices in the Asia Pacific Region recently have been
highly volatile. Each Fund may use derivatives, such as options, futures and
forward currency contracts and, in the case of Asia Pacific Growth Fund and
Global Income Fund, swap agreements, all of which may involve additional risks.
Each Fund's share price will rise and fall, and investors may lose money by
investing in a Fund. Investment in any of the Funds is not guaranteed.

ASIA PACIFIC GROWTH FUND, EMERGING MARKETS EQUITY FUND AND GLOBAL EQUITY FUND
all invest primarily in equity securities. Historically, equity
securities have shown greater growth potential than other types of securities,
but they also have shown greater volatility.

GLOBAL INCOME FUND invests primarily in bonds, which are subject to interest
rate and credit risk. Interest rate risk is the risk that interest rates will
rise and bond prices will fall, lowering the value of the Fund's investments and
share price. Credit risk is the risk that adverse changes in economic conditions
will affect an issuer's ability to pay interest and principal. Certain
investment grade bonds in which the Fund may invest have speculative
characteristics. Bonds rated below investment grade, in which the Fund may
invest up to 35% of its total assets, are subject to greater risks of default or
price fluctuation than investment grade bonds and are considered predominantly
speculative. The U.S. government securities in which the Fund may invest include
mortgage-backed securities, which involve special risks. The Fund is a
non-diversified fund, as defined in the Investment Company Act of 1940 ('1940
Act'), and as such is subject to greater risk than funds that have a broader
range of investments.

--------------------
Prospectus Page 4

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund

Emerging Markets Equity Fund Global Income Fund

THE FUNDS AT A GLANCE
(Continued)
- --------------------------------------------------------------------------------

HOW TO PURCHASE SHARES OF THE FUNDS

Investors may select among these classes of shares:

CLASS A SHARES

The price is the net asset value plus the initial sales charge; the maximum
sales charge is 4.5% of the public offering price (4% in the case of Global
Income Fund). Although investors pay an initial sales charge when they buy Class
A shares, the ongoing expenses for this class are lower than the ongoing
expenses of Class B and Class C shares.

CLASS B SHARES

The price is the net asset value. Investors do not pay an initial sales charge
when they buy Class B shares. As a result, 100% of their purchase is immediately
invested. However, Class B shares have higher ongoing expenses than Class A
shares. Depending upon how long they own the shares, investors may have to pay a
sales charge when they sell Class B shares. This sales charge is called a
'contingent deferred sales charge' and applies when investors sell their Class B
shares within six years after purchase. After six years, Class B shares convert
to Class A shares, which have lower ongoing expenses and no contingent deferred
sales charge.

CLASS C SHARES

The price is the net asset value. Investors do not pay an initial sales charge
when they buy Class C shares. As a result, 100% of their purchase is immediately
invested. However, Class C shares have higher ongoing expenses than Class A
shares. A contingent deferred sales charge of 1% (0.75% in the case of Global
Income Fund) is charged on shares sold within one year of purchase. Class C
shares never convert to any other class of shares.

CLASS Y SHARES

Class Y shares are offered only to limited groups of investors. See 'How to Buy
Shares.' The price is the net asset value. Investors do not pay an initial sales
charge when they buy Class Y shares. As a result, 100% of their purchase is
immediately invested. Investors also do not pay a contingent deferred sales
charge when they sell Class Y shares. Class Y shares have lower ongoing expenses
than any other class of shares.

--------------------
Prospectus Page 5

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

EXPENSE TABLE

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

The following tables are intended to assist investors in understanding the
expenses associated with investing in
each class of shares of the Funds. Expenses shown below represent those incurred
for the most recent fiscal year, except in the case of Asia Pacific Growth Fund,
where 'Other Expenses' are based on estimated amounts for its current fiscal
year because it commenced operations on March 25, 1997. In the case of Emerging
Markets Equity Fund, expenses shown below reflect anticipated fee waivers and
expense reimbursements.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge on Purchases of Shares (as a % of
offering price)

<CAPTION>
ASIA PACIFIC GROWTH FUND, EMERGING MARKETS EQUITY FUND
AND GLOBAL EQUITY FUND.................................. 4.5% None None None
GLOBAL INCOME FUND...................................... 4% None None None
Sales Charge on Reinvested Dividends (as a % of offering
price)...................................................... None None None None
Maximum Contingent Deferred Sales Charge (as a % of offering
price or net asset value at the time of sale, whichever
is less)
ASIA PACIFIC GROWTH FUND, EMERGING MARKETS EQUITY FUND
AND GLOBAL EQUITY FUND.................................. None 5% 1% None
GLOBAL INCOME FUND...................................... None 5% 0.75% None
Exchange Fee................................................ None None None None
<S> <C> <C> <C> <C>

ANNUAL FUND OPERATING EXPENSES (as a % of average net
assets)
ASIA PACIFIC GROWTH FUND
Management Fees............................................. 1.20% 1.20% 1.20% 1.20%
12b-1 Fees.................................................. 0.25 1.00 1.00 None
Other Expenses.............................................. 0.88 0.92 0.90 0.88
------- ------- ------- -------

Total Operating Expenses.................................... 2.33% 3.12% 3.10% 2.08%
------- ------- ------- -------
------- ------- ------- -------
EMERGING MARKETS EQUITY FUND
Management Fees (after fee waivers)*........................ 1.20% 1.20% 1.20% 1.20%
12b-1 Fees.................................................. 0.25 1.00 1.00 None
Other Expenses.............................................. 0.99 0.99 0.99 0.99
------- ------- ------- -------
Total Operating Expenses.................................... 2.44% 3.19% 3.19% 2.19%
------- ------- ------- -------
------- ------- ------- -------
GLOBAL EQUITY FUND
Management Fees............................................. 0.85% 0.85% 0.85% 0.85%
12b-1 Fees.................................................. 0.25 1.00 1.00 None
Other Expenses.............................................. 0.34 0.41 0.35 0.25
------- ------- ------- -------
Total Operating Expenses.................................... 1.44% 2.26% 2.20% 1.10%
------- ------- ------- -------
------- ------- ------- -------
GLOBAL INCOME FUND
Management Fees............................................. 0.50% 0.50% 0.50% 0.50%
12b-1 Fees.................................................. 0.25 1.00 0.75 None
Other Expenses.............................................. 0.46 0.49 0.44 0.44
------- ------- ------- -------
Total Operating Expenses.................................... 1.21% 1.99% 1.69% 0.94%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>

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

* 'Management Fees' and 'Other Expenses' for Emerging Markets Equity Fund
reflect anticipated fee waivers and expense reimbursements from Mitchell
Hutchins. Without taking into account anticipated fee waivers and expense
reimbursements, 'Management Fees,' 'Other Expenses' and 'Total Operating
Expenses' for shares of Emerging Markets Equity Fund would be as follows:
1.20%, 1.61% and 3.06% for Class A; 1.20%, 1.61% and 3.81% for Class B;
1.20%, 1.61% and 3.81% for Class C; and %, % and % for Class Y.

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Prospectus Page 6

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PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

EXPENSE TABLE
(Continued)

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

CLASS A SHARES: Sales charge waivers and a reduced sales charge purchase plan
are available. Purchases of $1 million or more are not subject to an initial
sales charge; however, if a shareholder sells these shares within one year
after purchase, a contingent deferred sales charge of 1% of the offering price
or the net asset value of the shares at the time of sale by the shareholder,
whichever is less, is imposed.
CLASS B SHARES: Sales charge waivers are available. The maximum 5% contingent
deferred sales charge applies to sales of shares during the first year after
purchase. The charge generally declines by 1% annually, reaching zero after six
years.
CLASS C SHARES: If a shareholder sells these shares within one year after
purchase, a contingent deferred sales charge of 1% (0.75% in the case of Global
Income Fund) of the offering price or the net asset value of the shares at the
time of sale by the shareholder, whichever is less, is imposed.
CLASS Y SHARES: No initial or contingent deferred sales charge is imposed, nor
are Class Y shares subject to 12b-1 distribution or service fees. Class Y
shares may be purchased by participants in the INSIGHT Investment Advisory
Program ('INSIGHT') sponsored by PaineWebber, when purchased through that
program. Participation in INSIGHT is subject to payment of an advisory fee at
the maximum annual rate of 1.5% of assets held through INSIGHT (generally
charged quarterly in advance), which may be charged to the INSIGHT
participant's PaineWebber account. This account charge is not included in the
table because non-INSIGHT participants are permitted to purchase Class Y
shares.

12b-1 distribution fees are asset-based sales charges. Long-term Class B and
Class C shareholders may pay more in direct and indirect sales charges
(including 12b-1 distribution fees) than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc. 12b-1 fees have two components, as follows:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
12b-1 service fees................. 0.25% 0.25% 0.25% None
12b-1 distribution fees............ 0.00 0.75 0.75* None
</TABLE>

* 12b-1 distribution fees for Class C shares of Global Income Fund are 0.50%.

For more information, see 'Management' and 'Flexible Pricing(Service Mark).'

EXAMPLES OF EFFECT OF FUND EXPENSES

The following examples should assist investors in understanding various costs

and expenses they would incur as shareholders of a Fund. The assumed 5% annual
return shown in the examples is required by regulations of the Securities and
Exchange Commission ('SEC') applicable to all mutual funds. THESE EXAMPLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES OF A FUND MAY BE MORE OR LESS THAN THOSE SHOWN.

An investor would pay the following expenses, directly or indirectly, on a
$1,000 investment in a Fund, assuming a 5% annual return:

<TABLE>
<CAPTION>
ASIA PACIFIC GROWTH FUND
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Class A............................ $68 $114 $ $
Class B (Assuming sale of all
shares at end of period)......... $81 $126 $ $
Class B (Assuming no sale of
shares).......................... $31 $ 96 $ $
Class C (Assuming sale of all
shares at end of period)......... $41 $ 96 $ $
Class C (Assuming no sale of
shares).......................... $31 $ 96 $ $
Class Y............................ $21 $ 65 $ $
</TABLE>

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Prospectus Page 7

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PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

EXPENSE TABLE
(Continued)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A............................ $69 $118 $169 $310
Class B (Assuming sale of all
shares at end of period)......... $82 $128 $187 $316

Class B (Assuming no sale of
shares).......................... $32 $ 98 $167 $316
Class C (Assuming sale of all
shares at end of period)......... $42 $ 98 $167 $349
Class C (Assuming no sale of
shares).......................... $32 $ 98 $167 $349
Class Y............................ $22 $ 69 $117 $252

GLOBAL EQUITY FUND

<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A............................ $69 $ 89 $120 $210
Class B (Assuming sale of all
shares at end of period)......... $73 $101 $141 $220
Class B (Assuming no sale of
shares).......................... $23 $ 71 $121 $220
Class C (Assuming sale of all
shares at end of period)......... $32 $ 69 $118 $253
Class C (Assuming no sale of
shares).......................... $22 $ 69 $118 $253
Class Y............................ $11 $ 35 $ 61 $134

GLOBAL INCOME FUND
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A............................ $57 $82 $108 $185
Class B (Assuming sale of all
shares at end of period)......... $70 $92 $127 $193
Class B (Assuming no sale of
shares).......................... $20 $62 $107 $193
Class C (Assuming sale of all
shares at end of period)......... $27 $53 $ 92 $200
Class C (Assuming no sale of
shares).......................... $17 $53 $ 92 $200
Class Y............................ $10 $30 $ 52 $115
</TABLE>

ASSUMPTIONS MADE IN THE EXAMPLES
o ALL CLASSES: Reinvestment of all dividends and other distributions;
percentage amounts listed under 'Annual Fund Operating Expenses' remain the
same for years shown.
oCLASS A SHARES: Deduction of the maximum 4.5% (4% in the case of Global
Income Fund) initial sales charge at the time of purchase.
o CLASS B SHARES: Deduction of the maximum applicable contingent deferred
sales charge at the time of sale, which declines over a period of six years.
Ten-year figures assume that Class B shares convert to Class A shares at the
end of the sixth year.

o CLASS C SHARES: Deduction of a 1% (0.75% in the case of Global Income Fund)
contingent deferred sales charge for sales of shares within one year of
purchase.

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Prospectus Page 8

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

FINANCIAL HIGHLIGHTS

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

ASIA PACIFIC GROWTH FUND

The following table provides investors with data and ratios for one Class A,
Class B and Class C share for the period shown. The Fund had no Class Y shares
outstanding during that period. This information is supplemented by the
financial statements and accompanying notes appearing in Asia Pacific Growth
Fund's Annual Report to Shareholders for the period ended October 31, 1997 and
the report of Ernst & Young LLP, independent auditors, appearing in the Fund's
Annual Report to Shareholders. The financial statements, accompanying notes and
auditors' report are incorporated by reference into the Statement of Additional
Information. The financial statements and notes, as well as the financial
information in the table below relating to the period March 25, 1997
(commencement of operations) through October 31, 1997, have been audited by
Ernst & Young LLP, independent auditors. Further information about the Fund's
performance is also included in the Annual Report to Shareholders, which may be
obtained without charge by calling 1-800-647-1568.

<TABLE>
<CAPTION>
ASIA PACIFIC GROWTH FUND
-----------------------------------------------------------
CLASS A CLASS B CLASS C
----------------- ----------------- -----------------
FOR THE FOR THE FOR THE
PERIOD ENDED PERIOD ENDED PERIOD ENDED
OCTOBER 31, 1997+ OCTOBER 31, 1997+ OCTOBER 31, 1997+
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period......................... $ 12.50 $ 12.50 $ 12.50

----------------- ----------------- -----------------
Net investment income (loss)................................. 0.03 (0.03) (0.03)
Net realized and unrealized losses from investments and
foreign currency transactions.............................. (3.57) (3.55) (3.55)
----------------- ----------------- -----------------
Net decrease from investment operations...................... (3.54) (3.58) (3.58)
----------------- ----------------- -----------------
Net asset value, end of period............................... $ 8.96 $ 8.92 $ 8.92
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Total investment return (1).................................. (28.32)% (28.64)% (28.64)%
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Ratios/Supplemental Data:
Net assets, end of period (000's)............................ $21,466 $22,949 $13,887
Expenses to average net assets............................... 2.33%* 3.12%* 3.10%*
Net investment income (loss) to average net assets........... 0.37%* (0.43)%* (0.42)%*
Portfolio turnover........................................... 13% 13% 13%
Average commission rate paid................................. $0.0156 $0.0156 $0.0156
</TABLE>

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

* Annualized

+ For the period March 25, 1997 (commencement of operations) to October 31,
1997.

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions, if any, at net asset value on the payable dates, and a sale
at net asset value on the last day of each period reported. The figures do
not include sales charges; results for each class would be lower if sales
charges were included. Total investment returns for periods less than a year
have not been annualized.

--------------------
Prospectus Page 9

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

FINANCIAL HIGHLIGHTS

(Continued)
- --------------------------------------------------------------------------------

EMERGING MARKETS EQUITY FUND

The following tables provide investors with data and ratios for one Class A,
Class B, Class C and Class Y share for each of the periods shown. This
information is supplemented by the financial statements and accompanying notes
appearing in Emerging Markets Equity Fund's Annual Report to Shareholders for
the fiscal year ended October 31, 1997 and the report of Ernst & Young LLP,
independent auditors, appearing in the Fund's Annual Report to Shareholders. The
financial statements, accompanying notes and auditors' report are incorporated
by reference into the Statement of Additional Information. The financial
statements and notes, as well as the financial information in the table below
relating to the fiscal year ended October 31, 1997, the four months ended
October 31, 1996 and the fiscal year ended June 30, 1996, have been audited by
Ernst & Young LLP, independent auditors. The financial information for the prior
years was audited by another independent accounting firm, whose reports thereon
were unqualified. Further information about the Fund's performance is also
included in the Annual Report to Shareholders, which may be obtained without
charge by calling 1-800-647-1568.

<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
-----------------------------------------------------------------------------------
CLASS A
-----------------------------------------------------------------------------------
FOR THE YEARS ENDED
FOR THE FOR THE JUNE 30,
YEAR ENDED FOUR MONTHS ENDED -------------------------
OCTOBER 31, 1997 OCTOBER 31, 1996 1996 1995**
---------------- ----------------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 9.46 $ 10.06 $ 9.73 $ 10.79
-------- -------- -------- --------
Net investment income (loss)....... (0.06) (0.13) (0.14) (0.04)
Net realized and unrealized gains
(losses) from investment and
foreign currency transactions.... (0.01) (0.47) 0.47 (0.97)
-------- -------- -------- --------
Net increase (decrease) from
investment operations............ (0.07) (0.60) 0.33 (1.01)
-------- -------- -------- --------
Dividends from net investment
income........................... -- -- -- (0.05)
-------- -------- -------- --------
Net asset value, end of period..... $ 9.39 $ 9.46 $ 10.06 $ 9.73
-------- -------- -------- --------
-------- -------- -------- --------
Total investment return (1)........ (0.74)% (5.96)% 3.39% (9.29)%

-------- -------- -------- --------
-------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $ 9,222 $14,992 $20,680 $33,043
Expenses, net of fee waivers, to
average net assets............... 0.44% 2.44%* 2.44% 2.44%
Expenses, before fee waivers, to
average net assets............... 3.01% 3.48%* 3.42% 2.54%
Net investment income (loss), net
of fee waivers, to average net
assets........................... (0.40)% (1.42)%* (0.52)% (0.76)%
Net investment income (loss),
before fee waivers, to average
net assets....................... (0.97)% (2.46)%* (1.50)% (0.86)%
Portfolio turnover................. 87% 22% 69% 76%
Average commission rate paid (2)... $ 0.0009 $0.0024 -- --

<CAPTION>
EMERGING MARKETS
EQUITY FUND
----------------
CLASS A
---------------
FOR THE
PERIOD ENDED
JUNE 30, 1994+
----------------
<S> <C>
Net asset value, beginning of
period........................... $ 12.00
--------
Net investment income (loss)....... 0.04
Net realized and unrealized gains
(losses) from investment and
foreign currency transactions.... (1.25)
--------
Net increase (decrease) from
investment operations............ (1.21)
--------
Dividends from net investment
income........................... --
--------
Net asset value, end of period..... $ 10.79
--------
--------
Total investment return (1)........ (10.08)%
--------
--------
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $ 46,758
Expenses, net of fee waivers, to
average net assets............... 2.47%*

Expenses, before fee waivers, to
average net assets............... 2.47%*
Net investment income (loss), net
of fee waivers, to average net
assets........................... 0.72%*
Net investment income (loss),
before fee waivers, to average
net assets....................... 0.72%*
Portfolio turnover................. 8%
Average commission rate paid (2)... --
</TABLE>

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

* Annualized

** Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.
Emerging Markets Management served as sub-adviser prior to February 25,
1997; as of that date Schroder Capital became sub-adviser.

+ For the period January 19, 1994 (commencement of operations) to June 30,
1994.

++ For the period December 5, 1995 (commencement of offering of shares) to June
30, 1996.

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates, and a sale at net asset value on the last
day of each period reported. The figures do not include sales charges;
results for each class would be lower if sales charges were included. Total
investment returns for periods of less than one year have not been
annualized.

(2) Effective for fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose the average commission rate paid per share of common
stock investments purchased or sold.

--------------------
Prospectus Page 10

<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
------------------------------------------------------------
CLASS B
------------------------------------------------------------
FOR THE
YEAR ENDED FOR THE FOR THE
OCTOBER 31, FOUR MONTHS ENDED PERIOD ENDED
1997 OCTOBER 31, 1996 JUNE 30, 1996++
--------------- ----------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of
period........................... $ 9.32 $ 9.94 $ 9.13
--------------- -------- ------
Net investment income (loss)....... (0.10) (0.07) (0.01)
Net realized and unrealized gains
(losses) from investment and
foreign currency transactions.... (0.03) (0.55) 0.82
--------------- -------- ------
Net increase (decrease) from
investment operations............ (0.13) (0.62) 0.81
--------------- -------- ------
Dividends from net investment
income........................... -- -- --
--------------- -------- ------
Net asset value, end of period..... $ 9.19 $ 9.32 $ 9.94
--------------- -------- ------
--------------- -------- ------
Total investment return (1)........ (1.39)% (6.24)% 8.87%
--------------- -------- ------
--------------- -------- ------
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $ 1,598 $ 879 $ 936
Expenses, net of fee waivers, to
average net assets............... 3.19% 3.19%* 3.19%*
Expenses, before fee waivers, to
average net assets............... 3.82% 4.23%* 4.97%*
Net investment income (loss), net
of fee waivers, to average net
assets........................... (1.25)% (2.12)%* (0.21)%*
Net investment income (loss),
before fee waivers, to average
net assets....................... (1.88)% (3.16)%* (1.99)%*
Portfolio turnover................. 87% 22% 69%
Average commission rate paid (2)... $0.0009 $0.0024 --

<CAPTION>
EMERGING MARKETS EQUITY FUND
-------------------------------------------------------------------------------------
CLASS C
-------------------------------------------------------------------------------------
FOR THE FOR THE YEARS ENDED
YEAR ENDED FOR THE JUNE 30,
OCTOBER 31, FOUR MONTHS ENDED ----------------------
1997 OCTOBER 31, 1996 1996 1995**
--------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 9.32 $ 9.94 $ 9.67 $ 10.75
--------------- -------- -------- --------
Net investment income (loss)....... (0.14) (0.22) (0.24) (0.17)
Net realized and unrealized gains
(losses) from investment and
foreign currency transactions.... (0.01) (0.40) 0.51 (0.90)
--------------- -------- -------- --------
Net increase (decrease) from
investment operations............ (0.15) (0.62) 0.27 (1.07)
--------------- -------- -------- --------
Dividends from net investment
income........................... -- -- -- (0.01)
--------------- -------- -------- --------
Net asset value, end of period..... $ 9.17 $ 9.32 $ 9.94 $ 9.67
--------------- -------- -------- --------
--------------- -------- -------- --------
Total investment return (1)........ (1.61)% (6.24)% 2.79% (10.01)%
--------------- -------- -------- --------
--------------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $ 5,345 $ 7,882 $11,561 $18,551
Expenses, net of fee waivers, to
average net assets............... 3.19% 3.19%* 3.19% 3.19%
Expenses, before fee waivers, to
average net assets............... 3.78% 4.23%* 4.17% 3.29%
Net investment income (loss), net
of fee waivers, to average net
assets........................... (1.18)% (2.16)%* (1.28)% (1.50)%
Net investment income (loss),
before fee waivers, to average
net assets....................... (1.77)% (3.20)%* (2.26)% (1.60)%
Portfolio turnover................. 87% 22% 69% 76%
Average commission rate paid (2)... $0.0009 $0.0024 -- --

<CAPTION>
EMERGING MARKETS
EQUITY FUND
----------------
CLASS C
----------------
FOR THE
PERIOD ENDED
JUNE 30, 1994+
----------------
<S> <C>
Net asset value, beginning of
period........................... $ 12.00
--------
Net investment income (loss)....... --
Net realized and unrealized gains
(losses) from investment and
foreign currency transactions.... (1.25)
--------
Net increase (decrease) from
investment operations............ (1.25)
--------
Dividends from net investment
income........................... --
--------
Net asset value, end of period..... $ 10.75
--------
--------
Total investment return (1)........ (10.42)%
--------
--------
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $ 26,721
Expenses, net of fee waivers, to
average net assets............... 3.22%*
Expenses, before fee waivers, to
average net assets............... 3.22%*
Net investment income (loss), net
of fee waivers, to average net
assets........................... (0.03)%*
Net investment income (loss),
before fee waivers, to average
net assets....................... (0.03)%*
Portfolio turnover................. 8%
Average commission rate paid (2)... --
</TABLE>

--------------------
Prospectus Page 11

<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
-----------------------------------------------------------------------------------
CLASS Y
-----------------------------------------------------------------------------------
FOR THE YEARS ENDED
FOR THE FOR THE JUNE 30,
YEAR ENDED FOUR MONTHS ENDED ------------------------------------------
OCTOBER 31, 1997 OCTOBER 31, 1996 1996 1995**
---------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 9.51 $ 10.11 $ 9.75 $ 10.80
-------- -------- -------- --------
Net investment income (loss)....... (0.02) (0.05) (0.01) 0.01
Net realized and unrealized gains
(losses) from investment and
foreign currency transactions.... (0.03) (0.55) 0.37 (0.99)
-------- -------- -------- --------
Net increase (decrease) from
investment operations............ (0.05) (0.60) 0.36 (0.98)
-------- -------- -------- --------
Dividends from net investment
income........................... -- -- -- (0.07)
-------- -------- -------- --------
Net asset value, end of period..... $ 9.46 $ 9.51 $ 10.11 $ 9.75
-------- -------- -------- --------
-------- -------- -------- --------
Total investment return (1)........ (0.53)% (5.93)% 3.69% (9.03)%
-------- -------- -------- --------
-------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $ 10,053 $11,375 $12,979 $12,332
Expenses, net of fee waivers, to
average net assets............... 2.19% 2.19%* 2.19% 2.19%
Expenses, before fee waivers, to
average net assets............... 2.69% 3.23%* 3.29% 2.29%
Net investment income (loss), net
of fee waivers, to average net
assets........................... (0.15)% (1.13)%* (0.15) % (0.51) %
Net investment income (loss),
before fee waivers, to average

net assets....................... (0.65)% (2.17)%* (1.25)% (0.61)%
Portfolio turnover................. 87% 22% 69% 76%
Average commission rate paid (2)... $ 0.0009 $0.0024 -- --

FOR THE
PERIOD ENDED
JUNE 30, 1994+
----------------
<S> <C>
Net asset value, beginning of
period........................... $ 12.00
--------
Net investment income (loss)....... 0.05
Net realized and unrealized gains
(losses) from investment and
foreign currency transactions.... (1.25)
--------
Net increase (decrease) from
investment operations............ (1.20)
--------
Dividends from net investment
income........................... --
--------
Net asset value, end of period..... $ 10.80
--------
--------
Total investment return (1)........ (10.00)%
--------
--------
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $ 15,435
Expenses, net of fee waivers, to
average net assets............... 2.22%*
Expenses, before fee waivers, to
average net assets............... 2.22%*
Net investment income (loss), net
of fee waivers, to average net
assets........................... 0.97%*
Net investment income (loss),
before fee waivers, to average
net assets....................... 0.97%*
Portfolio turnover................. 8%
Average commission rate paid (2)... --
</TABLE>

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

* Annualized.

+ For the period January 19, 1994 (commencement of operations) to June 30,
1994.

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates, and a sale at net asset value on the last
day of each period reported. Total investment returns for periods of less
than one year have not been annualized.

(2) Effective for fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose the average commission rate paid per share of common
stock investments purchased or sold.

--------------------
Prospectus Page 12

<PAGE>

[This page intentionally left blank]

--------------------
Prospectus Page 13

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------

GLOBAL EQUITY FUND

statements and notes, as well as the financial information in the table below
relating to the fiscal year ended October 31, 1997, the two months ended October
31, 1996 and to each of the two years in the period ended August 31, 1996, have
been audited by Ernst & Young LLP, independent auditors. The financial
information for the prior years was audited by another independent accounting
firm, whose reports thereon were unqualified. Further information about the
Fund's performance is also included in the Annual Report to Shareholders, which
may be obtained without charge by calling 1-800-647-1568.

<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
----------------------------------------------------------------------------
CLASS A
----------------------------------------------------------------------------
FOR THE FOR THE
YEAR TWO MONTHS
ENDED ENDED FOR THE YEARS ENDED AUGUST 31,
OCTOBER 31, OCTOBER 31, -------------------------------------------------
1997 1996 1996 1995** 1994 1993
----------- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 17.43 $ 16.81 $ 16.12 $ 16.98 $ 14.55 $ 12.87
----------- ----------- -------- -------- -------- --------
Net investment income (loss)....... 0.00 (0.02) 0.02 0.02 0.01 0.03

Net realized and unrealized gains
(losses) from investment and
foreign currency................. 1.52 0.64 1.24 0.37 2.63 1.89
----------- ----------- -------- -------- -------- --------
Net increase (decrease) from
investment operations............ 1.52 0.62 1.26 0.39 2.64 1.92
----------- ----------- -------- -------- -------- --------
Dividends from net investment
income........................... -- -- -- -- -- (0.08)
Distributions from net realized
gains............................ (0.58) -- (0.57) (1.25) (0.21) (0.16)
----------- ----------- -------- -------- -------- --------
Total dividends and
distributions.................... (0.58) 0.00 (0.57) (1.25) (0.21) (0.24)
----------- ----------- -------- -------- -------- --------
Net asset value, end of period..... $ 18.37 $ 17.43 $ 16.81 $ 16.12 $ 16.98 $ 14.55
----------- ----------- -------- -------- -------- --------
----------- ----------- -------- -------- -------- --------
Total investment return (1)........ 8.87% 3.69% 8.06% 3.24% 18.23% 15.24%
----------- ----------- -------- -------- -------- --------
----------- ----------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $ 294,878 $ 307,267 $305,218 $360,652 $185,493 $156,451
Expenses to average net assets..... 1.44% 1.53%* 1.48% 1.71%(2) 1.58% 1.53%
Net investment income (loss) to
average net assets............... 0.01% (0.80)%* 0.10% 0.09%(2) 0.07% 0.22%
Portfolio turnover................. 86% 3% 33% 40% 51% 56%
Average commission rate paid (3)... $ 0.0069 $ 0.0069 $ 0.0120 -- -- --

<CAPTION>
GLOBAL EQUITY FUND
------------------
CLASS A
----------------
FOR THE
PERIOD
NOV. 14, 1991+
TO AUG. 31, 1992
----------------
<S> <C>
Net asset value, beginning of
period........................... $ 12.00
--------
Net investment income (loss)....... 0.09
Net realized and unrealized gains
(losses) from investment and
foreign currency................. 0.78
--------
Net increase (decrease) from
investment operations............ 0.87
--------
Dividends from net investment
income........................... --

Distributions from net realized
gains............................ --
--------
Total dividends and
distributions.................... 0.00
--------
Net asset value, end of period..... $ 12.87
--------
--------
Total investment return (1)........ 7.25%
--------
--------
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $113,070
Expenses to average net assets..... 1.68%*
Net investment income (loss) to
average net assets............... 0.93%*
Portfolio turnover................. 30%
Average commission rate paid (3)... --
</TABLE>

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

* Annualized

** Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.

+ Commencement of operations

++ Commencement of offering of shares
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. The figures do not
include sales charges; results for each class would be lower if sales
charges were included. Total investment returns for periods of less than one
year have not been annualized.

(2) These ratios include non-recurring reorganization expenses of 0.06%, 0.00%
and 0.06% for Class A, Class B and Class C shares, respectively.

(3) Effective for fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose the average commission rate paid per share of common
stock investments purchased or sold.

--------------------
Prospectus Page 14

<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
------------------------------------------------------------------------------
CLASS B CLASS C
-------------------------------------------------------------- -----------
FOR THE FOR THE FOR THE
FISCAL YEAR TWO MONTHS FOR THE FOR THE FISCAL YEAR
ENDED ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, OCTOBER 31, AUGUST 31, AUG. 25, 1995++ OCTOBER 31,
1997 1996 1996 TO AUG. 31, 1995 1997
----------- ----------- ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 16.93 $ 16.35 $ 15.82 $ 15.83 $ 16.93
----------- ----------- ---------- -------- -----------
Net investment income (loss)....... (0.21) (0.05) (0.12) 0.00 (0.23)
Net realized and unrealized gains
(losses) from investment and
foreign currency................. 1.55 0.63 1.22 (0.01) 1.57
----------- ----------- ---------- -------- -----------
Net increase (decrease) from
investment operations............ 1.34 0.58 1.10 (0.01) 1.34
----------- ----------- ---------- -------- -----------
Dividends from net investment
income........................... -- -- -- -- --
Distributions from net realized
gains............................ (0.58) -- (0.57) -- (0.58)
----------- ----------- ---------- -------- -----------
Total dividends and
distributions.................... (0.58) 0.00 (0.57) 0.00 (0.58)
----------- ----------- ---------- -------- -----------
Net asset value, end of period..... $ 17.69 $ 16.93 $ 16.35 $ 15.82 $ 17.69
----------- ----------- ---------- -------- -----------
----------- ----------- ---------- -------- -----------
Total investment return (1)........ 8.05% 3.55% 7.18% (0.06)% 8.05%
----------- ----------- ---------- -------- -----------
----------- ----------- ---------- -------- -----------
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $ 87,104 $ 113,445 $113,235 $ 142,880 $54,510
Expenses to average net assets..... 2.26% 2.34%* 2.25% 2.17%*(2) 2.20%
Net investment income (loss) to
average net assets............... (0.80)% (1.61)%* (0.68)% (1.92)%*(2) (0.75)%
Portfolio turnover................. 86% 3% 33% 40% 86%
Average commission rate paid (3)... $ 0.0069 $ 0.0069 $ 0.0120 -- $0.0069

<CAPTION>
GLOBAL EQUITY FUND
-------------------------------------------------------------------
CLASS C
-------------------------------------------------------------------
FOR THE
TWO MONTHS
ENDED FOR THE YEARS ENDED AUGUST 31, FOR THE PERIOD
OCTOBER 31, -------------------------------- MAY 10, 1993++
1996 1996 1995** 1994 TO AUG. 31, 1993
----------- -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 16.35 $ 15.82 $ 16.81 $ 14.52 $ 13.80
----------- -------- ------- ------- -------
Net investment income (loss)....... (0.05) (0.13) (0.11) (0.07) (0.02)
Net realized and unrealized gains
(losses) from investment and
foreign currency................. 0.63 1.23 0.37 2.57 0.74
----------- -------- ------- ------- -------
Net increase (decrease) from
investment operations............ 0.58 1.10 0.26 2.50 0.72
----------- -------- ------- ------- -------
Dividends from net investment
income........................... -- -- -- -- --
Distributions from net realized
gains............................ -- (0.57) (1.25) (0.21) --
----------- -------- ------- ------- -------
Total dividends and
distributions.................... 0.00 (0.57) (1.25) (0.21) 0.00
----------- -------- ------- ------- -------
Net asset value, end of period..... $ 16.93 $ 16.35 $ 15.82 $ 16.81 $ 14.52
----------- -------- ------- ------- -------
----------- -------- ------- ------- -------
Total investment return (1)........ 3.55% 7.18% 2.46% 17.29% 5.22%
----------- -------- ------- ------- -------
----------- -------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $67,530 $ 66,585 $83,485 $31,837 $ 10,807
Expenses to average net assets..... 2.30%* 2.27% 2.48%(2) 2.33% 2.28%*
Net investment income (loss) to
average net assets............... (1.57)%* (0.70)% (0.68)%(2) (0.68)% (0.53)%*
Portfolio turnover................. 3% 33% 40% 51% 56%
Average commission rate paid (3)... $0.0069 $ 0.0120 -- -- --
</TABLE>

--------------------
Prospectus Page 15

<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
------------------------------------------------------------------------------
CLASS Y
------------------------------------------------------------------------------
FOR THE FOR THE
YEAR TWO MONTHS FOR THE
ENDED ENDED FOR THE YEARS ENDED AUGUST 31, PERIOD
OCTOBER 31, OCTOBER 31, -------------------------------- NOV. 14, 1991+
1997 1996 1996 1995** 1994 TO AUG. 31, 1992
----------- ----------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 17.60 $ 16.97 $ 16.22 $ 17.03 $ 14.56 $ 13.80
----------- ----------- ------- ------- ------- -------
Net investment income (loss)........................ 0.10 (0.01) 0.07 0.07 0.05 0.02
Net realized and unrealized gains from investment
and foreign currency.............................. 1.51 0.64 1.25 0.37 2.63 0.74
----------- ----------- ------- ------- ------- -------
Net increase from investment operations............. 1.61 0.63 1.32 0.44 2.68 0.76
----------- ----------- ------- ------- ------- -------
Dividends from net investment income................ -- -- -- -- -- --
Distributions from net realized gains............... (0.58) -- (0.57) (1.25) (0.21) --
----------- ----------- ------- ------- ------- -------
Total dividends and distributions................... (0.58) 0.00 (0.57) (1.25) (0.21) 0.00
----------- ----------- ------- ------- ------- -------
Net asset value, end of period...................... $ 18.63 $ 17.60 $ 16.97 $ 16.22 $ 17.03 $ 14.56
----------- ----------- ------- ------- ------- -------
----------- ----------- ------- ------- ------- -------
Total investment return (1)......................... 9.31% 3.71% 8.39% 3.54% 18.49% 5.51%
----------- ----------- ------- ------- ------- -------
----------- ----------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's)................... $57,683 $63,225 $61,763 $57,150 $28,390 $ 19,098
Expenses to average net assets...................... 1.10% 1.18%* 1.17% 1.46%(2) 1.33% 1.28%*
Net investment income to average net assets......... 0.36% (0.45)%* 0.46% 0.36%(2) 0.32% 0.47%*
Portfolio turnover.................................. 0.86% 3% 33% 40% 51% 56%
Average commission rate paid (3).................... $0.0069 $0.0069 $0.0120 -- -- --
</TABLE>

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

* Annualized

** Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.

+ Commencement of offering of shares

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates, and a sale
at net asset value on the last day of each period reported. Total investment
returns for periods of less than one year have not been annualized.

(2) These ratios include non-recurring reorganization expenses of 0.06% for
Class Y shares.

(3) Effective for fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose the average commission rate paid per share of common
stock investments purchased or sold.

--------------------
Prospectus Page 16

<PAGE>

[This page intentionally left blank]

--------------------
Prospectus Page 17

<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------

GLOBAL INCOME FUND

The following tables provide investors with data and ratios for one Class A,
Class B, Class C and Class Y share for each of the periods shown. This
information is supplemented by the financial statements and accompanying notes
appearing in Global Income Fund's Annual Report to Shareholders for the fiscal
year ended October 31, 1997 and the report of Price Waterhouse LLP, independent
accountants, appearing in the Fund's Annual Report to Shareholders. The
financial statements, accompanying notes and accountants' report are
incorporated by reference into the Statement of Additional Information. The
financial statements and notes, as well as the financial information in the
table below insofar as they relate to each of the periods presented in the five
year period ended October 31, 1997, have been audited by Price Waterhouse LLP,
independent accountants. Further information about the Fund's performance is
also included in the Annual Report to Shareholders, which may be obtained
without charge by calling 1-800-647-1568.

<TABLE>
<CAPTION>
GLOBAL INCOME FUND
--------------------------------------------------------------------------------------------------
CLASS B
CLASS A --------
-------------------------------------------------------------------------------------- FOR THE
FOR THE YEARS
PERIOD ENDED
JULY 1, OCTOBER
FOR THE YEARS ENDED OCTOBER 31, 1991+ TO 31,
----------------------------------------------------------------------- OCTOBER 31, --------
1997 1996 1995 1994 1993 1992 1991 1997
-------- -------- -------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 10.46 $ 10.35 $ 9.99 $ 10.97 $ 10.64 $ 10.75 $ 10.40 $ 10.44
-------- -------- -------- -------- -------- -------- ----- --------
Net investment income.......... 0.69@ 0.72@ 0.77@ 0.72 0.59 0.83 0.20 0.58@
Net realized and unrealized
gains (losses) from investment
and foreign currency
transactions.................. (0.19)@ 0.13@ 0.31@ (1.05) 0.68 (0.12) 0.40 (0.17)@
-------- -------- -------- -------- -------- -------- ----- --------
Total increase (decrease) from
investment operations......... 0.50 0.85 1.08 (0.33) 1.27 0.71 0.60 0.41
-------- -------- -------- -------- -------- -------- ----- --------
Dividends from net investment
income........................ (0.54) (0.74) (0.72) (0.33) (0.80) (0.64) (0.23) 0.48
Distributions from realized
gains on investments and
foreign currency
transactions.................. -- -- -- -- (0.14) (0.18) (0.02) --
Distributions in excess of
income........................ (0.06) -- -- -- -- -- -- (0.05)
Distributions from paid-in
capital....................... (0.09) -- -- (0.32) -- -- -- (0.08)
-------- -------- -------- -------- -------- -------- ----- --------
Total dividends and
distributions................. (0.69) (0.74) (0.72) (0.65) (0.94) (0.82) (0.25) (0.61)
-------- -------- -------- -------- -------- -------- ----- --------
Net asset value, end of
period........................ $ 10.27 $ 10.46 $ 10.35 $ 9.99 $ 10.97 $ 10.64 $ 10.75 $ 10.24
-------- -------- -------- -------- -------- -------- ----- --------
-------- -------- -------- -------- -------- -------- ----- --------
Total investment return (1).... 4.99% 8.60% 11.09% (3.10)% 12.41% 6.70% 5.79% 4.11%
-------- -------- -------- -------- -------- -------- ----- --------
-------- -------- -------- -------- -------- -------- ----- --------
Ratios/Supplemental Data:
Net assets, end of period
(000's)....................... $486,718 $549,932 $663,022 $611,855 $648,853 $107,033 $16,501 $103,312
Expenses to average net
assets........................ 1.21% 1.27% 1.24%(2) 1.17% 1.32%** 1.21% 1.35%* 1.99%
Net investment income to
average net assets............ 6.66% 6.88% 7.47%(2) 6.94% 6.82%** 7.84% 8.59%* 5.83%
Portfolio turnover rate........ 172% 126% 113% 108% 90% 92% 53% 172%

<CAPTION>
GLOBAL INCOME FUND
----------------------------------
CLASS B
----------------------------------
FOR THE YEARS ENDED OCTOBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period........................ $ 10.31 $ 9.96 $ 10.95
-------- -------- --------
Net investment income.......... 0.64@ 0.69@ 0.86
Net realized and unrealized
gains (losses) from investment
and foreign currency
transactions.................. 0.15@ 0.30@ (1.28)
-------- -------- --------
Total increase (decrease) from
investment operations......... 0.79 0.99 (0.42)
-------- -------- --------
Dividends from net investment
income........................ (0.66) (0.64) (0.29)
Distributions from realized
gains on investments and
foreign currency
transactions.................. -- -- --
Distributions in excess of
income........................ -- -- --
Distributions from paid-in
capital....................... -- -- (0.28)
-------- -------- --------
Total dividends and
distributions................. (0.66) (0.64) (0.57)
-------- -------- --------
Net asset value, end of
period........................ $ 10.44 $ 10.31 $ 9.96
-------- -------- --------
-------- -------- --------
Total investment return (1).... 7.95% 10.24% (3.90)%
-------- -------- --------
-------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period
(000's)....................... $307,577 $484,534 $725,553
Expenses to average net
assets........................ 1.99% 2.00%(2) 1.94%
Net investment income to
average net assets............ 6.14% 6.71%(2) 6.05%
Portfolio turnover rate........ 126% 113% 108%
</TABLE>

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

@ Calculated using the average shares outstanding for the year.

* Annualized.

** Includes 0.15% of interest expense related to the reverse repurchase
agreement transactions entered into during the fiscal year.

+ Commencement of issuance of shares.

++ Formerly Class D.

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for each class would be lower if sales
charges were included. Total investment return information for periods of
less than one year is not annualized.

(2) These ratios include non-recurring reorganization expenses of 0.04% for
each class.

--------------------
Prospectus Page 18

<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GLOBAL INCOME FUND
----------------------------------------------------------------------------
CLASS B
----------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
----------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 10.62 $ 10.74 $ 11.07 $ 10.08 $ 11.10 $ 10.28
---------- ---------- ---------- ---------- ---------- ----------
Net investment income.......... 0.78 0.94 0.85 1.01 1.01 0.98
Net realized and unrealized
gains (losses) from investment
and foreign currency
transactions.................. 0.40 (0.32) (0.09) 0.96 (0.64) 1.15
---------- ---------- ---------- ---------- ---------- ----------
Total increase (decrease) from
investment operations......... 1.18 0.62 0.76 1.97 0.37 2.13
---------- ---------- ---------- ---------- ---------- ----------
Dividends from net investment
income........................ (0.71) (0.56) (0.97) (0.98) (0.94) (1.06)
Distributions from realized
gains on investments and
foreign currency
transactions.................. (0.14) (0.18) (0.12) -- (0.45) (0.25)
Distributions in excess of
income........................ -- -- -- -- -- --
Distributions from paid-in
capital....................... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions................. (0.85) (0.74) (1.09) (0.98) (1.39) (1.31)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
period........................ $ 10.95 $ 10.62 $ 10.74 $ 11.07 $ 10.08 $ 11.10
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total investment return (1).... 11.45% 5.93% 7.39% 20.32% 3.66% 18.29%
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------

Ratios/Supplemental Data:
Net assets, end of period
(000's)....................... $1,188,890 $1,542,255 $1,593,814 $1,323,495 $1,085,851 $1,145,460
Expenses to average net
assets........................ 2.11%** 1.98% 1.94% 1.90% 1.95% 2.05%
Net investment income to
average net assets............ 5.97%** 7.11% 8.09% 9.88% 9.73% 9.13%
Portfolio turnover rate........ 90% 92% 33% 126% 124% 120%

<CAPTION>
CLASS C++
-------------------------------------------------------------
FOR THE
PERIOD
JULY 2,
FOR THE YEARS ENDED OCTOBER 31, 1992+ TO
------------------------------------------------- OCTOBER
1997 1996 1995 1994 1993 31, 1992
------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 10.45 $ 10.33 $ 9.98 $ 10.96 $ 10.64 $ 10.94
------- ------- ------- ------- ------- -----
Net investment income.......... 0.63@ 0.67@ 0.71@ 0.70 0.68 0.20
Net realized and unrealized
gains (losses) from investment
and foreign currency
transactions.................. (0.18)@ 0.14@ 0.31@ (1.09) 0.52 (0.13)
------- ------- ------- ------- ------- -----
Total increase (decrease) from
investment operations......... 0.45 0.81 1.02 (0.39) 1.20 0.07
------- ------- ------- ------- ------- -----
Dividends from net investment
income........................ 0.50 (0.69) (0.67) (0.30) (0.74) (0.21)
Distributions from realized
gains on investments and
foreign currency
transactions.................. -- -- -- -- (0.14) (0.16)
Distributions in excess of
income........................ (0.06) -- -- -- -- --
Distributions from paid-in
capital....................... (0.08) -- -- (0.29) -- --
------- ------- ------- ------- ------- -----
Total dividends and
distributions................. (0.64) (0.69) (0.67) (0.59) (0.88) (0.37)
------- ------- ------- ------- -------
Net asset value, end of
period........................ $ 10.26 $ 10.45 $ 10.33 $ 9.98 $ 10.96 $ 10.64
------- ------- ------- ------- ------- -----
------- ------- ------- ------- ------- -----
Total investment return (1).... 4.48% 8.12% 10.49% (3.56)% 11.64% 0.61%
------- ------- ------- ------- ------- -----
------- ------- ------- ------- ------- -----
Ratios/Supplemental Data:

Net assets, end of period
(000's)....................... $36,935 $50,928 $71,329 $92,480 $135,847 $36,598
Expenses to average net
assets........................ 1.69% 1.73% 1.75%(2) 1.68% 1.83%** 1.75%*
Net investment income to
average net assets............ 6.17% 6.40% 6.96%(2) 6.34% 6.17%** 7.02%*
Portfolio turnover rate........ 172% 126% 113% 108% 90% 92%
</TABLE>

--------------------
Prospectus Page 19

<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

FINANCIAL HIGHLIGHTS
(Concluded)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GLOBAL INCOME FUND
-----------------------------------------------------------------------------
CLASS Y
-----------------------------------------------------------------------------
FOR THE
PERIOD
AUGUST 26,
FOR THE YEARS ENDED OCTOBER 31, 1991+ TO
-------------------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 10.49 $ 10.35 $ 9.99 $ 10.97 $ 10.64 $ 10.76 $ 10.53
------- ------- ------- ------- ------- ------- -----------
Net investment income................... 0.71@ 0.75@ 0.78@ 0.75 0.71 0.81 0.17
Net realized and unrealized gains
(losses) from investment and
foreign currency transactions......... (0.21)@ 0.17@ 0.32@ (1.06) 0.58 (0.08) 0.32
------- ------- ------- ------- ------- ------- -----------
Total increase (decrease) from
investment operations................. 0.50 0.92 1.10 (0.31) 1.29 0.73 0.49
------- ------- ------- ------- ------- ------- -----------
Dividends from net investment income.... (0.56) (0.78) (0.74) (0.34) (0.82) (0.67) (0.24)
Distributions from realized gains on
investments and foreign currency
transactions.......................... -- -- -- -- (0.14) (0.18) (0.02)
Distributions in excess of net income... (0.06) -- -- -- -- -- --
Distributions from paid in capital...... (0.10) -- -- (0.33) -- -- --
------- ------- ------- ------- ------- ------- -----------
Total dividends and distributions....... (0.72) (0.78) (0.74) (0.67) (0.96) (0.85) (0.26)
------- ------- ------- ------- ------- ------- -----------
Net asset value, end of period.......... $ 10.27 $ 10.49 $ 10.35 $ 9.99 $ 10.97 $ 10.64 $ 10.76
------- ------- ------- ------- ------- ------- -----------
------- ------- ------- ------- ------- ------- -----------
Total investment return (1)............. 5.20% 9.25% 11.39% (2.86)% 12.60% 6.98% 4.63%
------- ------- ------- ------- ------- ------- -----------
------- ------- ------- ------- ------- ------- -----------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $10,096 $13,077 $16,613 $12,975 $12,043 $ 7,252 $ 2,565
Expenses to average net assets.......... 0.94% 0.96% 0.95%(2) 0.88% 1.06%** 0.94% 1.09%*
Net investment income to average net
assets................................ 6.93% 7.19% 7.77%(2) 7.23% 7.00%** 8.15% 8.79%*

Portfolio turnover rate................. 172% 126% 113% 108% 90% 92% 53%
</TABLE>

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

@ Calculated using the average shares outstanding for the year.

* Annualized

** Includes 0.15% of interest expense related to the reverse repurchase
agreement transactions entered into during the fiscal year.

+ Commencement of issuance of shares.

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. Total investment
return information for periods of less than one year is not annualized.

(2) These ratios include non-recurring reorganization expenses of 0.04%.

--------------------
Prospectus Page 20

<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

INVESTMENT OBJECTIVES & POLICIES

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

The Funds' investment objectives may not be changed without shareholder
approval. Except where noted, the Funds' other investment policies are not
fundamental and may be changed by their boards.

ASIA PACIFIC GROWTH FUND

Asia Pacific Growth Fund's investment objective is long-term capital
appreciation. The Fund seeks to achieve its objective by investing primarily in
equity securities of Asia Pacific Region companies. The Fund considers the 'Asia
Pacific Region' to be the region located south of the former Soviet Union, east
of Afghanistan and Iran and west of the International Date Line, but excluding
Japan. The Asia Pacific Region countries that currently have established
securities markets and that Schroder Capital normally considers for investments
by the Fund include: Australia, China, Hong Kong, India, Indonesia, Malaysia,
New Zealand, Pakistan, the Philippines, Singapore, South Korea, Sri Lanka,
Taiwan and Thailand. The Fund may also invest in other Asia Pacific Region
countries whose securities markets become sufficiently established. Except under
unusual conditions, the Fund invests in a minimum of three, and generally in a
larger number of, Asia Pacific Region countries. The Fund invests across a broad
spectrum of industries, including trade, finance, real estate, transportation,
communications, energy, construction, manufacturing, services, food processing
and others. The mix of industries and countries changes over time as investment
opportunities change.

The Fund defines Asia Pacific Region companies as companies:

o that are organized under the laws of countries in the Asia Pacific Region that
now or in the future permit foreign investors to participate in their stock
markets,

o that regardless of where organized, and as determined by Schroder Capital,
either (A) derive at least 50% of their revenues from goods produced or sold,
investments made or services performed in Asia Pacific Region countries or (B)
maintain at least 50% of their assets in Asia Pacific Region countries, or

o for which the principal securities trading market is an exchange or
over-the-counter ('OTC') market in the Asia Pacific Region.

Schroder Capital believes that the Asia Pacific Region markets offer the
potential of superior returns through their ability to grow at rates
substantially in excess of the world overall. Under normal market conditions,
the Fund will invest at least 65% of its total assets in equity securities of
Asia Pacific Region companies. Most of the equity securities purchased by the
Fund are expected to be traded on a foreign stock exchange or in a foreign OTC
market. When Schroder Capital believes it is consistent with the Fund's
investment objective, the Fund may invest up to 10% of its total assets in
convertible and non-convertible bonds issued or guaranteed by Asia Pacific
Region issuers, including obligations of sovereign governmental issuers
('sovereign debt').

EMERGING MARKETS EQUITY FUND

Emerging Markets Equity Fund's investment objective is long-term capital
appreciation. The Fund seeks to achieve its objective through investment in a
diversified portfolio consisting primarily of equity securities of issuers in
emerging markets. 'Emerging markets' are the markets in all the countries not
included in the Morgan Stanley Capital International World Index, an index of
major world economies, and Malaysia. Under normal market conditions, the Fund
invests a minimum of 65% of its total assets in equity securities of issuers
located in emerging market countries and maintains investments in at least three
emerging market countries. The Fund considers issuers to be located in an
emerging market country if: (1) the principal securities trading market for the
issuer is in an emerging market country; (2) the issuer derives 50% or more of
its annual revenue or profit from either goods produced, sales made, investments
made or services performed in emerging market countries; or (3) the issuer is
organized under the laws of an emerging market country.

Schroder Capital attempts to spread the Fund's investments over geographic as
well as economic sectors. Generally, Schroder Capital will not invest more than
35% of the Fund's total assets in any single country, and it will not invest 25%
or more of the Fund's total assets in any single industry. Within each emerging
market, the Fund is diversified through investments in a number of local
companies characterized by attractive valuation relative to expected growth.

There are currently over 60 newly industrializing and developing countries with
equity markets. A number

--------------------
Prospectus Page 21

<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

of these emerging markets are not yet easily accessible to foreign investors and
have unattractive tax barriers or insufficient liquidity to make significant
investments by the Fund feasible or attractive. However, many of the largest of
the emerging market countries have liberalized access in recent years, and more
are expected to do so in the future.

In recent years, many emerging market countries have begun programs of economic
reform: removing import tariffs, dismantling trade barriers, deregulating
foreign investment, privatizing state owned industries, permitting the value of
their currencies to float against the dollar and other major currencies, and
generally reducing the level of state intervention in industry and commerce.
Important intra-regional economic integration also holds the promise of greater
trade and growth. At the same time, significant progress has been made in
restructuring the heavy external debt burden that certain emerging market
countries accumulated during the 1970s and 1980s. While there is no assurance
that these trends will continue, Schroder Capital will seek out attractive
investment opportunities in these countries.

GLOBAL EQUITY FUND

Global Equity Fund's investment objective is long-term growth of capital. The
Fund attempts to achieve this goal by investing primarily in equity securities
issued by companies in foreign countries, as well as in the United States. Under
normal circumstances, at least 80% of the Fund's total assets are invested in
securities of issuers in countries represented in the Morgan Stanley Capital
International World Index. This is a well-known index that reflects developed
and developing markets throughout the world.

The International Equity Team at GE Investment Management selects equity
securities issued by companies located in developed and developing countries
throughout the world. The Fund normally invests in at least three countries, one
of which is typically the United States. The Fund considers an issuer to be
located in the country in which the issuer (a) is organized, (b) derives at
least 50% of its revenues or profits from goods produced or sold, investments
made or services performed, (c) has at least 50% of its assets situated or (d)
has the principal trading market for its securities. The Fund normally invests
at least 65% of its total assets in equity securities of foreign and U.S.
companies.

When the International Equity Team believes it is consistent with the Fund's
investment objective of long-term growth of capital, the Fund may invest up to

35% of its total assets in investment grade bonds that are issued by corporate
or governmental entities and that have maturities no longer than seven years.
The Fund may invest up to 10% of its net assets in convertible securities rated
below investment grade. When the International Equity Team considers market,
economic, political or currency conditions abroad to be unstable, the Fund may
assume a temporary defensive position by investing all or a significant portion
of its assets in securities of U.S. and Canadian issuers or by holding cash or
short-term money market investments.

GLOBAL INCOME FUND

Global Income Fund's primary investment objective is high current income
consistent with prudent investment risk; capital appreciation is a secondary
objective. The Fund seeks to achieve these objectives by
investing principally in high-quality bonds issued or guaranteed by foreign
governments, by the U.S. government, by their respective agencies or
instrumentalities or by supranational organizations, or issued by U.S. or
foreign companies.

The Fund's portfolio consists primarily of bonds rated within one of the two
highest grades assigned by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ('S&P'), Moody's Investors Service, Inc. ('Moody's') or another
nationally recognized statistical rating organization ('NRSRO') or, if unrated,
determined by Mitchell Hutchins to be of comparable quality. Normally, at least
65% of the Fund's total assets consist of high-quality bonds (and receivables
from the sale of such bonds), denominated in foreign currencies or U.S. dollars,
of issuers located in at least three 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 40% of the Fund's assets normally are invested in securities of issuers
located in any one country other than the United States. Up to 5% of the Fund's
total assets may be invested in bonds convertible into equity securities.

The Fund may invest up to 35% of its total assets in bonds 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 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 bonds rated

--------------------
Prospectus Page 22

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

as low as D by S&P, C by Moody's or comparably rated by another NRSRO or, in the
case of bonds 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. Bonds rated D by S&P are 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.
Bonds rated C by Moody's are in the lowest rated class and can be regarded as
having extremely poor prospects of attaining any real investment standing.
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. Lower-rated bonds are often issued by
businesses and governments in emerging markets. Because the Fund may also invest
in emerging market bonds that are rated investment grade, the Fund's total
investment in emerging market bonds may exceed the 20% noted above.

In the event that, due to a downgrade of one or more bonds, an amount in excess
of 20% of the Fund's total assets is held in securities rated below investment
grade and comparable 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.

Up to 20% of the Fund's total assets may be invested in bonds that are not
paying current income. The Fund may purchase these bonds if Mitchell Hutchins
believes that they have a potential for capital appreciation.

- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY & PROCESS
- --------------------------------------------------------------------------------

ASIA PACIFIC GROWTH FUND

Stock selection is at the heart of Schroder Capital's investment philosophy. Its
approach to selecting investments emphasizes fundamental company analysis.
Schroder Capital's stock selection focuses on Asia Pacific Region companies that
it believes have a sustainable competitive advantage and whose growth potential
is undervalued by other investors. In selecting companies for investment,
Schroder Capital considers historical growth rates and future growth prospects,
management capability, the ability of the company to access capital, government
regulation, market share, profit margins, competitive position in both domestic

and export markets and other factors. Schroder Capital allocates investments
among companies in various Asia Pacific Region countries based on its assessment
of the likelihood that those countries will have favorable long-term business
environments in which corporate growth will not be impeded by adverse
macroeconomic or political factors.

Schroder Capital is committed to maximizing risk-
adjusted returns for investors through comprehensive research conducted by an
extensive network of locally based analysts. This investment approach is
consistent with the Fund's overall strategy of taking a long-term view to
investment based upon its assessment of growth potential. Schroder Capital is a
wholly owned indirect subsidiary of Schroders plc, the holding company parent of
an international group of banks and financial services companies ('Schroder
Group'), with associated companies and investment and representative offices
located around the world. Schroder Capital believes that one of its key
strengths is the Schroder Group's worldwide network of investment management
affiliates and access to its extensive network of research offices, many long
established, in the Asia Pacific Region, including, as of October 31, 1997,
offices in [Bangkok, Beijing, Hong Kong, Singapore, Seoul, Sydney, Jakarta,
Kuala Lumpur, Shanghai, Taipei and Tokyo]. As of that date, Schroder Capital's
global research network was staffed by over [50] investment professionals,
including [12] Asia Pacific Region specialists in Schroder Capital's London
office.

Each year, the Schroder Group researches and conducts on-site visits with
approximately 700 companies in the Asia Pacific Region countries. Of those
companies, the Schroder Group's investment professionals further develop
extensive management contacts with, and produce independent forecasts of
earnings estimates for, approximately 550 companies. Schroder Capital's analysis
includes small and medium-sized companies, as well as the larger-capitalization
companies. Schroder Capital believes that small companies

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<PAGE>
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PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

are analyzed by fewer investors and are less likely than larger companies to be
efficiently priced.

Asia Pacific Region countries have experienced among the highest real economic

growth rates in the world for most of the past 15-year period. Schroder Capital
believes that economic conditions in the Asia Pacific Region may provide for
high levels of economic activity in the long term, offering the potential for
long-term capital appreciation from investment in equity securities of Asia
Pacific Region companies. These conditions have in the past included (1) the
increasing industrialization of Asia Pacific Region economies, (2) favorable
demographics and competitive wage rates, (3) high rates of domestic savings
available to fund investment, particularly in the area of infrastructure, (4)
the ability to attract foreign direct investment, (5) the emergence of a
regional trading zone and (6) rising per capita incomes available to support
local markets for consumer goods. There can be no assurance, however, that
economic growth in the Asia Pacific Region will occur, that the growth rate will
be as high on either an absolute or relative scale as in the past or that market
performance will reflect any actual economic growth in the Asia Pacific Region
overall. Many of the countries within the Asia Pacific Region may experience
political, social or economic instability in the future.

EMERGING MARKETS EQUITY FUND

In selecting emerging market equity securities for Emerging Markets Equity Fund,
Schroder Capital combines rigorous, fundamental research with a quantitative
assessment of the economic potential of the various countries in which
investments might be made. Schroder Capital focuses on companies in emerging
market countries where it believes there is likely to be a favorable long-term
business environment and where it believes a company's growth is less likely to
be impeded by adverse macro-economic or political factors. Within those
countries, Schroder Capital selects stocks of companies that, based on its
analysis of fundamental corporate data, it believes have a sustainable
competitive advantage and whose growth potential is undervalued by other
investors.

Schroder Capital believes that one of its key strengths is the Schroder Group's
worldwide network of investment management affiliates and access to its network
of local research offices, many long established, in emerging market countries.
Each year, the Schroder Group researches and conducts on-site visits with
approximately 1,200 companies in emerging market countries. Of those companies,
the Schroder Group's investment professionals further develop extensive
management contacts with, and produce independent forecasts of earnings
estimates for, approximately 550 companies. Schroder Capital analyzes small and
medium-sized companies, as well as the better-known larger capitalization
companies. Schroder Capital believes that small companies are analyzed by fewer
investors and are less likely than larger companies to be efficiently priced.

GLOBAL EQUITY FUND

In selecting equity securities for Global Equity Fund, the International Equity
Team at GE Investment Management searches for growth companies selling at
reasonable prices, with an emphasis on undervalued medium- to large-size growth
companies with a global presence. The investment process employed by the

International Equity Team involves several steps.

First, the International Equity Team carefully screens a universe of thousands
of global stocks by comparing each company's price-to-earnings ratio with its
long-term growth. This evaluation helps eliminate companies whose stock prices
are too expensive, typically resulting in a list of several hundred stocks.
Next, this smaller group of stocks is rigorously analyzed by the International
Equity Team's experienced investment professionals. This step, which is designed
to determine whether a stock's price reflects its true value and whether the
market may eventually recognize the stock's value, reduces the universe to fewer
stocks.

Finally, the International Equity Team looks for a catalyst (such as new
management, new products or changing industry dynamics) that might cause the
market to realize a stock is undervalued. This process typically results in
fewer than 100 stocks that the
International Equity Team will buy for the Fund's portfolio.

The strength of the Team's conviction about each company is part of what
determines the size of each holding.

The International Equity Team regularly reviews the equity securities held in
the Fund's portfolio to assess risks, such as stability in the political and
economic conditions of underlying countries, fluctuations in currency rates,
liquidity, changes in company earnings, and other relevant factors.

GLOBAL INCOME FUND

Global Income Fund's investment policies are designed to enable it to capitalize
on unique investment opportunities presented throughout the world and in
international financial markets influenced by the increasing interdependence of
economic cycles and currency exchange rates. Over the past decade, bonds

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PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

offered by certain foreign governments provided higher investment returns than
U.S. government debt securities. Such returns reflect interest rates and other
market conditions prevailing in those countries and the effect of gains and
losses in the denominated currencies, which have had a substantial impact on
investment in foreign bonds. The importance of global debt markets is
illustrated by the Salomon Brothers World Government Bond Market Index, a
popular index used to assess both U.S. government and foreign government debt
markets. As of December 31, 1997, more than [ ]% of this index was represented
by securities denominated in currencies other than the U.S. dollar.

The Global Fixed Income Management Team at Mitchell Hutchins relies on
fundamental economic strength, credit quality and currency and interest rate
trends as the principal determinants of the various country, geographic and
industry sector weightings within the Fund's portfolio. In addition, certain of
the Fund's assets are invested in bonds of U.S. governmental and corporate
issuers. The Management Team believes that over time investment in a composite
of foreign fixed income markets and in the U.S. government and corporate bond
markets is less risky than a portfolio comprised exclusively of foreign
securities and provides investors with the potential to earn a higher return
than a portfolio invested exclusively in U.S. debt securities.

- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------

These charts show the total returns for the Funds. Sales charges have not been
deducted from total returns shown in the charts. Returns would be lower if sales
charges were deducted. Total returns both before and after deducting the maximum
sales charges are shown below in the tables that follow the performance charts.
Past results are not a guarantee of future results.

ASIA PACIFIC GROWTH FUND

Plot Points for Chart

3/25/97-10/31/97
Class A -28.32%
Class B -28.64%
Class C -28.64%

The inception date for Class A, Class B and Class C shares was March 25, 1997;
thus, the 1997 return represents the period from March 25, 1997 through December
31, 1997. As of December 31, 1997, no Class Y shares had been sold to the
public.

<TABLE>
<CAPTION>
TOTAL RETURN
As of October 31, 1997
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
------- -------- -------- --------
LIFE (3/25/97 - 10/31/97)
<S> <C> <C> <C> <C>
Without deducting maximum sales
charge........................ (28.32)% (28.64)% (28.64)% N/A
After deducting maximum sales
charge........................ (31.55)% (33.64)% (29.64)% N/A

</TABLE>

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PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

1/19/94-12/31/94 1995 1996 1997
Class A -12.58% -11.20% 4.86%
Class B 0.55% 4.14%
Class C -13.17% -11.87% 4.03%
Class Y -12.33% -10.92% 5.05%

The inception date for Class A, Class C and Class Y shares was January 19, 1994;
thus, the 1994 return represents the period from January 19, 1994 through
December 31, 1994. The inception date for the Class B shares was
December 5, 1995; thus the 1995 return represents the period from December 5,
1995 to December 31, 1995. Schroder Capital was appointed sub-adviser for
Emerging Markets Equity Fund effective February 25, 1997; thus, while past
performance is never a guarantee of future results, information for periods
prior to that date may be less indicative of current or future operations than
would otherwise be the case.

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of October 31, 1997
CLASS A CLASS B CLASS C CLASS Y
--------- --------- --------- ---------
Inception Date..................... 1/19/94 12/5/95 1/19/94 1/19/94
<S> <C> <C> <C> <C>
ONE YEAR
Before deducting maximum sales
charges....................... (0.74)% (1.39)% (1.61)% (0.53)%
After deducting maximum sales
charges....................... (5.25)% (6.39)% (2.61)% (0.53)%
LIFE
Before deducting maximum sales
charges....................... (6.13)% 0.39 % (6.85)% (5.90)%
After deducting maximum sales
charges....................... (7.27)% (1.76)% (6.85)% (5.90)%
</TABLE>

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<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

GLOBAL EQUITY FUND

11/14/91 1992 1993 1994 1995 1996 1997
Class A 2.42% 3.26% 30.77% -2.53% 13.54% 14.80%
Class B 1.29% 13.91%
Class C 17.39% -3.12% 12.76% 13.91%
Class Y 18.19% -2.16% 13.90% 15.12%

The inception date for Class A shares was November 14, 1991; thus, the 1991
return represents the period from November 14, 1991 through December 31, 1991.
As the inception date of Class B shares was August 25, 1995, the 1995 return
for Class B shares represents the period from August 25, 1995 through
December 31, 1995. The inception date of Class C and Class Y shares was
May 10, 1993; thus, the 1993 returns for Class C and Class Y shares represent
the period from May 10, 1993 through December 31, 1993.

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of October 31, 1997
CLASS A CLASS B CLASS C CLASS Y
--------- --------- --------- ---------
Inception Date..................... 11/14/91 8/25/95 5/10/93 5/10/93
<S> <C> <C> <C> <C>
ONE YEAR
Before deducting maximum sales
charges....................... 8.87% 8.05% 8.05% 9.31%
After deducting maximum sales
charges....................... 3.98% 3.05% 7.05% 9.31%
FIVE YEARS
Before deducting maximum sales
charges....................... 12.04% N/A N/A N/A
After deducting maximum sales
charges....................... 11.00% N/A N/A N/A
LIFE
Before deducting maximum sales
charges....................... 10.76% 8.63% 9.74% 10.92%
After deducting maximum sales
charges....................... 9.90% 7.38% 9.74% 10.92%
</TABLE>

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PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

GLOBAL INCOME FUND

<TABLE>
<CAPTION>
3/20/87- 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A 11.11% 1.22% 14.16% -3.89% 13.20% 7.13%
Class B 17.58% 12.15% 5.44% 17.72% 10.75% 0.38% 13.36% -4.77% 12.39% 6.34%
Class C 0.10% 13.64% -4.43% 12.54% 6.70%
Class Y 9.83% 1.51% 14.54% -3.74% 13.53% 7.54%
</TABLE>

The inception date for Class A shares was July 1, 1991; thus, the 1991 return
for Class A shares represents the period from July 1, 1991 through December 31,
1991. The inception date of Class B shares was March 20, 1987; thus, the 1987
return represents the period from March 20, 1987 through December 31, 1987. The
inception date of Class C shares was July 2, 1992; thus, the 1992 return for
Class C shares represents the period from July 2, 1992 through December 31,
1992. The inception date for Class Y shares was August 26, 1991; thus, the 1991
return for Class Y shares represents the period from August 26, 1991 through
December 31, 1991.

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of October 31, 1997

CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Inception Date..................... 7/1/91 3/20/87 7/2/92 8/26/91
ONE YEAR
Before deducting maximum sales
charges....................... 4.99% 4.11% 4.48% 5.20%
After deducting maximum sales
charges....................... 0.75% (0.89)% 3.73% 5.20%
FIVE YEARS
Before deducting maximum sales
charges....................... 6.64% 5.81% 6.10% 6.91%
After deducting maximum sales
charges....................... 5.78% 5.49% 6.10% 6.91%
TEN YEARS (OR LIFE OF CLASS)
Before deducting maximum sales
charges....................... 7.23% 9.02% 5.82% 7.43%

After deducting maximum sales
charges....................... 6.55% 9.02% 5.82% 7.43%
</TABLE>

PERFORMANCE INFORMATION

The Funds perform a standardized computation of annualized total return and may
show this return in advertisements or promotional materials. Standardized return
shows the change in value of an investment in a Fund as a steady compound annual
rate of return. Actual year-by-year returns fluctuate and may be higher or lower
than standardized return. Standardized returns for Class A shares of the Funds
reflect deduction of the Funds' maximum initial sales charge of 4.5% (4% in the
case of Global Income Fund) at the time of

--------------------
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<PAGE>

------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

purchase, and standardized returns for the Class B and Class C shares of the
Funds reflect deduction of the applicable contingent deferred sales charge
imposed on the sale of shares held for the period. One-, five-and ten-year
periods will be shown, unless the Fund or Class has been in existence for a
shorter period. If so, returns will be shown for the period since inception,
known as 'Life.' Total return calculations assume reinvestment of dividends and
other distributions.

The Funds may use other total return presentations in conjunction with
standardized return. These may cover the same or different periods as those used
for standardized return and may include cumulative returns, average annual
rates, actual year-by-year rates or any combination thereof. Non-standardized
return does not reflect initial or contingent deferred sales charges and would
be lower if such charges were deducted.

Global Income Fund also may advertise its yield. Yield reflects investment
income net of expenses over a 30-day (or one month) period on a Fund share.
Yield is expressed as an annualized percentage of the maximum offering price for
a Fund share at the end of the period. For Class B, C and Y shares, the maximum
offering price is the same as the net asset value per share. Yield computations
differ from other accounting methods and may differ from dividends actually paid
or reported net income.

Total return information reflects past performance and does not indicate future
results. The investment return and principal value of shares of the Funds will
fluctuate. The amount investors receive when selling shares may be more or less
than what they paid. Further information about each Fund's performance is

contained in its Annual Report, which may be obtained without charge by
contacting the Fund, your PaineWebber investment executive or PaineWebber's
correspondent firms or by calling toll-free 1-800-647-1568.

- --------------------------------------------------------------------------------
THE FUNDS' INVESTMENTS
- --------------------------------------------------------------------------------

EQUITY SECURITIES include common stocks, preferred stocks and securities that
are convertible into them, including common stock purchase warrants and rights,
equity interests in trusts, partnerships, joint ventures or similar enterprises
and depository receipts. Common stocks, the most familiar type, represent an
equity (ownership) interest in a corporation.

Preferred stock has certain fixed income features, like a bond, but is actually
equity in a company, like common stock. Convertible securities may include
debentures, notes and preferred equity securities, that may be converted into or
exchanged for a prescribed amount of common stock of the same or a different
issuer within a particular period of time at a specified price or formula.
Depository receipts typically are issued by banks or trust companies and
evidence ownership of underlying equity securities.

BONDS (meaning debt securities in general, including notes and debentures) are
used by corporations and governments to borrow money from investors. The issuer
pays the investor a fixed or variable rate of interest and must repay the amount
borrowed at maturity. Bonds have varying degrees of investment risk and varying
levels of sensitivity to changes in interest rates.

RISKS

EQUITY SECURITIES. While past performance does not guarantee future results,
equity securities historically have provided the greatest long-term growth
potential in a company. However, their prices generally fluctuate more than
other securities, and reflect changes in a company's financial condition and in
overall market and economic conditions. Common stocks generally represent the
riskiest investment in a company. It is possible that a Fund may experience a
substantial or complete loss on an individual equity investment.

BONDS. Bonds are subject to interest rate risk and credit risk. Interest rate
risk is the risk that interest rates will rise and bond prices will fall,
lowering the value of a Fund's investments in bonds. Credit risk is the risk
that adverse changes in economic conditions can affect an issuer's ability to
pay principal and interest. In addition, there is a risk that bonds will be
downgraded by rating agencies, which can be expected to lower value and

liquidity. Credit ratings attempt to evaluate the safety of principal and
interest payments and do not evaluate the volatility of the security's value or
its liquidity and do not guarantee the performance of the issuer. Rating
agencies may fail to make timely changes in credit ratings in

--------------------
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<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

response to subsequent events, so that an issuer's current financial condition
may be better or worse than the rating indicates.

Bonds rated below investment grade (that is, rated lower the BBB by S&P, Baa by
Moody's, comparably rated by another NRSRO or determined to be of similar
quality), generally offer a higher current yield than that available for higher
grade issues, but they involve higher risks. 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 fluctuations in response to changes in interest rates. Such
securities, commonly referred to as 'junk bonds,' are considered predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal and may involve major risk exposure to adverse conditions. These
securities may be rated in the lowest rating category by a ratings agency and
may be in default.

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 interest and principal 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.

CONVERTIBLE SECURITIES. Each Fund may invest in convertible securities. A
convertible security entitles the holder to receive interest paid or accrued on
debt or dividends paid on preferred stock until the convertible security matures
or is redeemed, converted or exchanged. Convertible securities have unique
investment characteristics in that they generally (1) have higher yields than
common stocks, but lower yields than comparable non-convertible securities, (2)
are less subject to fluctuation in value than the underlying stock because they

have fixed income characteristics and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases. While
no securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer's common stock. However,
the extent to which such risk is reduced depends in large measure upon the
degree to which the convertible security sells above its value as a fixed income
security.

FOREIGN INVESTING. Investing in foreign securities involves more risks than
investing in the U.S. Their value is subject to economic and political
developments in the countries where the companies operate and to changes in
foreign currency values. Values may also be affected by foreign tax laws,
changes in foreign economic or monetary policies, exchange control regulations
and regulations involving prohibitions on the repatriation of foreign
currencies. Investments in foreign countries could be affected by other factors
not present in the United States, including expropriation, confiscatory
taxation, lack of uniform accounting and auditing standards and potential
difficulties in enforcing contractual obligations. Transactions in foreign
securities may be subject to less efficient settlement practices, including
extended clearance and settlement periods.

In general, less information may be available about foreign companies than about
U.S. companies, and foreign companies are generally not subject to the same
accounting, auditing and financial reporting standards as are U.S. companies.
Foreign securities markets may be less liquid and subject to less regulation
than the U.S. securities markets. The costs of investing outside the United
States frequently are higher than those in the United States. These costs
include relatively higher brokerage commissions and foreign custody expenses.

Investments in foreign government bonds involve special risks. The issuer of the
bond or the governmental authorities that control the repayment of the bond may
be unable or unwilling to pay interest or repay principal when due in accordance
with the terms of the bond, and a Fund may have limited legal recourse in the
event of default. Political conditions, especially a sovereign entity's
willingness to meet the terms of its debt obligations, are of considerable
significance.

INVESTING IN EMERGING MARKETS. Investing in securities issued by companies
located in emerging markets involves additional risks. These countries typically
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. The possibility of low or nonexistent trading volume in the
securities of companies in emerging markets may also result in a lack of
liquidity and in price volatility. Issuers in emerging markets typically are
subject to a greater degree of change in earnings and business prospects than
are companies in developed markets.

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PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

The emerging markets in which the Funds may invest include formerly communist
countries of Eastern
Europe, the Commonwealth of Independent States (formerly the Soviet Union) and
the People's Republic of China. Upon the accession to power of communist regimes
approximately 50 to 80 years ago, the governments of a number of these countries
expropriated a large amount of property. The claims of many property owners
against those governments were never finally settled. There can be no assurance
that a Fund's investments in these countries, if any, would not also be
expropriated, nationalized or otherwise confiscated, in which case the Fund
could lose its entire investment in the country involved. In addition, any
change in the leadership or policies of these countries may halt the expansion
of or reverse the liberalization of foreign investment policies now occurring.
The Funds may invest in Hong Kong, which reverted to Chinese administration on
July 1, 1997. The long-term effects of this reversion are not known at this
time. However, a Fund's investments in Hong Kong may now be subject to the same
or similar risks as any investment in China.

CURRENCY. Currency risk is the risk that changes in foreign exchange rates may
reduce the U.S. dollar value of a Fund's foreign investments. A Fund's share
value may change significantly when investments are denominated in foreign
currencies. Generally, currency exchange rates are determined by supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries. Currency exchange rates can also be affected by the
intervention of the U.S. and foreign governments or central banks, the
imposition of currency controls, speculation or other political or economic
developments inside and outside the United States.

DERIVATIVES. Some of the instruments in which the Funds may invest may be
referred to as 'derivatives,' because their value depends on (or 'derives' from)
the value of an underlying asset, reference rate or index. These instruments
include options, futures contracts, swap agreements, forward currency contracts,
interest rate protection contracts and similar instruments. There is limited
consensus as to what constitutes a 'derivative' security. The market value of
derivative instruments and securities sometimes is more volatile than that of
other investments, and each type of derivative instrument may pose its own
special risks. Mitchell Hutchins and the sub-advisers take these risks into
account in their management of the Funds.

COUNTERPARTIES. The Funds may be exposed to the risk of financial failure or
insolvency of another party. To help lessen those risks, the sub-advisers and
Mitchell Hutchins, subject to the supervision of the respective boards, monitor
and evaluate the creditworthiness of the parties with which each Fund does
business.

U.S. GOVERNMENT SECURITIES. The U.S. government securities in which Global
Income Fund may invest include direct obligations of the U.S. government (such
as Treasury bills, notes and bonds) and obligations issued or guaranteed as to
principal and interest (but not as to market value) by U.S. government agencies
and instrumentalities. The Fund is authorized to invest in mortgage-backed
securities issued or guaranteed by Ginnie Mae (also known as the Government
National Mortgage Association), Fannie Mae (also known as, the Federal National
Mortgage Association) or Freddie Mac (also known as the Federal Home Loan
Mortgage Corporation).

Global Income Fund may invest in 'zero coupon' Treasury securities, which are
Treasury bills, notes and bonds that have been stripped of their unmatured
interest coupons, and receipts or certificates representing interest in such
stripped debt obligations and coupons. A zero coupon security pays no cash
interest to its holder prior to maturity. Accordingly, these securities usually
are issued and traded at a deep discount from their face or par value and are
subject to greater fluctuations of market value in response to changing interest
rates than debt obligations of comparable maturities that make current income
payments. Federal tax law requires that the holder of a zero coupon security
include in gross income each year the original issue discount that accrues on
the security for the year, even though the holder receives no interest payment
on the security during the year. For additional discussion of the tax treatment
of zero coupon securities, see 'Taxes' in the Statement of Additional
Information.

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are bonds backed by
direct or indirect pools of underlying mortgage loans that are secured by real
property. Mortgage-backed securities may be composed of one or more classes and
may be structured either as pass-through securities or collateralized debt
obligations. Multiple-class mortgage-backed securities are referred to in this
Prospectus as 'CMOs.' Some CMOs are directly supported by other CMOs, which in
turn are supported by mortgage pools. Investors typically receive payments out
of the interest and principal on the underlying mortgages. The portions of these
payments that investors receive,

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PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

as well as the priority of their rights to receive payments, are determined by
the specific terms of the CMO class. CMOs involve speical risk, and evaluating
them requires special knowledge.

A major difference between mortgage-backed securities and traditional bonds
is that interest and principal payments are made more frequently (usually
monthly) and that principal may be repaid at any time. When interest rates go
down and homeowners refinance their mortgages, mortgage-backed securities may be
paid off more quickly than investors expect. When interest rates rise,
mortgage-backed securities may be paid off more slowly than originally expected.
Changes in the rate or 'speed' of these prepayments can cause the value of
mortgage-backed securities to fluctuate rapidly.

Because of prepayments, mortgage-backed securities may benefit less than other
bonds from declining interest rates. Reinvestments of prepayments may occur at
lower interest rates than the original investment, thus adversely affecting
Global Income Fund's yield. Actual prepayment experience may cause the yield of
a mortgage-backed security to differ from what was assumed when the Fund
purchased the security.

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.

Certain classes of CMOs and other mortgage-backed securities are structured in a
manner that makes them extremely sensitive to changes in prepayment rates.
Interest-only ('IO') and principal-only ('PO') classes are examples of this. IOs
are entitled to receive all or a portion of the interest, but none (or only a
nominal amount) of the principal payments, from the underlying mortgage assets.
If the mortgage assets underlying an IO experience greater than anticipated
principal prepayments, then the total amount of interest payments allocable to
the IO class, and therefore the yield to investors, generally will be reduced.
In some instances, an investor in an IO may fail to recoup all of his or her
initial investment, even if the security is government issued or guaranteed or
is rated AAA or the equivalent. Conversely, PO classes are entitled to receive
all or a portion of the principal payments, but none of the interest, from the

underlying mortgage assets. PO classes are purchased at substantial discounts
from par, and the yield to investors will be reduced if principal payments are
slower than expected. Some IOs and POs, as well as other CMO classes, are
structured to have special protections against the effects of prepayments. These
structural protections, however, normally are effective only within certan
ranges of prepayment rates and thus will not protect investors in all
circumstances. Inverse floating rate CMO classes also may be extremely volatile.
These classes pay interest at a rate that decreases when a specified index of
market rates increases.

During 1994, the value and liquidity of many mortgage-backed securities declined
sharply due primarily to increases in interest rates. There can be no assurace
that such declines will not recur. The market value of certain mortgage-backed
securities in which Global Income Fund may invest, including IO and PO classes
of mortgage-backed securities, can be extremely volatile and these securities
may become illiquid. Mitchell Hutchins seeks to manage the Fund's investments in
mortgage-backed securities so that the volatility of the Fund's portfolio, taken
as a whole, is consistent with the Fund's investment objective. If market
interest rates or other factors that affect the volatility of securities held by
the Fund change in ways that Mitchell Hutchins does not anticipate, the Fund's
ability to meet its investment objective may be reduced.

NON-DIVERSIFIED STATUS. Global Income Fund is 'non-diversified,' as that term is
defined in the 1940 Act, but it intends to continue to qualify as a 'regulated
investment company' for federal income tax purposes. See 'Dividends & Taxes.'
This means, in general, that more than 5% of the total assets of the Fund may be
invested in securities of one issuer (including a foreign government), but only
if, at the close of each quarter of the Fund's taxable year, the aggregate
amount of such holdings does not exceed 50% of the value of its total assets and
no more than 25% of the value of its total assets is invested in the securities
of a single issuer. To the extent that the Fund's portfolio at times may include
the securities of a smaller number of issuers than if it were 'diversified' (as
defined in the 1940 Act), the Fund will at such times be subject to greater risk
with respect to its portfolio securities

--------------------
Prospectus Page 32

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

than an investment company that invests in a broader range of securities, in
that changes in the financial condition or market assessment of a single issuer
may cause greater fluctuation in the Fund's total return and the price of Fund

shares.

INVESTMENTS IN LOWER RATED BONDS. [During the fiscal year ended October 31,
1997, Global Income Fund invested 5% or more of its average annual net assets in
securities rated below investment grade. The Fund's average annual net assets
during that fiscal year were invested as follows:

<TABLE>
<CAPTION>
AVERAGE ANNUAL NET ASSETS INVESTED IN: PERCENTAGE
- ------------------------------------------- ----------
<S> <C>
Debt securities rated by S&P, Moody's or
another NRSRO............................ %
Securities rated AAA/Aaa.................
Securities rated AA/Aa...................
Securities rated A/A.....................
Securities rated BBB/Baa.................
Securities rated BB/Ba...................
Securities rated B/B.....................
Securities rated CCC/Caa.................
Securities rated CC/Ca...................
Securities rated C/C.....................
Securities rated D.......................
Debt securities not so rated...............
Unrated securities determined to be of
comparable quality to rated securities,
as follows:
Securities rated AAA/Aaa.................
Securities rated AA/Aa...................
Securities rated A/A.....................
Securities rated BBB/Baa.................
Securities rated BB/Ba...................
Securities rated B/B.....................
Securities rated CCC/Caa.................
Securities rated CC/Ca...................
Securities rated C/C.....................
Securities rated D]......................
</TABLE>

YEAR 2000 RISKS. Like other mutual funds, financial and business organizations
and individuals around the world, each of the Funds could be adversely affected
if the computer systems used by its investment adviser, sub-advisers and other
service providers do not properly process and calculate date-related information
from and after January 1, 2000. this is commonly known as the 'Year 2000
Problem.' Mitchell Hutchins is taking steps that it believes are reasonably
designed to address the Year 2000 Problem with respect to the computer systems
that it uses and to obtain satisfactory assurances that comparable steps are

being taken by each of the Funds' other, major service providers. at this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the funds.

OTHER INVESTMENT TECHNIQUES AND STRATEGIES

HEDGING AND OTHER STRATEGIES USING DERIVATIVE INSTRUMENTS. Each Fund may use
certain instruments and strategies designed to adjust the overall risk of its
investment portfolio ('hedge') or, in the case of Global Income Fund, to enhance
income or realize gains. Use of derivative instruments solely to enhance income
or realize gains may be considered a form of speculation. These strategies
involve derivative instruments, including options (both exchange traded and
over-the-counter), futures contracts and forward currency contracts. In
addition, Asia Pacific Growth Fund and Global Income Fund may use interest rate
swaps and similar contracts to preserve a return or spread on a particular
investment or portion of its portfolio or to protect against an increase in the
price of securities that either Fund anticipates purchasing at a later date.
Asia Pacific Growth Fund may also engage in currency swaps. New financial
products and risk management techniques continue to be developed, and they may
be used by any Fund if consistent with its investment objective and policies.
The Funds' ability to use these strategies may be limited by market conditions,
regulatory limits and tax considerations. In addition, in some countries there
may not be a market for derivative instruments, or it may be too small to permit
effective hedging. The Statement of Additional Information contains further
information on these derivative instruments and related hedging strategies.

The Funds might not use any derivative instruments or hedging strategies, and
there can be no assurance that using them will succeed. If Schroder Capital, GE
Investment Management or Mitchell Hutchins, as applicable, is incorrect in its
judgment on market values, interest rates or other economic factors in using a
derivative instrument or hedging strategy, a Fund may have lower net income and
a net loss on the investment. Each of these strategies involves certain risks,
which include:

o the fact that the skills needed to use derivative instruments are different
from those needed to select securities for the Funds;

o the possibility of imperfect correlation, or even no correlation, between
price movements of derivative instruments used in hedging strategies and price
movements of the securities or currencies being hedged;

--------------------
Prospectus Page 33

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

o possible constraints placed on a Fund's ability to purchase or sell portfolio
investments at advantageous times due to the need for the Fund to maintain
'cover' or to segregate securities; and

o the possibility that a Fund is unable to close out or liquidate its hedged
position.

REPURCHASE AGREEMENTS. Each Fund may use repurchase agreements. Repurchase
agreements are transactions in which a Fund 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 or upon demand and at a 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 a possible decline
in the market value of the underlying securities and delays and costs to the
Fund if the other party to the repurchase agreement becomes insolvent. Each Fund
intends to enter into repurchase agreements only with banks and dealers in
transactions believed by Mitchell Hutchins or a sub-adviser to present minimum
credit risks in accordance with guidelines established by the Fund's board.

REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse repurchase
agreements with banks and securities-dealers up to the percentages specified
below under 'Other Information.' Such agreements involve the sale of securities
held by the Fund subject to its agreement to repurchase the securities at an
agreed-upon date or upon demand and at a price reflecting a market rate of
interest. Such agreements are considered to be borrowings and may be entered
into only for temporary or emergency purposes.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES.
Each Fund may purchase securities on a 'when-issued' basis or may purchase or
sell securities for delayed delivery, i.e., for issuance or delivery to the
Funds later than the normal settlement date for such securities at a stated
price and yield. The Funds generally would not pay for such securities or start
earning interest on them until they are received. However, when a Fund
undertakes a when-issued or delayed-delivery obligation, it immediately assumes
the risks of ownership, including the risks of price fluctuation. Failure of the
issuer to deliver a security purchased by a Fund on a when-issued or
delayed-delivery basis may result in that Fund's incurring or missing an
opportunity to make an alternative investment. Depending on market conditions, a
Fund's when-issued and delayed-delivery purchase commitments could cause its net

asset value per share to be more volatile, because such securities may increase
the amount by which the Fund's total assets, including the value of when-issued
and delayed-delivery securities held by that Fund, exceeds its net assets.
When-issued and delayed-delivery securities will not exceed 10% of Global Equity
Fund's net assets.

LENDING PORTFOLIO SECURITIES. Each Fund may lend its securities to qualified
broker-dealers or institutional investors in an amount up to 33 1/3% of that
Fund's total assets. Lending securities enables a Fund to earn additional
income, but could result in a loss or delay in recovering these securities.

PORTFOLIO TURNOVER. Each Fund's portfolio turn-over rate may vary greatly
from year to year and will not be a limiting factor when Mitchell Hutchins
or a sub-adviser deems portfolio changes appropriate. A higher turnover rate
(100% or more) for a Fund will involve correspondingly greater transaction
costs, which will be borne directly by the Fund, and may increase the
potential for short-term capital gains.

TEMPORARY DEFENSIVE POSITIONS. When Mitchell Hutchins or a sub-adviser, as
applicable, believes that unusual circumstances warrant a defensive posture,
each Fund may temporarily commit all or any portion of its assets to cash (U.S.
dollars or foreign currencies) or investment grade money market instruments of
U.S. or foreign issuers, including repurchase agreements.

ILLIQUID SECURITIES. Global Equity Fund and Global Income Fund each may invest
up to 10% of its net assets, and Emerging Markets Equity Fund and Asia Pacific
Growth Fund up to 15% of its net assets, in illiquid securities, including
certain cover for over-the-counter options and securities whose disposition is
restricted under the federal securities laws other than those Mitchell Hutchins,
or a sub-adviser, as applicable, has determined to be liquid pursuant to
guidelines established by a Fund's board. To the extent that securities are
freely tradeable in the country in which they are principally traded, they are
not considered illiquid even if they are not freely tradeable in the United
States. Each Fund may invest in restricted securities that are eligible for
resale to qualified institutional buyers pursuant to SEC Rule 144A, but a Fund
will not consider those securities to be illiquid if Mitchell Hutchins or a
sub-adviser, as applicable, determines them to be liquid in accordance with
procedures approved by the Fund's board. The lack of a liquid second market for
illiquid securities may make it more difficult for a Fund to assign a value to
those securities

--------------------
Prospectus Page 34

<PAGE>

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

PaineWebber

Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

for purposes of valuing its portfolio and calculating its net asset value.

OTHER INFORMATION. Each Fund may borrow money from banks or through reverse
repurchase agreements for temporary or emergency purposes in the following
amounts of total assets: Asia Pacific Growth Fund-- 33 1/3%, Emerging Markets
Equity Fund--33 1/3%, Global Equity Fund--20%, and Global Income Fund--10%.
However, none of the Funds will purchase portfolio securities while borrowings
(including reverse repurchase agreements) in excess of 5% of the value of its
total assets are outstanding. Each Fund may sell securities short 'against the
box' to defer realization of gains or losses. When a security is sold against
the box, the seller owns the security. In addition, each Fund may invest up to
10% of its total assets in the securities of other investment companies. To the
extent a Fund invests in other investment companies, its shareholders incur
duplicative fees and expenses, including investment advisory fees. Each Fund may
invest up to 35% of its total assets in cash (U.S. dollars or foreign
currencies) or investment grade money market instruments of U.S. or foreign
issuers for liquidity purposes or pending investment in other securities.
Subject to this 35% limitation, Global Income Fund may acquire these securities
as an investment.

--------------------
Prospectus Page 35
<PAGE>
------------------------------

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

FLEXIBLE PRICING(SM)

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

Each Fund offers through this Prospectus four classes of shares that differ in
terms of sales charges and expenses. An investor can select the class that is
best suited to his or her investment needs, based upon the holding period and
the amount of investment.

CLASS A SHARES

HOW PRICE IS CALCULATED: The price is the net asset value plus the initial sales
charge (the maximum is 4.5% of the public offering price or, in the case of
Global Income Fund, 4% of the public offering price) next calculated after
PaineWebber's New York City headquarters or PFPC Inc., the Funds' transfer agent
('Transfer Agent'), receives the purchase order. Although investors pay an
initial sales charge when they buy Class A shares, the ongoing expenses for

this class are lower than the ongoing expenses of Class B and Class C shares.
Class A shares sales charges are calculated as follows:

ASIA PACIFIC GROWTH FUND, EMERGING MARKETS
EQUITY FUND AND GLOBAL EQUITY FUND

<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF DISCOUNT TO
------------------------- SELECTED DEALERS
OFFERING NET AMOUNT AS PERCENTAGE
AMOUNT OF INVESTMENT PRICE INVESTED OF OFFERING PRICE
- ----------------------------------- -------- ---------- -----------------
<S> <C> <C> <C>
Less than $50,000.................. 4.50% 4.71% 4.25%
$50,000 to $99,999................. 4.00 4.17 3.75
$100,000 to $249,999............... 3.50 3.63 3.25
$250,000 to $499,999............... 2.50 2.56 2.25
$500,000 to $999,999............... 1.75 1.78 1.50
$1,000,000 and over (1)............ None None 1.00(2)
</TABLE>

GLOBAL INCOME FUND

<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF DISCOUNT TO
------------------------- SELECTED DEALERS
OFFERING NET AMOUNT AS PERCENTAGE
AMOUNT OF PURCHASE PRICE INVESTED OF OFFERING PRICE
- ----------------------------------- -------- ---------- -----------------
<S> <C> <C> <C>
Less than $100,000................. 4.00% 4.17% 3.75%
$100,000 to $249,999............... 3.00 3.09 2.75
$250,000 to $499,999............... 2.25 2.30 2.00
$500,000 to $999,999............... 1.75 1.78 1.50
$1,000,000 and over (1)............ None None 1.00(2)
</TABLE>

- ------------------
(1) A contingent deferred sales charge of 1% of the shares' offering price or
the net asset value at the time of sale by the shareholder, whichever is
less, is charged on sales of shares made within one year of the purchase
date. Class A shares representing reinvestment of any dividends or other
distributions are not subject to the 1% charge. Withdrawals under the
Systematic Withdrawal Plan are not subject to this charge. However,
investors may not withdraw annually more than 12% of the value of the Fund
account under the Plan in the first year after purchase.

(2) Mitchell Hutchins pays 1% to PaineWebber.

SALES CHARGE REDUCTIONS & WAIVERS

Investors who are purchasing Class A shares in more than one PaineWebber mutual
fund may combine those purchases to get a reduced sales charge. Investors who
already own Class A shares in one or more PaineWebber mutual funds may combine
the amount they are currently purchasing with the value of such previously owned
shares to qualify for a reduced sales charge. To determine the sales charge
reduction in either case, please refer to the charts above.

Investors may also qualify for a lower sales charge when they combine their
purchases with those of:

o their spouses, parents or children under age 21;

o their Individual Retirement Accounts (IRAs);

o certain employee benefit plans, including 401(k) plans;

o any company controlled by the investor;

o trusts created by the investor;

o Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts created
by the investor or group

--------------------
Prospectus Page 36

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

of investors for the benefit of the investors' children; or

o accounts with the same adviser.

Employers who own Class A shares for one or more of their qualified retirement
plans may also qualify for the reduced sales charge.

The sales charge will not apply when the investor:

o is an employee, director, trustee or officer of PaineWebber, its affiliates or
any PaineWebber mutual fund;

o is the spouse, parent or child of any of the above;

o buys these shares through a PaineWebber investment executive who was formerly
employed as a broker with a competing brokerage firm that was registered as a
broker-dealer with the SEC; and

o was the investment executive's client at the competing brokerage firm;

o within 90 days of buying Class A shares in a Fund, the investor sells
shares of one or more mutual funds that (a) were principally underwritten
by the competing brokerage firm or its affiliates and (b) the investor
either paid a sales charge to buy those shares, paid a contingent
deferred sales charge when selling them or held those shares until the
contingent deferred sales charge was waived; and

o the amount that the investor purchases does not exceed the total amount
of money the investor received from the sale of the other mutual fund;

o is a certificate holder of unit investment trusts sponsored by PaineWebber and
has elected to have dividends and other distributions from that investment
automatically invested in Class A shares;

o is an employer establishing an employee benefit plan qualified under section
401, including a salary reduction plan qualified under section 401(k), or
section 403(b) of the Internal Revenue Code ('Code') (each a 'qualified
pension plan'). (This waiver is subject to minimum requirements, with respect
to the number of employees and investment amount, established by Mitchell
Hutchins. Currently, the plan must have 50 or more eligible employees and at
least $1 million in plan assets.) For investments made pursuant to this
waiver, Mitchell Hutchins may make a payment to PaineWebber out of its own
resources in an amount not to exceed 1% of the amount invested;

o is a participant in the PaineWebber Members Only Program(Trademark). For
investments made pursuant to this waiver, Mitchell Hutchins may make payments
out of its own resources to PaineWebber and to participating membership
organizations in a total amount not to exceed 1% of the amount invested;

o is a variable annuity offered only to qualified pension plans. For investments
made pursuant to this waiver, Mitchell Hutchins may make payments out of its
own resources to PaineWebber and to the variable annuity's sponsor, adviser or
distributor in a total amount not to exceed 1% of the amount invested;

o acquires Class A shares through an investment program that is not sponsored by

PaineWebber or its affiliates and that charges participants a fee for program
services, provided that the program sponsor has entered into a written
agreement with PaineWebber permitting the sale of Class A shares at net asset
value to that program. For investments made pursuant to this waiver, Mitchell
Hutchins may make a payment to PaineWebber out of its own resources in an
amount not to exceed 1% of the amount invested. For subsequent investments or
exchanges made to implement a rebalancing feature of such an investment
program, the minimum subsequent investment requirement is also waived; or

o acquires Class A shares in connection with a reorganization pursuant to which
a Fund acquires substantially all of the assets and liabilities of another
investment company in exchange solely for shares of the Fund.

For more information on how to get any reduced sales charge, investors should
contact their investment executive at PaineWebber or one of its correspondent
firms or call 1-800-647-1568. Investors must provide satisfactory information to
PaineWebber or the Fund if they seek any of these waivers.

CLASS B SHARES

HOW PRICE IS CALCULATED: The price is the net asset value next calculated after
PaineWebber's New York City headquarters or the Transfer Agent receives the
purchase order. The ongoing expenses investors pay for Class B shares are higher
than those of Class A shares. Because investors do not pay an initial sales
charge when they buy Class B shares, 100% of their purchase is immediately
invested.

Depending on how long they own their Fund investment, investors may have to pay
a sales charge when they sell their Fund shares. This sales charge is called a
'contingent deferred sales charge.' The amount of the charge depends on how long
the investor owned the shares. The sales charge is calculated by multiplying
the offering price (the net asset value of the shares at the time of

--------------------
Prospectus Page 37

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

purchase) or the net asset value of the shares at the time of sale by the
shareholder, whichever is less, by the percentage shown on the following
table. Investors who own shares for more than six years do not have to pay a
sales charge when selling those shares.

<TABLE>
<CAPTION>
PERCENTAGE BY WHICH
THE SHARES' NET
ASSET
IF THE INVESTOR VALUE IS
SELLS SHARES WITHIN: MULTIPLIED:
- ----------------------------------- -------------------
<S> <C>
1st year since purchase 5%
2nd year since purchase 4
3rd year since purchase 3
4th year since purchase 2
5th year since purchase 2
6th year since purchase 1
7th year since purchase None
</TABLE>

CONVERSION OF CLASS B SHARES

Class B shares automatically convert to the appropriate number of Class A shares
of equal dollar value after the investor has owned them for six years. Dividends
and other distributions paid to the investor by the Fund in the form of
additional Class B shares will also convert to Class A shares on a pro-rata
basis. This benefits shareholders because Class A shares have lower ongoing
expenses than Class B shares. If the investor has exchanged Class B shares
between PaineWebber funds, the Fund uses the purchase date at which the initial
investment was made to determine the conversion date.

MINIMIZING THE CONTINGENT DEFERRED
SALES CHARGE

When investors sell Class B shares they have owned for less than six years, the
Fund automatically will minimize the sales charge by assuming the investors are
selling:

o First, Class B shares owned through reinvested dividends and capital gain
distributions; and

o Second, Class B shares held in the portfolio the longest.

WAIVERS OF THE CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge will not apply to:

o sales of shares under the Fund's 'Systematic Withdrawal Plan' (investors may
not withdraw annually more than 12% of the value of the Fund account under the
Plan);

o a distribution from an IRA, a self-employed individual retirement plan ('Keogh
Plan') or a custodial account under Section 403(b) of the Internal Revenue
Code (after the investor reaches age 59 1/2);

o a tax-free return of an excess IRA contribution;

o a tax-qualified retirement plan distribution following retirement; or

o Class B shares sold within one year of an investor's death if the investor
owned the shares at the time of death either as the sole shareholder or with
his or her spouse as a joint tenant with the right of survivorship.

Investors must provide satisfactory information to PaineWebber or the Fund to
seek any of these waivers.

CLASS C SHARES

HOW PRICE IS CALCULATED: The price of Class C shares is the net asset value next
calculated after PaineWebber's New York City headquarters or the Transfer Agent
receives the purchase order. Investors do not pay an initial sales charge when
they buy Class C shares, but the ongoing expenses of Class C shares are higher
than those of Class A shares. Because investors do not pay an initial sales
charge when they buy Class C shares, 100% of their purchase is
immediately invested. Class C shares never convert to any other class of shares.

A contingent deferred sales charge of 1% (0.75% in the case of Global Income
Fund) of the offering price (the net asset value at the time of purchase) or the
net asset value of the shares at the time of sale by the shareholder, whichever
is less, is charged on sales of shares made within one year of the purchase
date. Other PaineWebber mutual funds may impose a different contingent deferred
sales charge on Class C shares sold within one year of the purchase date. A sale
of Class C shares acquired through an exchange and held less than one year will
be subject to the same contingent deferred sales charge that would have been
imposed on Class C shares of the PaineWebber
mutual fund originally purchased. Class C shares representing reinvestment of
any dividends or capital gain distributions will not be subject to the 1%
charge. Withdrawals under the Systematic Withdrawal Plan also will not be
subject to this charge. However, investors may not withdraw more than 12% of the
value of the Fund account under the Plan in the first year after purchase.

CLASS Y SHARES

HOW PRICE IS CALCULATED: Eligible investors may purchase Class Y shares at the
net asset value next calculated after PaineWebber's New York City headquarters
or the Transfer Agent receives the purchase order. Because investors do not pay
an initial sales charge when they buy Class Y shares, 100% of their purchase is
immediately invested. No contingent deferred sales

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

Prospectus Page 38

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

charge is imposed on Class Y shares, and the ongoing expenses for Class Y
shares are lower than for the other classes because Class Y shares are not
subject to Rule 12b-1 distribution or service fees.

LIMITED GROUPS OF INVESTORS. The following investors are eligible to buy Class Y
shares:

o a participant in INSIGHT when Class Y shares are purchased through that
program;

o an investor who buys $10 million or more at any one time in any combination of
PaineWebber mutual funds in the Flexible Pricing(Service Mark) System;

o a qualified pension plan that has either

5,000 or more eligible employees or

$50 million or more in assets;

o an investment company advised by PaineWebber or an affiliate of PaineWebber;
and

o for Global Equity Fund and Global Income Fund, the trustee of the PaineWebber
Savings Investment Plan ('PW SIP').

INSIGHT. An investor who purchases $50,000 or more of shares of the mutual funds

that are available to INSIGHT participants (which include the PaineWebber mutual
funds in the Flexible Pricing(Service Mark) System and certain other specified
mutual funds) may take part in INSIGHT, a total portfolio asset allocation
program sponsored by PaineWebber, and thus become eligible to purchase Class Y
shares. INSIGHT offers comprehensive investment services, including a
personalized asset allocation investment strategy using an appropriate
combination of funds, monitoring of investment performance and comprehensive
quarterly reports that cover market trends, portfolio summaries and personalized
account information.

Participation in INSIGHT is subject to payment of an advisory fee to PaineWebber
at the maximum annual rate of 1.5% of assets held through the program (generally
charged quarterly in advance), which covers all INSIGHT investment advisory
services and program administration fees. Employees of PaineWebber and its
affiliates are entitled to a 50% reduction in the fee otherwise payable for
participation in INSIGHT. INSIGHT clients may elect to have their INSIGHT fees
charged to their PaineWebber accounts (by the automatic redemption of money
market fund shares) or, if a qualified plan, invoiced.

Please contact your PaineWebber investment executive or PaineWebber
correspondent firms or call 1-800-647-1568 for more information concerning
mutual funds that are available to INSIGHT participants or for other INSIGHT
program information.

PURCHASES BY THE TRUSTEE OF THE PW SIP. The Class Y shares of Global Equity Fund
and Global Income Fund also are offered for sale to the trustee of the PW SIP, a
defined contribution plan sponsored by Paine Webber Group Inc. ('PW Group'). The
trustee of the PW SIP purchases and redeems these Class Y shares to implement
the investment choices of individual plan participants with respect to their PW
SIP contributions. Individual plan participants should consult the Plan
Information Statement and Summary Plan Description of the PW SIP (collectively
the 'Plan Documents') for a description of the procedures and limitations
applicable to making and changing investment choices.

Copies of the Plan Documents are available from the Benefits Connection, 100
Halfday Road, Lincolnshire, Il. 60069 or by calling 1-888-PWebber
(1-888-793-2237).

As described in the Plan Documents, the average net asset value per share at
which Class Y shares of Global Equity Fund and Global Income Fund are purchased
or redeemed by the trustee of the PW SIP for the accounts of individual
participants might be more or less than the net asset value per share prevailing
at the time that such participants made their investment choices or made their
contributions to the PW SIP.

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

HOW TO BUY SHARES

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

Prices are calculated for each class of the Fund's shares once each Business
Day, at the close of regular trading on the New York Stock Exchange (currently
4:00 p.m., Eastern time). A 'Business Day' is any day, Monday through Friday,
on which the New York Stock Exchange is open for business. The Funds and
Mitchell Hutchins reserve the right to reject any purchase order and to
suspend the offering of Fund shares for a period of time.

--------------------
Prospectus Page 39

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

When placing an order to buy shares, investors should specify which class of
shares they want to buy. If investors fail to specify the class, they will
automatically receive Class A shares, which include an initial sales charge.
Investors in Class Y shares must provide satisfactory information to PaineWebber
or an individual Fund that they are eligible to purchase Class Y shares.

PAINEWEBBER CLIENTS

Investors who are PaineWebber clients may buy shares through PaineWebber
investment executives or its correspondent firms. Investors may buy shares in
person, by mail, by telephone or by wire (the minimum wire purchase is $1
million). PaineWebber investment executives and correspondent firms are
responsible for promptly sending investors' purchase orders to PaineWebber's New
York City headquarters.

Investors may pay for their purchases with checks drawn on U.S. banks or with
funds they have in their brokerage accounts at PaineWebber or its correspondent
firms.

OTHER INVESTORS

Investors who are not PaineWebber clients may purchase Fund shares and set up an
account through the Transfer Agent (PFPC Inc.) by completing an account
application, which you may obtain by calling 1-800-647-1568. The application and
check must be mailed to PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box
8950, Wilmington, DE 19899.

Investors who are new to PaineWebber may complete and sign an account
application and mail it along with a check. Investors may also open an account
in person.

Investors who already have money invested in a PaineWebber mutual fund, and want
to invest in another PaineWebber mutual fund, can:

o mail an application with a check; or

o open an account by exchanging from another PaineWebber mutual fund.

Investors do not have to send an application when making additional investments
in the Fund.

MINIMUM INVESTMENTS

<TABLE>
<S> <C>
To open an account................. $1,000
To add to an account............... $ 100
</TABLE>

A Fund may waive or reduce these minimums for:

o employees of PaineWebber or its affiliates;

o participants in certain pension plans, retirement accounts, unaffiliated
investment programs or the Fund's automatic investment plan; or

o transactions in Class A shares made to implement a rebalancing feature in
certain investment programs.

HOW TO EXCHANGE SHARES

As shareholders, investors have the privilege of exchanging Class A, B and C

shares for the same class of other PaineWebber mutual fund shares. Class Y
shares are not exchangeable. For classes of shares where no initial sales charge
is imposed, a contingent deferred sales charge may apply if the investor sells
the shares acquired through the exchange.

Exchanges may be subject to minimum investment requirements of the fund into
which exchanges are made.

o Investors who purchased their shares through an investment executive at
PaineWebber or one of its correspondent firms may exchange their shares by
contacting their investment executive in person or by telephone, mail or wire.

o Investors who do not have an account with an investment executive at
PaineWebber or one of its correspondent firms may exchange their shares by
writing a 'letter of instruction' to the Transfer Agent. The letter of
instruction must include:

o the investor's name and address;

o the Fund's name;

o the Fund account number;

o the dollar amount or number of shares to be sold; and

o a guarantee of each registered owner's signature by an eligible
institution, such as a commercial bank, trust company or stock exchange
member.

The letter must be mailed to PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box
8950, Wilmington, DE 19899.

No contingent deferred sales charge is imposed when shares are exchanged for the
corresponding class of shares of other PaineWebber mutual funds. A Fund will use
the purchase date of the initial investment to determine any contingent deferred
sales charge due when the acquired shares are sold. Fund shares may be exchanged
only after the settlement date has passed and payment for the shares has been
made. The exchange privilege is available only in those jurisdictions where
the sale of the Fund shares to be acquired is authorized. This exchange

--------------------
Prospectus Page 40

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

privilege may be modified or terminated at any time and, when required by SEC
rules, upon 60 days' notice. See the back cover of this Prospectus for a list
of other PaineWebber mutual funds.

- --------------------------------------------------------------------------------
HOW TO SELL SHARES
- --------------------------------------------------------------------------------

Investors can sell (redeem) shares at any time. Shares will be sold at the share
price for that class as next calculated after the order is received and accepted
(less any applicable contingent deferred sales charge). Share prices are
normally calculated at the close of regular trading on the New York Stock
Exchange (currently 4:00 p.m., Eastern time).

Investors who own more than one class of shares should specify which class they
are selling. If they do not, the Fund will assume they are first selling their
Class A shares, then Class C, then Class B and last, Class Y.

If a shareholder wants to sell shares that were purchased recently, the Fund may
delay payment until it verifies that good payment was received. In the case of
purchases by check, this can take up to 15 days.

Investors who have an account with PaineWebber or one of PaineWebber's
correspondent firms can sell their shares by contacting their investment
executive. Investors who do not have an account and have bought their shares
through the Fund's Transfer Agent (PFPC Inc.) may sell shares by writing a
'letter of instruction,' as detailed in 'How to Exchange Shares.'

Because the Funds incur certain fixed costs in maintaining shareholder accounts,
each Fund reserves the right to purchase back all Fund shares in any shareholder
account with a net asset value of less than $500.

If a Fund elects to do so, it will notify the shareholder of the opportunity to
increase the amount invested to $500 or more within 60 days of the notice. A
Fund will not purchase back accounts that fall below $500 solely due to a
reduction in net asset value per share.

SALES BY PARTICIPANTS IN PW SIP

The trustee of the PW SIP sells Class Y shares of Global Equity Fund and Global

Income Fund to implement the investment choices of individual plan participants
with respect to their PW SIP contributions, as described in the Plan Documents
referenced under 'How to Buy Shares' above. The price at which Class Y shares
are sold by the trustee of PW SIP might be more or less than the price per share
at the time the participants made their investment choices.

REINSTATEMENT PRIVILEGE

Shareholders who sell their Class A shares may reinstate their Fund account
without a sales charge up to the dollar amount sold by purchasing the Fund's
Class A shares within 365 days after the sale. To take advantage of this
reinstatement privilege, shareholders must notify their investment executive at
PaineWebber or one of its correspondent firms at the time of purchase.

- --------------------------------------------------------------------------------
OTHER SERVICES
- --------------------------------------------------------------------------------

Investors should consult their investment executives at PaineWebber or one of
its correspondent firms to learn more about the following services available
with respect to the Fund's Class A, B and C shares:

AUTOMATIC INVESTMENT PLAN

Investing on a regular basis helps investors meet their financial goals.
PaineWebber offers an Automatic Investment Plan with a minimum initial
investment of $1,000 through which a Fund will deduct $50 or more monthly,
quarterly, semi-annually or annually from the investor's bank account to
invest directly in the

--------------------
Prospectus Page 41
<PAGE>
------------------------------

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

Fund. In addition to providing a convenient and disciplined manner of
investing, participation in the Automatic Investment Plan enables the
investor to use the technique of 'dollar cost averaging.'

SYSTEMATIC WITHDRAWAL PLAN

The Systematic Withdrawal Plan allows investors to set up monthly, quarterly
(March, June, September and December) or semiannual (June and December) or

annual (December) withdrawals from their PaineWebber Mutual Fund accounts.
Minimum balances and withdrawals vary according to the class of shares:

o CLASS A AND CLASS C SHARES. Minimum value of Fund shares is $5,000; minimum
withdrawals of $100.

o CLASS B SHARES. Minimum value of Fund shares
is $20,000; minimum monthly, quarterly, and semi-
annual and annual withdrawals of $200, $400, $600 and $800, respectively.

Withdrawals under the Systematic Withdrawal Plan will not be subject to a
contingent deferred sales charge. An investor may not withdraw more than 12% of
the value of the Fund account when the investor signed up for the Plan (for
Class B shares, annually; for Class A and Class C shares, during the first year
under the Plan). Shareholders who elect to receive dividends or other
distributions in cash may not participate in this Plan.

INDIVIDUAL RETIREMENT ACCOUNTS

Self-directed IRAs are available through PaineWebber in which purchases of
PaineWebber mutual funds and other investments may be made. Investors
considering establishing an IRA should review applicable tax laws and should
consult their tax advisers.

TRANSFER OF ACCOUNTS

If investors holding shares of a Fund in a Paine-
Webber brokerage account transfer their brokerage accounts to another firm, the
Fund shares will be moved to an account with the Transfer Agent. However, if the
other firm has entered into a selected dealer agreement with Mitchell Hutchins
relating to the Fund, the shareholder may be able to hold Fund shares in an
account with the other firm.

- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------

Each Fund is governed by a board of trustees, which oversees the Fund's
operations. Each board has appointed Mitchell Hutchins as investment adviser and
administrator responsible for the Fund's operations (subject to the authority of
the board). Mitchell Hutchins is responsible for the day-to-day management of
Global Income Fund's investments and has appointed the sub-advisers to be
responsible for the day-to-day management of the other Funds' investments, as
described below.

In accordance with procedures adopted by each Fund's board, brokerage
transactions for each Fund may be conducted through PaineWebber or its
affiliates or the affiliates of a sub-adviser, and each Fund may pay fees to
PaineWebber for its services as lending agent in its portfolio securities
lending program. Personnel of Mitchell Hutchins and each sub-adviser may engage
in securities transactions for their own accounts pursuant to each firm's code
of ethics that establishes procedures for personal investing and restricts
certain transactions.

ASIA PACIFIC GROWTH FUND. Schroder Capital is the Fund's sub-adviser. Since its
founding in 1980, Schroder Capital has developed an expertise in Asia Pacific
Region investments. Louise Croset and Heather Crighton, with the assistance of
Schroder Capital's Asia Pacific Region investment committee, are primarily
responsible for the day-to-day management of the Fund. Mesdames Croset and
Crighton have served in this capacity since the Fund's inception. Ms. Croset, a
first vice president and director of Schroder Capital, has been with the firm
since 1993. Previously, she was a Vice President of Wellington Management Co.
Ms. Croset has managed Asia Pacific Region equity investments for the past 14
years. Ms. Crighton, a first vice president of Schroder Capital, has also been
with the first since 1993. Previously, she was fund manager at Mercantile &
General Reinsurance Co. She has managed Asia Pacific Region equity investments
for the past nine years.

EMERGING MARKETS EQUITY FUND. Schroder Capital is the Fund's sub-adviser.
Schroder Group companies

--------------------
Prospectus Page 42

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

have invested internationally for over 50 years. Schroder Capital has developed
an expertise in emerging markets investments and has 39 investment professionals
located in 12 offices in emerging market countries around the world. John A.
Troiano, with the assistance of an emerging markets investment committee, has
been primarily responsible for the day-to-day management of Emerging Markets
Equity Fund since Schroder Capital was appointed sub-adviser on February 25,
1997. Mr. Troiano has been a managing director of Schroder Capital since
November 1995, and has been employed by various Schroder Group companies in the
portfolio management area since 1988. He is currently chairman of Schroder
Capital's emerging markets investment committee.

GLOBAL EQUITY FUND. GE Investment Management is the Fund's sub-adviser. Ralph R.
Layman is the head of the International Equity Team at GE Investment Management
and serves as portfolio manager of the Fund, primarily responsible for the
day-to-day management of the Fund's portfolio. Mr. Layman has served in this
capacity since the Fund's inception in 1991. He is a Chartered Financial Analyst
and an Executive Vice President and senior investment manager of GE Investment
Management and General Electric Investment Corporation.

From 1989 to 1991, Mr. Layman served as Executive Vice President, partner and
portfolio manager of Northern Capital Management Co. Prior to 1989 when he
joined Northern, he served as Vice President and portfolio manager of Templeton
Investment Counsel, Inc., and Vice President of the Templeton Emerging Markets
Fund.

Directly assisting Mr. Layman are Michael J. Solecki, vice president of
international equities at GE Investments, and the rest of the International
Equity Team. Mr. Solecki is a Chartered Financial Analyst and has been with GE
Investment Management for seven years. From 1992 to 1995, Mr. Solecki was a
senior
European analyst at GE Investment Management's London, England office. Prior to
1992, he was an international analyst with GE Investment Management. The
International Equity Team is comprised of eleven analysts, seven of whom manage
portfolios.

GLOBAL INCOME FUND. Mitchell Hutchins is responsible for the day-to-day
management of the Fund's investments. Stuart Waugh and William King are
primarily responsible for the day-to-day portfolio management of the Fund. Mr.
Waugh has been involved with the Fund since its inception, first as an analyst
and then as portfolio manager since 1993. Mr. Waugh is a vice president of
PaineWebber Investment Series and a managing director of global fixed income
investments and currency trading of Mitchell Hutchins. Mr. Waugh has been with
Mitchell Hutchins since 1983. Mr. King joined Mitchell Hutchins in November
1995. Previously, he was at IBM Corporation where he was responsible for the
management of IBM Pension Fund's global bond portfolio. Both Mr. Waugh and Mr.
King are Chartered Financial Analysts.

Other members of Mitchell Hutchins' international fixed income group provide
input on market outlook, interest rate forecasts and other considerations
pertaining to global fixed income investments.

ABOUT THE INVESTMENT ADVISER

Mitchell Hutchins, located at 1285 Avenue of the Americas, New York, New York

10019, is the asset management subsidiary of PaineWebber, which is wholly owned
by Paine Webber Group Inc., a publicly owned financial services holding company.
On December 31, 1997, Mitchell Hutchins was adviser or sub-adviser of [ ]
investment companies with [ ] separate portfolios and aggregate assets of over
[ ] billion.

ABOUT THE SUB-ADVISERS

Schroder Capital, the sub-adviser to Asia Pacific Growth Fund and Emerging
Markets Equity Fund, is located at 787 Seventh Avenue, New York, New York 10019.
It is a wholly owned U.S. subsidiary of Schroders Incorporated, the wholly owned
U.S. holding company subsidiary of Schroders plc. Schroders plc, which is listed
on the London Stock Exchange, is the holding company parent of a large worldwide
group of banks and financial services companies (referred to as the 'Schroder
Group'), with associated companies, branch and representative offices located in
18 countries worldwide. As of December 31, 1997, the investment management
subsidiaries of the Schroder Group had approximately $[ ] billion in client
assets under management. Schroder Capital, together with its United Kingdom
affiliate Schroder Capital Management International Limited, had over $[ ]
billion under management as of that date.

GE Investment Management, the sub-adviser to Global Equity Fund, is located at
3003 Summer Street, Stamford, Connecticut 06905 and is a wholly owned subsidiary
of General Electric Company. GE Investment Management is a registered investment
adviser, and its principal officers and directors serve in

--------------------
Prospectus Page 43

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

similar capacities with respect to General Electric Investment Corporation
('GEIC') also a registered investment adviser and a wholly owned subsidiary of
General Electric Company. As of December 31, 1997, GE Investment Management and
GEIC together provided investment management services to various institutional
accounts with total assets in excess of $[ ] billion, of which more than
$[ ] billion is invested in mutual funds.

MANAGEMENT FEES & OTHER EXPENSES

ASIA PACIFIC GROWTH FUND. The Fund pays Mitchell Hutchins a monthly fee for its
services at the annual rate of 1.20% of its average daily net assets up to $100
million and 1.10% of its average daily net assets over $100 million.

Mitchell Hutchins (not the Fund) pays Schroder Capital a monthly fee for
sub-advisory services at an annual rate of 0.65% of the Fund's average daily net
assets up to $100 million and 0.55% of the Fund's average daily net assets over
$100 million.

EMERGING MARKETS EQUITY FUND. The Fund is obligated to pay Mitchell Hutchins a
monthly fee for its services at an annual rate of 1.20% of the Fund's average
daily net assets. However, after giving effect to fee waivers, the effective
annual rate during the fiscal year ended October 31, 1997, was 0.70%. During
that year, Mitchell Hutchins (not the Fund) paid Schroder Capital a fee for
sub-advisory services at the annual rate of 0.70% of the Fund's average daily
net assets.

GLOBAL EQUITY FUND. For the fiscal year ended October 31, 1997, Global Equity
Fund paid advisory fees to Mitchell Hutchins at the annual rate of 0.85% of its
average daily net assets. During that year, Mitchell Hutchins (not the Fund)
paid GE Investment Management sub-advisory fees at the annual rate of 0.31% of
the Fund's average daily net assets.

GLOBAL INCOME FUND. For the fiscal year ended October 31, 1997, Global Income
Fund paid advisory fees to Mitchell Hutchins at the effective annual rate of
0.74% of its average daily net assets.

Each Fund incurs various other expenses in its operations, such as custody and
transfer agency fees, brokerage commissions, professional fees, expenses of
board and shareholder meetings, fees and expenses relating to registration of
its shares, taxes and governmental fees, fees and expenses of trustees, costs of
obtaining insurance, expenses of printing and distributing shareholder
materials, organizational expenses and extraordinary expenses, including costs
or losses in any litigation.

DISTRIBUTION ARRANGEMENTS

Mitchell Hutchins is the distributor of each Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. There is no
distribution plan with respect to the Funds' Class Y shares. Under distribution
plans for Class A, Class B and Class C shares ('Class A Plan,' 'Class B Plan'

and 'Class C Plan,' collectively, 'Plans'), each Fund pays Mitchell Hutchins:

o Monthly service fees at the annual rate of 0.25% of the average daily net
assets of each class of shares.

o Monthly distribution fees at the annual rate of 0.75% of the average daily net
assets of Class B and Class C shares (0.50% for Class C shares of Global
Income Fund).

Mitchell Hutchins uses the service fees under the Plans for Class A, B and C
shares primarily to pay PaineWebber for shareholder servicing, currently at the
annual rate of 0.25% of the aggregate investment amounts maintained in each Fund
by PaineWebber clients. PaineWebber then compensates its investment executives
for shareholder servicing that they perform and offsets its own expenses in
servicing and maintaining shareholder accounts.

Mitchell Hutchins uses the distribution fees under the Class B and Class C Plans
to:

o Offset the commissions it pays to PaineWebber for selling each Fund's Class B
and Class C shares, respectively.

o Offset each Fund's marketing costs attributable to such classes, such as
preparation, printing and distribution of sales literature, advertising and
prospectuses to prospective investors and related overhead expenses, such as
employee salaries and bonuses.

PaineWebber compensates investment executives when Class B and Class C shares
are bought by investors, as well as on an ongoing basis. Mitchell Hutchins
receives no special compensation from any of the Funds or investors at the time
Class B or C shares are bought.

Mitchell Hutchins receives the proceeds of the initial sales charge paid when
Class A shares are bought and of the contingent deferred sales charge paid upon
sales of shares. These proceeds may be used to cover distribution expenses.

--------------------
Prospectus Page 44

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

The Plans and the related distribution contracts for each class of shares
('Distribution Contracts') specify that each Fund must pay service and
distribution fees to Mitchell Hutchins for its activities, not as reimbursement
for specific expenses incurred. Therefore, even if Mitchell Hutchins' expenses

exceed the service or distribution fees it receives, the Funds will not be
obligated to pay more than those fees. On the other hand, if Mitchell Hutchins'
expenses are less than such fees, it will retain its full fees and realize a
profit. Expenses in excess of service and distribution fees received or accrued
through the termination date of any Plan will be Mitchell Hutchins' sole
responsibility and not that of the Funds. Annually, the board of each Fund
reviews the Plans and Mitchell Hutchins' corresponding expenses for each class
separately from the Plans and expenses of the other classes.

- --------------------------------------------------------------------------------
DETERMINING THE SHARES'
NET ASSET VALUE
- --------------------------------------------------------------------------------

The net asset value of each Fund's shares fluctuates and is determined
separately for each class as of the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time) each Business Day. Each
Fund's net asset value per share is determined by dividing the value of the
securities held by the Fund, plus any cash or other assets, minus all
liabilities, by the total number of Fund shares outstanding.

Each Fund values its assets based on their current market value when market
quotations are readily available. If market quotations are not readily
available, assets are valued at fair value as determined in good faith by or
under the direction of each Fund's board. The amortized cost method of valuation
generally is used to value debt obligations with 60 days or less remaining to
maturity, unless the board determines that this does not represent fair value.
Investments denominated in foreign currencies are valued daily in U.S. dollars
based on the then-prevailing exchange rates. It should be recognized that
judgment plays a greater role in valuing thinly traded securities and
lower-rated debt securities in which a Fund may invest, because there is less
reliable, objective data available.

- --------------------------------------------------------------------------------
DIVIDENDS & TAXES
- --------------------------------------------------------------------------------

DIVIDENDS

Asia Pacific Growth Fund, Emerging Markets Equity Fund and Global Equity Fund
each pays an annual dividend from its net investment income, net short-term
capital gains and net realized gains from foreign currency transactions, if any.
Global Income Fund declares monthly dividends from its net investment income,
which may be accompanied by distributions of net realized short-term capital
gains and foreign currency gains. Although Global Income Fund will not, in any
month, distribute more than the amount of such income and gains then available
for distribution, capital losses and/or foreign currency losses realized later
in the same fiscal year may convert a portion of such a distribution to a
nontaxable return of capital. Each Fund also distributes annually substantially
all of its net capital gain (the excess of net long-term capital gain over net
short-term capital loss), if any. In the case of Global Income Fund, that

distribution is accompanied by any undistributed net realized short-term capital
gains and foreign currency gains. The Funds may make additional distributions,
if necessary, to avoid a 4% excise tax on certain undistributed income and
capital gains.

Dividends and other distributions paid on each class of shares of a Fund are
calculated at the same time and in the same manner. Dividends on Class A, Class
B and Class C shares of a Fund are expected to be lower than those on its Class
Y shares because the other shares have higher expenses resulting from their
service fees and, in the case of Class B and Class C

--------------------
Prospectus Page 45

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

shares, their distribution fees. Dividends on Class B and Class C shares of a
Fund are expected to be lower than those on its Class A shares because Class B
and Class C shares have higher expenses resulting from their distribution fees.
Dividends on each class also might be affected differently by the allocation of
other class-specific expenses. See 'General Information.'

The Funds' dividends and other distributions are paid in additional Fund shares
of the same class at net asset value, unless the shareholder has requested cash
payments. Shareholders who wish to receive dividends and other distributions in
cash, either mailed to them by check or credited to their PaineWebber accounts,
should contact their investment executives at PaineWebber or one of its
correspondent firms or complete the appropriate section of the account
application. For PW SIP participants, each Fund's Class Y dividends and other
distributions are paid in additional Class Y shares at net asset value unless
the Transfer Agent is instructed otherwise.

TAXES

Each Fund intends to continue to qualify for treatment as a regulated investment
company under the Internal Revenue Code so that it will not have to pay federal
income tax on that part of its investment company taxable income (generally
consisting of net investment income, net short-term capital gains and net gains
from certain foreign currency transactions) and net capital gain that it
distributes to its shareholders.

Dividends from each Fund's investment company taxable income (whether paid in
cash or additional shares) are generally taxable to its shareholders as ordinary
income. Distributions of each Fund's net capital gain (whether paid in cash or
additional shares) are taxable to its shareholders as long-term capital gain,
regardless of how long they have held their Fund shares. Under the Taxpayer
Relief Act of 1997, different maximum tax rates apply to a non-corporate
taxpayer's net capital gain depending on the taxpayer's holding period and
marginal rate of federal income tax -- generally, 28% for gain recognized on
securities held for more than one year but not more than 18 months and 20% (10%
for taxpayers in the 15% marginal tax bracket) for gain recognized on securities
held for more than 18 months. Pursuant to an Internal Revenue Service notice,
each Fund may divide each net capital gain distribution into a 28% rate gain
distribution and a 20% rate gain distribution (in accordance with the Fund's
holding periods for the securities it sold that generated the distributed gain)
and its shareholders must treat those portions accordingly. Shareholders who are
not subject to tax on their income generally will not be required to pay tax on
distributions.

YEAR-END TAX REPORTING

Following the end of each calendar year, each Fund notifies its shareholders of
the amounts of dividends and capital gain distributions paid (or deemed paid)
for that year, their share of any foreign taxes paid by the Fund that year and
any portion of those dividends that qualifies for special treatment. The
information regarding capital gain distributions designates the portions thereof
subject to the different maximum rates of tax applicable to non-corporate
taxpayers' net capital gain indicated above.

BACKUP WITHHOLDING

Each Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
and capital gain distributions payable to those shareholders who otherwise are
subject to backup withholding.

TAXES ON THE SALE OR EXCHANGE OF FUND SHARES

A shareholder's sale (redemption) of shares may result in a taxable gain or
loss. This depends upon whether the shareholder receives more or less than his
or her adjusted basis for the shares (which normally includes any initial sales
charge paid on Class A shares). An exchange of any Fund's shares for shares of

another PaineWebber mutual fund generally will have similar tax consequences. In
addition, if a Fund's shares are bought within 30 days before or after selling
other shares of the Fund (regardless of class) at a loss, all or a portion of
that loss will not be deductible and will increase the basis of the newly
purchased shares.

Qualified profit-sharing plans such as the PW SIP generally pay no federal
income tax. Individual participants in the PW SIP should consult the plan
documents and their own advisers for information on the tax consequences
associated with participating in the PW SIP.

--------------------
Prospectus Page 46

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

SPECIAL TAX RULES
FOR CLASS A SHAREHOLDERS

Special tax rules apply when a shareholder sells or exchanges Class A shares
within 90 days of purchase and subsequently acquires Class A shares of a
PaineWebber mutual fund without paying a sales charge due to the 365-day
reinstatement privilege or the exchange privilege. In these cases, any gain on
the sale or exchange of the original Class A shares would be increased, or any
loss would be decreased, by the amount of the sales charge paid when those
shares were bought, and that amount will increase the basis of the PaineWebber
mutual fund shares subsequently acquired.

No gain or loss will be recognized by a shareholder as a result of a conversion
from Class B shares into Class A shares.

* * * *

The foregoing only summarizes some of the important federal income tax
considerations affecting the Funds and their shareholders; see the Statement of
Additional Information for a further discussion. There may be other federal,
state, local or foreign tax considerations applicable to a particular investor.
Accordingly, prospective shareholders are urged to consult their tax advisers.

--------------------
Prospectus Page 47

<PAGE>
------------------------------

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

GENERAL INFORMATION

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

ORGANIZATION

ASIA PACIFIC GROWTH FUND

Asia Pacific Growth Fund is a diversified series of PaineWebber Managed
Investments Trust ('Managed Trust'), an open-end management investment company
that was organized on November 21, 1986 as a business trust under the laws of
the Commonwealth of Massachusetts. The trustees have authority to issue an
unlimited number of shares of beneficial interest of separate series, par value
of $0.001 per share. Shares of five other series have been authorized.

EMERGING MARKETS EQUITY FUND

Emerging Markets Equity Fund is a diversified series of PaineWebber Investment
Trust II, an open-end management investment company that was organized on August
10, 1992 as a business trust under the laws of the Commonwealth of
Massachusetts. The trustees have authority to issue an unlimited number of
shares of beneficial interest of separate series, par value of $0.001 per share.

GLOBAL EQUITY FUND

Global Equity Fund is a diversified series of PaineWebber Investment Trust
('Investment Trust'), an open-end management investment company that was
organized on March 28, 1991 as a business trust under the laws of the
Commonwealth of Massachusetts. The trustees have authority to issue an unlimited
number of shares of beneficial interest of separate series, par value of $0.001
per share. Shares of one other series have been authorized.

GLOBAL INCOME FUND

Global Income Fund is a non-diversified series of PaineWebber Investment Series,
an open-end management investment company that was organized on
December 22, 1986 as a business trust under the laws of the Commonwealth of
Massachusetts. The trustees have authority to issue an unlimited number of

shares of beneficial interest of separate series, with a par value of $0.001 per
share.

The shares of each Fund are divided into four classes, designated Class A, Class
B, Class C and Class Y shares. A share of each class represents an identical
interest in the respective Fund's investment portfolio and has the same rights,
privileges and preferences. However, each class may differ with respect to sales
charges, if any, distribution and/or service fees, if any, other expenses
allocable exclusively to each class, voting rights on matters exclusively
affecting that class, and its exchange privilege, if any. The different sales
charges and other expenses applicable to the different classes of shares of the
Funds will affect the performance of those classes.

Each share of each Fund is entitled to participate equally in dividends, other
distributions and the proceeds of any liquidation of that Fund. However, due to
the differing expenses of the classes, dividends on Class A, B, C and Y shares
will differ.

Although each Fund is offering only its own shares, it is possible that a Fund
might become liable for a misstatement in this Prospectus about another Fund.
The board of each Fund has considered this factor in approving the use of a
single, combined Prospectus.

VOTING RIGHTS

Shareholders of each Fund are entitled to one vote for each full share held and
fractional votes for fractional shares held. Voting rights are not cumulative
and, as a result, the holders of more than 50% of all the shares of any Fund (or
Investment Trust or Managed Trust, which each have more than one series) may
elect all of the board members of that Fund or of Investment Trust or Managed
Trust. The shares of a Fund will be voted together, except that only the
shareholders of a particular class of a Fund may vote on matters affecting only
that class, such as the terms of a Plan as it relates to the class. The shares
of each series of Investment Trust and Managed Trust will be voted separately,
except when an aggregate vote of all the series is required by law.

SHAREHOLDER MEETINGS

The Funds do not intend to hold annual meetings.

Shareholders of record of no less than two-thirds of the outstanding shares of
Investment Trust, Managed Trust or a Fund, as applicable, may remove a board

member through a declaration in writing or by vote cast in person or by proxy at
a meeting called for that purpose. A meeting will be called to vote on the
removal of a board member at the written request of holders of 10% of the
outstanding shares of Investment Trust, Managed Trust or a Fund.

--------------------
Prospectus Page 48

<PAGE>

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

PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund

REPORTS TO SHAREHOLDERS

Each Fund sends its shareholders audited annual and unaudited semiannual
reports, each of which includes a list of the investment securities held by the
Fund as of the end of the period covered by the report. The Statement of
Additional Information, which is incorporated herein by reference, is available
to shareholders upon request.

CUSTODIAN & RECORDKEEPING AGENT; TRANSFER & DIVIDEND AGENT

State Street Bank and Trust Company, located at One Heritage Drive, North
Quincy, Massachusetts 02171, serves as custodian and recordkeeping agent for
Asia Pacific Growth Fund, Emerging Markets Equity Fund and Global Equity Fund
and employs foreign sub-custodians approved by the respective boards in
accordance with applicable requirements under the 1940 Act to provide custody of
the Funds' foreign assets. Brown Brothers Harriman & Co., 40 Water Street,
Boston, Massachusetts 02109, serves as custodian for Global Income Fund and
employs foreign sub-custodians approved by the Boards in accordance with those
same requirements to provide custody of the Funds' foreign assets. PFPC Inc., a
subsidiary of PNC Bank, N.A., serves as each Fund's transfer and dividend
disbursing agent. It is located at 400 Bellevue Parkway, Wilmington, DE 19809.

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Prospectus Page 49

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[This page intentionally left blank]

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Prospectus Page 50

<PAGE>

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

PAINEWEBBER ASIA PACIFIC GROWTH FUND

PAINEWEBBER EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND

PROSPECTUS -- MARCH 1, 1998

<TABLE>
<S> <C>
/ / PAINEWEBBER BOND FUNDS / / PAINEWEBBER STOCK FUNDS
High Income Fund Capital Appreciation Fund
Investment Grade Income Fund Financial Services Growth Fund
Low Duration U.S. Government Growth Fund
Income Fund Growth and Income Fund
Strategic Income Fund Small Cap Fund
U.S. Government Income Fund Utility Income Fund

/ / PAINEWEBBER TAX-FREE BOND FUNDS / / PAINEWEBBER GLOBAL FUNDS
California Tax-Free Income Fund Asia Pacific Growth Fund
Municipal High Income Fund Emerging Markets Equity Fund
National Tax-Free Income Fund Global Equity Fund
New York Tax-Free Income Fund Global Income Fund

/ / PAINEWEBBER ASSET / / PAINEWEBBER MONEY MARKET FUND
ALLOCATION FUNDS
Balanced Fund
Tactical Allocation Fund
</TABLE>

A prospectus containing more complete information for any of these funds,
including charges and expenses, can be obtained from a PaineWebber investment
executive or correspondent firm. Please read it carefully before investing. It
is important you have all the information you need to make a sound investment
decision.

(Copyright) 1998 PaineWebber Incorporated

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

<PAGE>

PAINEWEBBER ASIA PACIFIC GROWTH FUND
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019

STATEMENT OF ADDITIONAL INFORMATION

The four funds named above (each a 'Fund' and, collectively, 'Funds') are
series of professionally managed open-end management investment companies
organized as Massachusetts business trusts (each a 'Trust' and, collectively,
'Trusts'). PaineWebber Asia Pacific Growth Fund ('Asia Pacific Growth Fund'), a
diversified series of PaineWebber Managed Investments Trust ('Managed Trust'),
seeks long-term capital appreciation by investing primarily in equity securities
of Asia Pacific Region companies. PaineWebber Emerging Markets Equity Fund
('Emerging Markets Equity Fund'), a diversified series of PaineWebber Investment
Trust II ('Investment Trust II'), seeks long-term capital appreciation by
investing primarily in equity securities of companies in newly industrializing
countries. PaineWebber Global Equity Fund ('Global Equity Fund'), a diversified
series of PaineWebber Investment Trust ('Investment Trust'), seeks long-term
growth of capital by investing primarily in U.S. and foreign equity securities.
PaineWebber Global Income Fund ('Global Income Fund'), a non-diversified series
of PaineWebber Investment Series ('Investment Series'), seeks high current
income and, secondarily, capital appreciation by investing primarily in
high-quality foreign and U.S. bonds.

The investment adviser, administrator and distributor for each Fund is
Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), a wholly owned
asset management subsidiary of PaineWebber Incorporated ('PaineWebber'). As
distributor for the Funds, Mitchell Hutchins has appointed PaineWebber to serve
as the exclusive dealer for the sale of Fund shares. Schroder Capital Management
International Inc. ('Schroder Capital') serves as investment sub-adviser for
Asia Pacific Growth Fund and Emerging Markets Equity Fund. GE Investment
Management Incorporated ('GE Investment Management') serves as investment
sub-adviser for Global Equity Fund. Schroder Capital and GE Investment
Management are each sometimes referred to as a 'Sub-Adviser.'

This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Funds' current Prospectus, dated March 1,
1998. A copy of the Prospectus may be obtained by calling any PaineWebber
investment executive or correspondent firm or by calling toll-free
1-800-647-1568. This Statement of Additional Information is dated March 1, 1998.

INVESTMENT POLICIES AND RESTRICTIONS

The following supplements the information contained in the Prospectus
concerning the Funds' investment policies and limitations. Except as otherwise
indicated in the Prospectus or the Statement of Additional Information, there
are no policy limitations on a Fund's ability to use the investments or
techniques discussed in these documents.

YIELD FACTORS AND RATINGS. Moody's Investors Service, Inc. ('Moody's'),
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ('S&P'), and
other nationally recognized statistical rating organizations ('NRSROs') are
private services that provide ratings of the credit quality of debt obligations
(bonds). A description of the ratings assigned to corporate bonds by Moody's and
S&P is included in the Appendix to this Statement of Additional Information. The
process by which S&P and Moody's determine ratings for mortgage-backed
securities includes consideration of the likelihood of the receipt by security
holders of all distributions, the nature of the underlying securities, the
credit quality of the guarantor, if any, and the structural, legal and tax
aspects associated with such securities. Not even the highest such ratings
represents an assessment of the likelihood that principal prepayments will be
made by mortgagors or the degree to which such prepayments may differ from that
originally anticipated, nor do such ratings address the

<PAGE>

possibility that investors may suffer a lower than anticipated yield or that
investors in such securities may fail to recoup fully their initial investment
due to prepayments.

The Funds may use these ratings in determining whether to purchase, sell or
hold a security. It should be emphasized, however, that ratings are general and
are not absolute standards of quality. Consequently, securities with the same
maturity, interest rate and rating may have different market prices.

In addition to ratings assigned to individual bond issues, Mitchell
Hutchins or a Sub-Adviser will analyze interest rate trends and developments
that may affect individual issuers, including factors such as liquidity,
profitability and asset quality. The yields on bonds are dependent on a variety
of factors, including general money market conditions, general conditions in the
bond market, the financial condition of the issuer, the size of the offering,
the maturity of the obligation and its rating. There is a wide variation in the
quality of bonds, both within a particular classification and between
classifications. An issuer's obligations under its bonds are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of bond holders or other creditors of an issuer; litigation or other
conditions may also adversely affect the power or ability of issuers to meet
their obligations for the payment of interest and principal on their bonds.

Asia Pacific Growth Fund is authorized to invest up to 10% of its net
assets in non-investment grade debt securities (bonds). Global Income Fund is
authorized to invest up to 20% of its total assets in non-investment grade debt
securities. Global Equity Fund may invest up to 10% of its net assets in
convertible securities rated below investment grade. Non-investment grade debt
securities are debt securities that are not rated at the time of purchase within
one of the four highest grades assigned by S&P or Moody's, comparably rated by
another NRSRO or determined by Mitchell Hutchins or a Sub-Adviser, as
appropriate, to be of comparable quality. Non-investment grade debt securities
are commonly refered to as 'junk bonds'; they are deemed by the NRSROs to be
predominantly speculative and may involve significant risk exposure to adverse
conditions. Non-investment grade debt securities generally offer a higher
current yield than that available for investment grade issues; however, they
involve higher risks, in that they are especially sensitive 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
fluctuations 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 interest and principal 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 non-investment grade debt securities, especially those of
foreign issuers, has expanded rapidly in recent years, which has been a period
of generally expanding growth and lower inflation. These securities will be
susceptible to greater risk when economic growth slows or reverses and when
inflation increases or deflation occurs. This has been reflected recent
volatility in emerging market securities, particularly in Asia. In the past,
many lower rated debt securities experienced substantial price declines
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. However, 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 restructurings or defaults. There can be no
assurance that such declines will not recur. The market for non-investment grade
debt issues generally is thinner and less active than that for higher quality
securities, which may limit a Fund's ability to sell such securities at fair
value in response to changes in the economy or financial markets. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of non-investment grade
securities, especially in a thinly traded market.

RISK CONSIDERATIONS RELATING TO FOREIGN SECURITIES. Investors should
recognize that investing in non-U.S. securities involves certain risks and

special considerations, including those set forth below, which are not typically
associated with investing in securities of U.S. companies. Investments in
foreign securities involve risks relating to political, social and economic
developments abroad, as well as risks resulting from the

<PAGE>

differences between the regulations to which U.S. and foreign issuers and
markets are subject. These risks may include expropriation, confiscatory
taxation, withholding taxes on interest and/or dividends, limitations on the use
of or transfer of Fund assets and political or social instability or diplomatic
developments. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. Securities of many foreign companies may be less
liquid and their prices more volatile than securities of comparable U.S.
companies. While the Funds generally invest only in securities that are traded
on recognized exchanges or in over-the-counter markets ('OTC'), from time to
time foreign securities may be difficult to liquidate rapidly without
significantly depressing the price of such securities. There may be less
publicly available information concerning foreign issuers of securities held by
the Funds 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 Fund assets may be released prior to receipt of payment, may expose the
Funds 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.

Securities of foreign issuers may not be registered with the Securities and
Exchange Commission ('SEC'), and the issuers thereof may not be subject to its
reporting requirements. Accordingly, there may be less publicly available
information concerning foreign issuers of securities held by the Funds 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.

The Funds may invest in foreign securities by purchasing depository
receipts, including American Depository Receipts ('ADRs'), European Depository
Receipts ('EDRs') and Global Depository Receipts ('GDRs'), or other securities
convertible into securities of issuers based in foreign countries. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a U.S. bank or trust company evidencing ownership of the underlying
securities. They generally are in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities markets. EDRs are
European receipts evidencing a similar arrangement, may be denominated in other

currencies and are designed for use in European securities markets. GDRs are
similar to EDRs and are designed for use in several international financial
markets. For purposes of each Fund's investment policies, ADRs, EDRs and GDRs
are deemed to have the same classification as the underlying securities they
represent. Thus, an ADR, EDR or GDR representing ownership of common stock will
be treated as common stock.

ADRs are publicy traded on exchanges or OTC in the United States and are
issued through 'sponsored' or 'unsponsored' arrangements. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary's transaction fees, whereas under an unsponsored arrangement, the
foreign issuer assumes no obligations and the depositary's transaction fees are
paid directly by the ADR holders. In addition, less information is available in
the United States about an unsponsored ADR than about a sponsored ADR.

The Funds anticipate that their brokerage transactions involving foreign
securities of companies headquartered in countries other than the United States
will be conducted primarily on the principal exchanges of such countries.
Although each Fund will endeavor to achieve the best net results in effecting
its portfolio transactions, transactions on foreign exchanges are usually
subject to fixed commissions that are generally higher than negotiated
commissions on U.S. 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 in which the Funds may
invest 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 Funds would be subject. In addition, substantial limitations may
exist in certain countries with respect to the Funds' ability to repatriate
investment capital or the proceeds of sales of securities.

<PAGE>

FOREIGN SOVEREIGN DEBT. Investment by the Funds 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 Funds may have limited legal recourse in the event of a default.

Sovereign Debt differs from debt obligations issued by private entities in
that, generally, remedies for defaults must be pursued in the courts of the
defaulting party. Legal recourse is therefore somewhat diminished. Political

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

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

INVESTMENTS IN OTHER INVESTMENT COMPANIES. From time to time, investments
in other investment companies may be the most effective available means by which
a Fund may invest in securities of issuers in certain countries. Investment in
such investment companies may involve the payment of management expenses and, in
connection with some purchases, sales loads and payment of substantial premiums
above the value of such companies' portfolio securities. At the same time, a
Fund would continue to pay its own management fees and other expenses. Each Fund
may invest up to 10% of its assets in such investment companies when, in the
judgment of Mitchell Hutchins or a Sub-Adviser, the potential benefits of such
investment outweigh the payment of any applicable premium, sales load and
expenses. In addition, the Funds' investments in such investment funds are
subject to other limitations under the Investment Company Act of 1940 ('1940
Act') and market availability, and may result in special federal income tax
consequences.

FOREIGN CURRENCY TRANSACTIONS. A significant portion of each Fund's assets
may be invested in foreign securities, and substantially all related income may
be received by a Fund in foreign currencies. Each Fund values its assets daily
in U.S. dollars and does not intend to convert its holdings of foreign
currencies to U.S. dollars on a daily basis. From time to time a Fund's 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 Fund could suffer a loss of some or all of the amounts deposited.

Each Fund may convert foreign currency to U.S. dollars from time to time.

The value of the assets of a Fund as measured in U.S. dollars may be
affected favorably or unfavorably by fluctuations in currency rates and exchange
control regulations. Further, a Fund may incur costs in connection with
conversions between various currencies. Currency exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a foreign
currency to a Fund at one rate, while offering a lesser rate of exchange should
a Fund desire immediately to resell that currency to the dealer. Each Fund
conducts its currency exchange transactions either on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign currency exchange market, or through
entering into forward, futures or options contracts to purchase or sell foreign
currencies.

<PAGE>

SPECIAL CONSIDERATIONS RELATING TO ASIA PACIFIC REGION AND OTHER EMERGING
MARKET INVESTMENTS. Certain of the risks associated with international
investments are heightened for investments in emerging markets, including many
Asia Pacific Region countries (as defined in the Prospectus). For example, many
of the currencies of Asia Pacific Region countries have experienced devaluations
relative to the U.S. dollar, and major adjustments have been made periodically
in various emerging market currencies.

Investment and Repatriation Restrictions. Foreign investment in the
securities markets of several emerging market countries is restricted or
controlled to varying degrees. These restrictions may limit a Fund's investment
in these countries and may increase its expenses. For example, certain countries
may require governmental approval prior to investments by foreign persons in a
particular company or industry sector or limit investment by foreign persons to
only a specific class of securities of a company, which may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. Certain countries may restrict or prohibit investment
opportunities in issuers or industries deemed important to national interests.
In addition, the repatriation of both investment income and capital from some
emerging market countries is subject to restrictions, such as the need for
certain government consents. Even where there is no outright restriction on
repatriation of capital, the mechanics of repatriation may affect certain
aspects of a Fund's operations. These restrictions may in the future make it
undesirable to invest in the countries to which they apply. In addition, if
there is a deterioration in a country's balance of payments or for other
reasons, a country may impose restrictions on foreign capital remittances
abroad. A Fund could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation, as well as by the
application to it of other restrictions or investments.

For example, in China, India, Indonesia, Malaysia, the Philippines,
Singapore, South Korea and Thailand, government regulation or a company's
charter may limit the maximum foreign aggregate ownership of equity in any one
company. South Korea generally prohibits foreign investment in Won-denominated
debt securities and Sri Lanka prohibits foreign investment in government debt
securities. South Korea prohibits foreign investment in specified
telecommunications companies and the Philippines prohibits foreign investment in
mass media companies and companies providing certain professional services. In
the Philippines, a Fund may generally invest in 'B' shares of Philippine issuers
engaged in partly nationalized business activities, the market prices, liquidity
and rights of which may vary from shares owned by nationals. Similarly, in
China, a Fund may only invest in 'B' shares of securities traded on The Shanghai
Securities Exchange and The Shenzhen Stock Exchange, currently the two
officially recognized securities exchanges in China. 'B' shares traded on The
Shanghai Securities Exchange are settled in U.S. dollars, and those traded on
The Shenzhen Stock Exchange are generally settled in Hong Kong dollars.

If, because of restrictions on repatriation or conversion, a Fund were
unable to distribute substantially all of its net investment income, including
net short-term capital gains and net long-term capital gains within applicable
time periods, the Fund could be subject to federal income and excise taxes that
would not otherwise be incurred and could cease to qualify for the favorable tax
treatment afforded to regulated investment companies ('RICs') under the Internal
Revenue Code ('Code'). In such case, it would become subject to federal income
tax on all of its income and net gains.

Differences Between the U.S. and Emerging Market Securities Markets. Most
of the securities markets of emerging market countries have substantially less
volume than the New York Stock Exchange, and equity securities of most companies
in emerging market countries are less liquid and more volatile than equity
securities of U.S. companies of comparable size. Some of the stock exchanges in
emerging market countries, such as those in China, are in the earliest stages of
their development. As a result, security settlements may in some instances be
subject to delays and related administrative uncertainties. Many companies
traded on securities markets in emerging market countries are smaller, newer and
less seasoned than companies whose securities are traded on securities markets
in the United States. Investments in smaller companies involve greater risk than
is customarily associated with investing in larger companies. Smaller companies
may have limited product lines, markets or financial or managerial resources and
may be more susceptible to losses and risks of bankruptcy. Additionally,
market-making and arbitrage activities are generally less extensive in such
markets, which may contribute to increased volatility and reduced liquidity of
such markets. Accordingly, each of these markets may be subject to greater
influence by adverse events generally affecting the market, and by large
investors trading significant blocks of securities, than is usual in the United
States. To the extent that an

<PAGE>

emerging market country experiences rapid increases in its money supply and
investment in equity securities for speculative purposes, the equity securities
traded in that country may trade at price-earnings multiples higher than those
of comparable companies trading on securities markets in the United States,
which may not be sustainable.

Government Supervision of Emerging Market Region Securities Markets; Legal
Systems. There is also less government supervision and regulation of securities
exchanges, listed companies and brokers in emerging market countries than exists
in the United States. Therefore, less information may be available to a Fund
than with respect to investments in the United States. Further, in certain
countries, less information may be available to a Fund than to local market
participants. Brokers in other countries may not be as well capitalized as those
in the United States, so that they are more susceptible to financial failure in
times of market, political or economic stress. In addition, existing laws and
regulations are often inconsistently applied. As legal systems in some of the
emerging market countries develop, foreign investors may be adversely affected
by new laws and regulations, changes to existing laws and regulations and
preemption of local laws and regulations by national laws. In circumstances
where adequate laws exist, it may not be possible to obtain swift and equitable
enforcement of the law.

Financial Information and Standards. Issuers in emerging market countries
generally are subject to accounting, auditing and financial standards and
requirements that differ, in some cases significantly, from those applicable to
U.S. issuers. In particular, the assets and profits appearing on the financial
statements of an emerging market issuer may not reflect its financial position
or results of operations in the way they would be reflected had the financial
statements been prepared in accordance with U.S. generally accepted accounting
principles. In addition, for an issuer that keeps accounting records in local
currency, inflation accounting rules may require, for both tax and accounting
purposes, that certain assets and liabilities be restated on the issuer's
balance sheet in order to express items in terms of currency of constant
purchasing power. Inflation accounting may indirectly generate losses or
profits. Consequently, financial data may be materially affected by restatements
for inflation and may not accurately reflect the real condition of those issuers
and securities markets.

Social, Political and Economic Factors. Many emerging market countries may
be subject to a greater degree of social, political and economic instability
than is the case in the United States. Such instability may result from, among
other things, the following: (i) authoritarian governments or military

involvement in political and economic decision making, and changes in government
through extra-constitutional means; (ii) popular unrest associated with demands
for improved political, economic and social conditions; (iii) internal
insurgencies; (iv) hostile relations with neighboring countries; and (v) ethnic,
religious and racial disaffection. Such social, political and economic
instability could significantly disrupt the financial markets in those countries
and elsewhere and could adversely affect the value of a Fund's assets. In
addition, there may be the possibility of asset expropriations or future
confiscatory levels of taxation affecting a Fund.

Few of the Asia Pacific Region countries have Western-style or fully
democratic governments. Some governments in the region are authoritarian in
nature and influenced by security forces. For example, during the course of the
last 25 years, governments in the region have been installed or removed as a
result of military coups, while others have periodically demonstrated repressive
police state characteristics. In several Asia Pacific Region countries, the
leadership ability of the government has suffered as a result of recent
corruption scandals. Disparities of wealth, among other factors, have also led
to social unrest in some of the Asia Pacific Region countries, accompanied, in
certain cases, by violence and labor unrest. Ethnic, religious and racial
disaffection, as evidenced in India, Pakistan and Sri Lanka, for example, have
created social, economic and political problems. Such problems also have
occurred in other regions.

As in some other regions, several Asia Pacific Region countries have or in
the past have had hostile relationships with neighboring nations or have
experienced internal insurgency. For example, Thailand has experienced border
conflicts with Laos and Cambodia, and India is engaged in border disputes with
several of its neighbors, including China and Pakistan. Tension between the
Tamil and Sinhalese communities in Sri Lanka has resulted in periodic outbreaks
of violence. An uneasy truce exists between North Korea and South Korea, and the
recurrence of hostilities remains possible. Reunification of North Korea and
South Korea could have a detrimental effect on the economy of South Korea. Also,
China continues to claim sovereignty over

<PAGE>

Taiwan and has conducted military maneuvers near Taiwan. China is acknowledged
to possess nuclear weapons capability; North Korea is alleged to possess or be
in the process of developing such a capability.

China assumed sovereignty over Hong Kong on July 1, 1997. Although China
has committed by treaty to preserve the economic and social freedoms enjoyed in
Hong Kong for 50 years after regaining control, there can be no assurance that

China will not renege, and in fact China has announced its intent to repeal
certain laws. Business confidence and market and business performance in Hong
Kong, therefore, can be significantly affected by political developments.

The reversion of Hong Kong also presents a risk that the Hong Kong dollar
will be devalued and a risk of possible loss of investor confidence in the Hong
Kong markets and dollar. However, factors exist that may mitigate this risk.
First, China has stated its intention to implement a 'one country, two systems'
policy, which would preserve monetary sovereignty and leave control in the hands
of the Hong Kong Monetary Authority ('HKMA'). Second, fixed rate parity with the
U.S. dollar is seen as critical to maintaining investors' confidence in the
transition to Chinese rule. Therefore, it is generally anticipated that, in the
event international investors lose confidence in Hong Kong dollar assets, the
HKMA would intervene to support the currency, though such intervention cannot be
assured. Third, Hong Kong's and China's sizable combined foreign exchange
reserve may be used to support the value of the Hong Kong dollar, provided that
China does not appropriate such reserves for other uses, which is not
anticipated, but cannot be assured. Finally, China would be likely to experience
significant adverse political and economic consequences if confidence in the
Hong Kong dollar and the territory's assets were to be endangered.

As is the case in many other emerging markets, the economies of most of the
Asia Pacific Region countries are heavily dependent upon international trade and
are accordingly affected by protective trade barriers and the economic
conditions of their trading partners, principally the United States, Japan,
China and the European Community. The enactment by the United States or other
principal trading partners of protectionist trade legislation, reduction of
foreign investment in the local economies and general declines in the
international securities markets could have a significant adverse effect upon
the securities markets of these countries. In addition, the economies of some
countries are vulnerable to weakness in world prices for their commodity
exports, including crude oil.

U.S. GOVERNMENT SECURITIES. The Funds may invest in various direct
obligations of the U.S. Treasury and obligations issued or guaranteed by the
U.S. government or one of it agencies or instrumentalities (collectively, 'U.S.
government securities'). Among the U.S. government securities that may be held
by the Funds are securities that are supported by the full faith and credit of
the United States; securities that are supported by the right of the issuer to
borrow from the U.S. Treasury; and securities that are supported solely by the
credit of the instrumentality. Global Income Fund may invest more frequently
than the other Funds in mortgage-backed securities issued or guaranteed by the
U.S. government, its agencies and instrumentalities. These securities are
described below under 'Investment Policies and Restrictions--Mortgage-Backed
Securities.'

Emerging Markets Equity Fund may invest in exchange rate-related U.S.

government securities. Such securities are indexed to specific foreign currency
exchange rates and generally provide that the interest rate and/or principal
amount will be adjusted upwards or downwards (but not below zero) to reflect
changes in the exchange rate between two currencies while the obligations are
outstanding. While such securities offer the potential for an attractive rate of
return, they also entail the risk of loss of principal.

CONVERTIBLE SECURITIES. Each Fund is permitted to invest in convertible
securities. Before conversion, convertible securities have characteristics
similar to non-convertible debt securities in that they ordinarily provide a
stable stream of income with generally higher yields than those of common stocks
of the same or similar issuers. Convertible securities rank senior to common
stock in a corporation's capital structure but are usually subordinated to
comparable non-convertible securities.

The value of a convertible security is a function of its 'investment value'
(determined by its yield comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
'conversion value' (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest

7
<PAGE>

rates, with investment value declining as interest rates increase and increasing
as interest rates decline. The credit standing of the issuer and other factors
also may have an effect on the convertible security's investment value. The
conversion value of a convertible security is determined by the market price of
the underlying common stock. If the conversion value is low relative to the
investment value, the price of the convertible security is governed principally
by its investment value and generally the conversion value decreases as the
convertible security approaches maturity. To the extent the market price of the
underlying common stock approaches or exceeds the conversion price, the price of
the convertible security will be increasingly influenced by its conversion
value. In addition, a convertible security generally will sell at a premium over
its conversion value determined by the extent to which investors place value on
the right to acquire the underlying common stock while holding a fixed income
security.

MORTGAGE-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. The U.S. government mortgage-backed securities in which Global
Income Fund may invest include mortgage-backed securities issued or guaranteed
as to the payment of principal and interest (but not as to market value) by
Ginnie Mae (also known as the Government National Mortgage Association), Fannie

Mae (also known as the Federal National Mortgage Association) or Freddie Mac
(also known as the Federal Home Loan Mortgage Corporation).

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

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

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

Collateralized Mortgage Obligations and Multi-Class Mortgage
Pass-Throughs--CMOs are debt obligations that are collateralized by mortgage
loans or mortgage pass-through securities (such collateral collectively being
called 'Mortgage Assets'). Payments of principal of, and interest on, the
Mortgage Assets

<PAGE>

(and in the case of CMOs, 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 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.

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.

ARM and Floating Rate Mortgage-Backed Securities--Adjustable Rate Mortgage
('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.

Types of Credit Enhancement--To lessen the effect of failures by obligors
on Mortgage Assets to make payments, mortgage-backed securities may contain
elements of credit enhancement. Such credit enhancement falls into two
categories: (1) liquidity protection and (2) protection against losses resulting
after default by an obligor on the underlying assets and collection of all
amounts recoverable directly from the obligor and through liquidation of the
collateral. Liquidity protection refers to the provision of advances, generally
by the entity administering the pool of assets (usually the bank, savings
association or mortgage banker that transferred the underlying loans to the
issuer of the security), to ensure that the receipt of payments on the
underlying pool occurs in a timely fashion. Protection against losses resulting
after default and liquidation ensures ultimate payment of the obligations on at
least a portion of the assets in the pool. Such protection may be provided
through guarantees, insurance policies or letters of credit obtained by the
issuer or sponsor, from third parties, through various means of structuring the
transaction or through a combination of such approaches. A Fund will not pay any
additional fees for such credit enhancement, although the existence of credit
enhancement may increase the price of a security. Credit enhancements do not
provide protection against changes in the market value of the security. Examples
of credit enhancement arising out of the structure of the transaction include
'senior-subordinated securities' (multiple class securities with one or

<PAGE>

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.

Special Characteristics of Mortgage-Backed Securities--The yield
characteristics of mortgage-backed securities differ from those of traditiona1
debt securities. Among the major differences are that interest and principal
payments are made more frequently, usually monthly, and that principal may be
prepaid at any time because the underlying mortgage loans or other obligations
generally may be prepaid at any time. 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. Mortgage-backed securities may decrease in value as a result of
increases in interest rates and may benefit less than other fixed-income
securities from declining interest rates because of the risk of prepayment.

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

Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. Because prepayment rates of individual pools vary widely, it is not
possible to predict accurately the average life of a particular pool. In the
past, a common industry practice was to assume that prepayments on pools of
fixed rate 30-year mortgages would result in a 12-year average life for the
pool. At present, mortgage pools, particularly those with loans with other
maturities or different characteristics, are priced on an assumption of average
life determined for each pool. In periods of declining interest rates, the rate
of prepayment tends to increase, thereby shortening the actual average life of a
pool of mortgage-related securities. Conversely, in periods of rising interest
rates, the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. However, these effects may not be present, or may
differ in degree, if the mortgage loans in the pools have adjustable interest
rates or other special payment terms, such as a prepayment charge. Actual
prepayment experience may cause the yield of mortgage-backed securities to
differ from the assumed average life yield. Reinvestment of prepayments may
occur at lower interest rates than the original investment, thus adversely
affecting the yield of a Fund.

Additional Information on ARM and Floating Rate Mortgage-Backed
Securities--ARM and floating rate mortgage-backed securities are reset in
response to changes in a specified market index, and hence 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 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 specify 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
specify limitations on the maximum amount

<PAGE>

by which the mortgage interest rate may adjust for any single adjustment period.
ARMs also may limit 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 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 oustanding
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.

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 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.

MONEY MARKET INVESTMENTS. Each Fund may invest up to 35% of its total
assets in money market investments. Such investments include: (i) securities
issued or guaranteed by the U.S. government or one of its agencies or
instrumentalities, (ii) debt obligations of banks, savings and loan
institutions, insurance companies and mortgage bankers, (iii) commercial paper
and notes, including those with variable and floating rates of interest, (iv)
debt obligations of foreign branches of U.S. banks, U.S. branches of foreign
banks and foreign branches of foreign banks, (v) debt obligations issued or
guaranteed by one or more foreign governments or any of their political
subdivisions, agencies or instrumentalities, including obligations of
supranational entities, (vi) debt securities issued by foreign issuers, and
(vii) repurchase agreements.

Global Income Fund may invest up to 25% of its assets in the Investment
Fund, an investment fund created specifically to serve as a vehicle for the
collective investment of cash balances of the Fund and other accounts advised by
either GE Investment Management, or its affiliate, General Electric Investment
Corporation. The Investment Fund invests exclusively in the money market
instruments described in (i) through (vii) above. The Investment Fund is advised
by GE Investment Management. No advisory fee is charged by GE Investment
Management to the Investment Fund, nor will the Fund incur any sales charge,
redemption fee, distribution fee or service fee in connection with its
investments in the Investment Fund.

ILLIQUID SECURITIES. Global Equity Fund and Global Income Fund each may
invest up to 10% of its net assets, and Asia Pacific Growth Fund and Emerging
Markets Equity Fund each may invest up to 15% 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 Fund has valued the securities and
includes, among other things, purchased OTC options, repurchase agreements
maturing in more than seven days and restricted securities other than those
Mitchell Hutchins or a Sub-

<PAGE>

Adviser, as applicable, have determined are liquid pursuant to guidelines
established by each Fund's board (each sometimes referred to as a 'board'). The
assets used as cover for OTC options written by the Funds will be considered
illiquid unless the OTC options are sold to qualified dealers who agree that the
Funds may repurchase any OTC options they write at a maximum price to be
calculated by a formula set forth in the option agreements. The cover for an OTC
option written subject to this procedure would be considered illiquid only to
the extent that the maximum repurchase price under the formula exceeds the
intrinsic value of the option. To the extent a Fund invests in illiquid
securities, it may not be able to readily liquidate such investments and may

have to sell other investments if necessary to raise cash to meet its
obligations.

Restricted securities are not registered under the Securities Act of 1933
('1933 Act') and may be sold only in privately negotiated or other exempted
transactions or after a 1933 Act registration statement has become effective.
Where registration is required, a Fund 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 a Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, a Fund might obtain a less favorable price
than prevailed when it decided to sell.

However, not all restricted securities are illiquid. To the extent that
foreign securities are freely tradeable in the country in which they are
principally traded, they are not considered illiquid, even if they are
restricted in the United States. Moreover, a large institutional market has
developed for many U.S. and foreign securities that are not registered under the
1933 Act. 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.

Institutional markets for restricted securities also have developed as a
result of Rule 144A, which establishes a 'safe harbor' from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Such markets 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 institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a Fund, however, could affect adversely the marketability of such portfolio
securities, and the Fund might be unable to dispose of such securities promptly
or at favorable prices.

Each board has delegated the function of making day-to-day determinations
of liquidity to Mitchell Hutchins or a Sub-Adviser, as applicable, pursuant to
guidelines approved by the board. Mitchell Hutchins or the Sub-Adviser takes
into account a number of factors in reaching liquidity decisions, including (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 a Sub-Adviser monitors the liquidity of restricted
securities in each Fund's portfolio and reports periodically on such decisions
to the applicable board.

REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a
Fund 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 or upon demand and at a price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased securities.
The Fund 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 or upon demand 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 a Fund upon acquisition is accrued as
interest and included in its net investment income. Repurchase agreements carry
certain risks not

<PAGE>

associated with direct investments in securities, including possible declines in
the market value of the underlying securities and delays and costs to a Fund if
the other party to a repurchase agreement becomes insolvent.

The Funds intend to enter into repurchase agreements only with banks and
dealers in transactions believed by Mitchell Hutchins or a Sub-Adviser to
present minimal credit risks in accordance with guidelines established by each
board. Mitchell Hutchins reviews and monitors the creditworthiness of those
institutions under each board's general supervision.

REVERSE REPURCHASE AGREEMENTS. As indicated in the Prospectus, each Fund
may enter into reverse repurchase agreements with banks and securities dealers.
While a reverse repurchase agreement is outstanding, a Fund will maintain, in a
segregated account with its custodian, cash or liquid securities, marked to
market daily, in an amount at least equal to its obligations under the reverse
repurchase agreement.

Reverse repurchase agreements involve the risk that the buyer of the
securities sold by a Fund might be unable to deliver them when that Fund seeks
to repurchase. In the event that the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
trustee or receiver may receive an extension of time to determine whether to

enforce that Fund's obligation to repurchase the securities, and the Fund's use
of the proceeds of the reverse repurchase agreement may effectively be
restricted pending such decision.

LENDING OF PORTFOLIO SECURITIES. Each Fund is authorized to lend up to
33 1/3% of its total assets to broker-dealers or institutional investors that
Mitchell Hutchins deems qualified, but only when the borrower maintains
acceptable collateral with that Fund's custodian in an amount, marked to market
daily, at least equal to the market value of the securities loaned, plus accrued
interest and dividends. Acceptable collateral is limited to cash, U.S.
government securities and irrevocable letters of credit that meet certain
guidelines established by Mitchell Hutchins. 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. Each Fund will retain authority to terminate any of its loans at any
time. Each Fund may pay reasonable 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 Fund will
receive reasonable interest on a loan or a flat fee from the borrower and
amounts equivalent to any dividends, interest or other distributions on the
securities loaned. Each Fund will regain record ownership of loaned securities
to exercise beneficial rights, such as voting and subscription rights, when
regaining such rights is considered to be in the Fund's interest.

Pursuant to procedures governing each Fund's securities lending program,
each board has approved retention of PaineWebber to serve as lending agent for
each Fund. The board also has authorized the payment of fees (including fees
calculated as a percentage of invested cash collateral) to PaineWebber for these
services. Each board periodically reviews all portfolio securities loan
transactions for which PaineWebber acted as lending agent.

SHORT SALES 'AGAINST THE BOX.' Each Fund may engage in short sales of
securities it owns or has the right to acquire at no added cost through
conversion or exchange of other securities it owns (short sales 'against the
box'). To make delivery to the purchaser in a short sale, the executing broker
borrows the securities being sold short on behalf of a Fund, and that Fund is
obligated to replace the securities borrowed at a date in the future. When a
Fund sells short, it establishes a margin account with the broker effecting the
short sale and deposits collateral with the broker. In addition, the Fund
maintains, in a segregated account with its custodian, the securities that could
be used to cover the short sale. Each Fund incurs transaction costs, including
interest expense, in connection with opening, maintaining and closing short
sales 'against the box.'

A Fund might make a short sale 'against the box' in order to hedge against

market risks when Mitchell Hutchins or a Sub-Adviser believes that the price of
a security may decline, thereby causing a decline in the value of a security
owned by the Fund or a security convertible into or exchangeable for a security
owned by the Fund. In such case, any loss in the Fund's long position after the
short sale should be reduced by a corresponding gain in the short position.
Conversely, any gain in the long position after the short sale should be reduced
by a corresponding loss in the short position. The extent to which gains or
losses in the long

<PAGE>

position are reduced will depend upon the amount of the securities sold short
relative to the amount of the securities a Fund owns, either directly or
indirectly, and in the case where the Fund owns convertible securities, changes
in the investment values or conversion premiums of such securities.

SEGREGATED ACCOUNTS. When a Fund enters into certain transactions to make
future payments to third parties, it will maintain with an approved custodian in
a segregated account cash or liquid securities, marked to market daily, in an
amount at least equal to the Fund's obligation or commitment under such
transactions. As described below under 'Hedging and Other Strategies Using
Derivative Instruments,' segregated accounts may also be required in connection
with certain transactions involving options, futures or forward currency
contracts (and, for Asia Pacific Growth Fund and Global Income Fund, certain
interest rate protection transactions).

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As stated in the Prospectus,
each Fund may purchase securities on a 'when-issued' or delayed delivery basis.
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 a
Fund's net asset value. When a Fund agrees 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
Restrictions--Segregated Accounts.' A Fund purchases 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 a Sub-Adviser, as applicable,
deems it advantageous to do so, which may result in a gain or loss to the Fund.

INVESTMENT LIMITATIONS OF THE FUNDS

FUNDAMENTAL LIMITATIONS. The following fundamental investment limitations
cannot be changed for a Fund without the affirmative vote of the lesser of (a)
more than 50% of the outstanding shares of the Fund or (b) 67% or more of the
Fund's shares present at a shareholders' meeting if more than 50% of the
outstanding Fund shares 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 increase or decrease 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 following limitations.

Each Fund will not:

(1) purchase any security if, as a result of that purchase, 25% or more of
the Fund's total assets would be invested in securities of issuers having their
principal business activities in the same industry, except that this limitation
does not apply to securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities or to municipal securities.

(2) issue senior securities or borrow money, except as permitted under the
1940 Act and then not in excess of 33 1/3% of the Fund's total assets (including
the amount of the senior securities issued but reduced by any liabilities not
constituting senior securities) at the time of the issuance or borrowing, except
that the Fund may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes.

(3) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this restriction, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances or
similar instruments will not be considered the making of a loan.

(4) engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under the
federal securities laws in connection with its disposition of portfolio
securities.

(5) purchase or sell real estate, except that investments in securities of
issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by interests
in real estate are not subject to this limitation, and except that the Fund may
exercise rights under

<PAGE>

agreements relating to such securities, including the right to enforce security
interests and to hold real estate acquired by reason of such enforcement until
that real estate can be liquidated in an orderly manner.

(6) purchase or sell physical commodities unless acquired as a result of
owning securities or other instruments, but the Fund may purchase, sell or enter
into financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.

In addition, Asia Pacific Growth Fund, Emerging Markets Equity Fund and
Global Equity Fund will not:

(7) purchase securities of any one issuer if, as a result, more than 5% of
the Fund's total assets would be invested in securities of that issuer or the
Fund would own or hold more than 10% of the outstanding voting securities of
that issuer, except that up to 25% of the Fund's total assets may be invested
without regard to this limitation, and except that this limitation does not
apply to securities issued or guaranteed by the U.S. government, its agencies
and instrumentalities or to securities issued by other investment companies.

The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the securities
having the same sponsor, and mortgage- and asset-backed securities issued by a
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company.

NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the appropriate board without
shareholder approval.

Each Fund will not:

(1) invest more than 10% of its net assets (15% of net assets for Asia
Pacific Growth Fund and Emerging Markets Equity Fund) in illiquid securities, a
term which means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued the securities and includes, among other things, repurchase agreements
maturing in more than seven days.

(2) purchase portfolio securities while borrowings in excess of 5% of its
total assets are outstanding.

(3) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may make margin
deposits in connection with its use of financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts or
derivative instruments.

(4) engage in short sales of securities or maintain a short position,
except that the Fund may (a) sell short 'against the box' and (b) maintain short
positions in connection with its use of financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts or
derivative instruments.

In addition, Emerging Markets Equity Fund, Global Equity Fund and Global
Income Fund will not:

(5) purchase securities of other investment companies, except to the extent
permitted by the 1940 Act and except that this limitation does not apply to
securities received or acquired as dividends, through offers of exchange, or as
a result of reorganization, consolidation, or merger (and except that the Fund
will not purchase securities of registered open-end investment companies or
registered unit investment trusts in reliance on Sections 12(d)(i)(F) or
12(d)(i)(G) of the 1940 Act).

<PAGE>

HEDGING AND OTHER STRATEGIES USING DERIVATIVE INSTRUMENTS

HEDGING STRATEGIES USING DERIVATIVE INSTRUMENTS. Mitchell Hutchins and the
Sub-Advisers may use a variety of financial instruments ('Derivative
Instruments'), including certain options, futures contracts (sometimes referred
to as 'futures'), options on futures contracts and forward currency contracts,
to attempt to hedge each Fund's portfolio. Global Income Fund also may use these
Derivative Instruments to attempt to enhance income or realize gains. Asia
Pacific Growth Fund and Global Income Fund may enter into interest rate swaps,
and Asia Pacific Growth Fund may engage in currency swaps, as also described
below. A Fund may enter into transactions involving one or more types of
Derivative Intruments under which the full value of its portfolio is at risk.
Under normal circumstances, however, each Fund's use of these instruments will
place at risk a much smaller portion of its assets. In particular, each Fund may
use the Derivative Instruments described below.

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 SECURITIES INDICES--A securities index assigns relative values
to the securities included in the index and fluctuates with changes in the
market values of those securities. A securities index option operates in the

same way as a more traditional securities option, except that exercise of a
securities index option is effected with cash payment and does not involve
delivery of securities. Thus, upon exercise of a securities 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 securities
index.

SECURITIES INDEX FUTURES CONTRACTS--A securities 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 securities 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 securities 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.

<PAGE>

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.

GENERAL DESCRIPTION OF HEDGING STRATEGIES. Hedging strategies can be
broadly categorized as 'short hedges' and 'long hedges.' A short hedge is a
purchase or sale of a Derivative Instrument intended partially or fully to
offset potential declines in the value of one or more investments held in a
Fund's portfolio. Thus, in a short hedge a Fund takes a position in a Derivative

Instrument whose price is expected to move in the opposite direction of the
price of the investment being hedged. For example, a Fund 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, a Fund 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, a Fund 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 Derivative Instrument
intended partially or fully to offset potential increases in the acquisition
cost of one or more investments that a Fund intends to acquire. Thus, in a long
hedge, a Fund takes a position in a Derivative Instrument whose price is
expected to move in the same direction as the price of the prospective
investment being hedged. For example, a Fund 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, a Fund could exercise the call and thus limit its acquisition
cost to the exercise price plus the premium paid and transactions costs.
Alternatively, a Fund might be able to offset the price increase by closing out
an appreciated call option and realizing a gain.

Asia Pacific Growth Fund may purchase and write (sell) straddles on
securities or indices of securities. 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. The Fund might enter into a long straddle when Mitchell Hutchins or
a Sub-Adviser believes it likely that the prices of the securities 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 Fund might enter into a short straddle when Mitchell Hutchins or a
Sub-Adviser believes it unlikely that the prices of the securities will be as
volatile during the term of the option as the option pricing implies.

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

The use of Derivative Instruments is subject to applicable regulations of
the SEC, the several options and futures exchanges upon which they are traded

and the Commodity Futures Trading Commission ('CFTC'). In addition, a Fund's
ability to use Derivative Instruments will be limited by tax considerations. See
'Taxes.'

Income strategies that Global Income Fund may use include the writing of
covered options to obtain the related option premiums. Gain strategies that
Global Income Fund may use include the use of Derivative Instruments to increase
or reduce the Fund's exposure to an asset class without buying or selling the
underlying instruments.

In addition to the products, strategies and risks described below and in
the Prospectus, Mitchell Hutchins and the Sub-Advisers may discover additional
opportunities in connection with Derivative Instruments and with hedging, income
and gain strategies. These new opportunities may become available as regulatory
authorities broaden the range of permitted transactions and as new Derivative
Instruments and techniques are developed. Mitchell Hutchins or a Sub-Adviser may
utilize these opportunities for a Fund to the extent that they are consistent
with the Fund's investment objective and permitted by its investment limitations
and applicable regulatory authorities. The Funds' Prospectus or Statement of
Additional Information will be

<PAGE>

supplemented to the extent that new products or techniques involve materially
different risks than those described below or in the Prospectus.

SPECIAL RISKS OF STRATEGIES USING DERIVATIVE INSTRUMENTS. The use of
Derivative Instruments involves special considerations and risks, as described
below. Risks pertaining to particular Derivative Instruments are described in
the sections that follow.

(1) Successful use of most Derivative Instruments depends upon the ability
of Mitchell Hutchins or a Sub-Adviser to predict movements of the overall
securities, interest rate or currency exchange markets, which requires different
skills than predicting changes in the prices of individual securities. While
Mitchell Hutchins and the Sub-Advisers are experienced in the use of Derivative
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 Derivative Instrument and price movements of the
investments that are being hedged. For example, if the value of a Derivative

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 affecting the markets in which Derivative
Instruments are traded, rather than the value of the investments being hedged.
The effectiveness of hedges using Derivative Instruments on indices will depend
on the degree of correlation between price movements in the index and price
movements in the securities being hedged.

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

(4) As described below, a Fund might be required to maintain assets as
'cover,' maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(i.e., Derivative Instruments other than purchased options). If the Fund was
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the positions expired or matured. These requirements might impair a Fund'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 the Fund sell a portfolio
security at a disadvantageous time. A Fund's ability to close out a position in
a Derivative 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 a Fund.

COVER FOR STRATEGIES USING DERIVATIVE INSTRUMENTS. Transactions using
Derivative Instruments, other than purchased options, expose the Funds to an
obligation to another party. A Fund will not enter into any such transactions
unless it owns either (1) an offsetting ('covered') position in securities,
other options or futures contracts or (2) cash and liquid securities, with a
value sufficient at all times to cover its potential obligations to the extent
not covered as provided in (1) above. Each Fund will comply with SEC guidelines
regarding cover for such transactions and will, if the guidelines so require,
set aside cash or liquid 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 Derivative Instrument is open, unless they are
replaced with similar assets. As a result, committing a large portion of a
Fund's assets to cover positions or to segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.

<PAGE>

OPTIONS. The Funds may purchase put and call options, and write (sell)
covered put or call options, in the case of Asia Pacific Growth Fund, Emerging
Markets Equity Fund and Global Equity Fund, on equity and debt securities, stock
indices and foreign currencies, and in the case of Global Income Fund, on debt
securities in which it is authorized to invest and on foreign currencies. The
purchase of call options may serve as a long hedge, and the purchase of put
options may serve as a short hedge. In addition, Global Income Fund may purchase
options to realize gains by increasing or reducing its exposure to an asset
class without purchasing or selling the underlying securities. Writing covered
put or call options can enable Global Income Fund to enhance income by reason of
the premiums paid by the purchasers of such options. 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 affected Fund will be obligated to sell the security at
less than its market value. Writing covered put options serves as a limited long
hedge because increases 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 depreciates to a price lower than the exercise price of the put option,
it can be expected that the put option will be exercised and the Fund will be
obligated to purchase the security at more than its market value. The securities
or other assets used as cover for OTC options written by a Fund would be
considered illiquid to the extent described under 'Investment Policies and
Restrictions--Illiquid Securities.'

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

A Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, a Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, a Fund 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. Closing transactions permit a Fund to realize profits or limit
losses on an option position prior to its exercise or expiration.

The Funds may purchase and write both exchange-traded and OTC options.
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 a Fund and its contra party (usually
a securities dealer or a bank) with no clearing organization guarantee. Thus,
when a Fund 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 Fund as well as the loss of any expected benefit of the transaction.
The Funds will enter into OTC option transactions only with contra parties that
have a net worth of at least $20 million.

Generally, the OTC debt options or foreign currency options used by the
Funds 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.

The Funds' ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Funds intend 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 the
Funds will enter into OTC options only with contra parties that are expected to
be capable of entering into closing transactions with the Funds, there is no
assurance that a Fund 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, a Fund might be unable to close out an OTC option position at any
time prior to its expiration.

<PAGE>

If a Fund 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 put or call
option written by the Fund could cause material losses because the Fund would be
unable to sell the investment used as cover for the written option until the
option expires or is exercised.

A Fund may purchase and write put and call options on indices in much the
same manner as the more traditional options discussed above, except the index
options may serve as a hedge against overall fluctuations in a securities market

(or market sector) rather than anticipated increases or decreases in the value
of a particular security.

LIMITATIONS ON THE USE OF OPTIONS. The use of options is governed by the
following guidelines, which can be changed by each respective Fund's board
without shareholder vote:

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

(2) The aggregate value of securities underlying put options written
by each Fund, determined as of the date the put options are written will
not exceed 50% of its net assets.

(3) The aggregate premiums paid on all options (including options on
securities, foreign currencies and stock and bond indices and options on
futures contracts) purchased by each Fund that are held at any time will
not exceed 20% of its net assets.

FUTURES. The Funds may purchase and sell securities index futures
contracts, interest rate futures contracts and foreign currency futures
contracts. A Fund may also purchase put and call options, and write covered put
and call options, on futures in which it is allowed to invest. 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, and writing covered put options on futures contracts can serve as a
limited long hedge, using a strategy similar to that used for writing covered
options on securities or indices. In addition, Global Income Fund may purchase
or sell futures contracts or purchase options thereon to realize gains by
increasing or reducing its exposure to an asset class without purchasing or
selling the underlying securities.

No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract a Fund 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, obligations of
the United States or obligations fully guaranteed as to principal and interest
by the United States, in an amount generally equal to 10% or less of the
contract value. Margin must also be deposited when writing a call 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 a Fund at the termination of the transaction if all
contractual obligations have been satisfied. Under certain circumstances, such
as periods of high volatility, a Fund 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 each Fund's obligations to or from a futures
broker. When a Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when a Fund 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 a Fund 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.
The Funds intend to enter into futures

<PAGE>

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

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

If a Fund 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. A Fund would continue to be subject
to market risk with respect to the position. In addition, except in the case of
purchased options, a Fund 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 AND RELATED OPTIONS. The use of futures
and related options is governed by the following guidelines, which can be
changed by a Fund's board without shareholder vote:

(1) To the extent a Fund enters into futures contracts and options on
futures positions 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 its net assets.

(2) 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 each Fund that are held at any time will
not exceed 20% of its net assets.

(3) The aggregate margin deposits on all futures contracts and options
thereon held at any time by each Fund will not exceed 5% of its total
assets.

FOREIGN CURRENCY HEDGING STRATEGIES--SPECIAL CONSIDERATIONS. Each Fund may
use options and futures on foreign currencies, as described above, and forward
currency contracts, as described below, to hedge against movements in the values
of the foreign currencies in which the Fund's securities are denominated. Such
currency hedges can protect against price movements in a security a Fund 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.

A Fund might seek to hedge against changes in the value of a particular
currency when no Derivative Instruments on that currency are available or such

Derivative Instruments are considered expensive. In such cases, the Fund may
hedge against price movements in that currency by entering into transactions
using Derivative Instruments on another currency or a basket of currencies, the
value of which Mitchell Hutchins or a Sub-Adviser believes will have a positive
correlation to the value of the currency being hedged. For example, if a Fund
owned securities denominated in a foreign currency and Mitchell Hutchins or the
Sub-Adviser believed that currency would 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.' The risk that

<PAGE>

movements in the price of the Derivative 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 Derivative 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 Derivative
Instruments, a Fund could be disadvantaged by having to deal in the odd-lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.

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

Settlement of Derivative Instruments involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
the Funds 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. Each Fund 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 Fund may purchase a forward currency contract to lock in
the U.S. dollar price of a security denominated in a foreign currency that the
Fund intends to acquire. Forward currency contract transactions may also serve
as short hedges--for example, a Fund 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. Global Income Fund may use forward
currency contracts to realize gains from favorable changes in exchange rates.

The cost to a Fund of 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 Fund 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 futures 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 purchased or sold. 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 Fund 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, a Fund might be unable to close out a forward currency
contract at any time prior to maturity. In either event, the Fund would continue
to be subject to market risk with respect to the position, and would continue to
be required to maintain a position in the securities or currencies that are the
subject of the hedge or to maintain cash or securities in a segregated account.

The precise matching of forward currency contract amounts and the value of
the securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, a Fund 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.

<PAGE>

LIMITATIONS ON THE USE OF FORWARD CURRENCY CONTRACTS. Each Fund 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 Fund to
deliver an amount of foreign currency in excess of the value of the position
being hedged by such contracts or (2) the Fund segregates with its custodian
cash or liquid securities 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 marked to market daily.

SWAP TRANSACTIONS. Asia Pacific Growth Fund and Global Income Fund each
may enter into interest rate swap transactions. Asia Pacific Growth Fund also
may enter into currency swap transactions. Swap transactions include swaps,
caps, floors and collars. Interest rate swaps 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 contra party
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. Currency swaps, caps, floors and collars are similar to interest rate
swaps, caps, floors and collars but they are based on currency exchange rates
rather than interest rates.

Asia Pacific Growth Fund and Global Income Fund each 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 it anticipates purchasing at a later date.
Each of these Funds 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.

Asia Pacific Growth Fund and Global Income Fund each may enter into
interest rate swaps, caps, floors and collars 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 a Fund 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 Schroder Capital believe such

obligations do not constitute senior securities and, accordingly, will not treat
them as being subject to either Fund's borrowing restrictions. The net amount of
the excess, if any, of a Fund's obligations over its entitlements with respect
to each interest rate swap will be accrued on a daily basis, and appropriate
Fund 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.' Each Fund also will
establish and maintain such segregated accounts with respect to its total
obligations under any swaps that are not entered into on a net basis and with
respect to any caps, floors and collars that are written by the Fund.

Asia Pacific Growth Fund and Global Income Fund each will enter into swap
transactions only with banks and recognized securities dealers believed by
Mitchell Hutchins or, in the case of Global Income Fund, Schroder Capital to
present minimal credit risk in accordance with guidelines established by the
Fund's board. If there is a default by the other party to such a transaction, a
Fund 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.

<PAGE>

TRUSTEES AND OFFICERS; PRINCIPAL HOLDERS OF SECURITIES

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

Richard Q. Armstrong; 62 Trustee Mr. Armstrong is chairman and principal of
78 West Brother Drive RQA Enterprises (management consulting
Greenwich, CT 06830 firm) (since April 1991 and principal
occupation since March 1995). Mr. Arm-
strong is also a director of Hi Lo Auto-
motive, Inc. He was chairman of the board,
chief executive officer and co-owner of
Adirondack Beverages (producer and
distributor of soft drinks and spar-
kling/still waters) (October 1993-March
1995). Mr. Armstrong was a partner of The
New England Consulting Group (management
consulting firm) (December 1992-September
1993). He was managing director of LVMH
U.S. Corporation (U.S. subsidiary of the
French luxury goods conglomerate, Luis
Vuitton Moet Hennessey Corporation)
(1987-1991) and chairman of its wine and
spirits subsidiary, Schieffelin &
Somerset Company (1987-1991). Mr.
Armstrong is a director or trustee of 27
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

E. Garrett Bewkes, Jr.**; 71 Trustee and Chairman of the Mr. Bewkes is a director of Paine Webber
Board of Trustees Group Inc. ('PW Group') (holding company of
PaineWebber and Mitchell Hutchins). Prior
to December 1995, he was a consultant to PW
Group. Prior to 1988, he was chairman of
the board, president and chief executive

officer of American Bakeries Company. Mr.
Bewkes is also a director of Interstate
Bakeries Corporation and NaPro BioTherapeu-
tics, Inc. Mr. Bewkes is a director or
trustee of 28 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
Richard R. Burt; 51 Trustee Mr. Burt is chairman of International Equity
1101 Connecticut Avenue, N.W. Partners (international investments and
Washington, D.C. 20036 consulting firm) (since March 1994) and a
partner of McKinsey & Company (management
consulting firm) (since 1991). He is also a
director of American Publishing Company and
Archer-Daniels-Midland Co. (agricultural
commodities). He was the chief negotiator
in the Strategic Arms Reduction Talks with
the former Soviet Union (1989-1991) and the
U.S. Ambassador to the Federal Republic of
Germany (1985-1989). Mr. Burt is a director
or trustee of 27 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.
<S> <C> <C>

Mary C. Farrell**; 48 Trustee Ms. Farrell is a managing director, senior
investment strategist and member of
the Investment Policy Committee
of PaineWebber. Ms. Farrell joined
PaineWebber in 1982. She is a member of the
Financial Women's Association and Women's
Economic Roundtable and appears as a
regular panelist on Wall $treet Week with
Louis Rukeyser. She also serves on the
Board of Overseers of New York University's
Stern School of Business. Ms. Farrell is a
director or trustee of 27 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.

Meyer Feldberg; 55 Trustee Mr. Feldberg is Dean and Professor of
Columbia University Management of the Graduate School of
101 Uris Hall Business, Columbia University. Prior to
New York, New York 10027 1989, he was president of the Illinois
Institute of Technology. Dean Feldberg is
also a director of K-III Communications
Corporation, Federated Department Stores,
Inc. and Revlon, Inc. Dean Feldberg is a
director or trustee of 27 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
George W. Gowen; 68 Trustee Mr. Gowen is a partner in the law firm of
666 Third Avenue Dunnington, Bartholow & Miller. Prior to
New York, New York 10017 May 1994, he was a partner in the law firm
of Fryer, Ross & Gowen. Mr. Gowen is a
director of Columbia Real Estate Invest-
ments, Inc. Mr. Gowen is a director or
trustee of 27 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.
<S> <C> <C>

Frederic V. Malek; 61 Trustee Mr. Malek is chairman of Thayer Capital
1455 Pennsylvania Avenue, N.W. Partners (merchant bank). From January 1992
Suite 350 to November 1992, he was campaign manager
Washington, D.C. 20004 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 North-
west Airlines Inc.) and Wings Holdings Inc.
(holding company of NWA Inc.). Prior to
1989, he was employed by the Marriott
Corporation (hotels, restaurants, airline
catering and contract feeding), where he
most recently was an executive vice president
and president of Marriott Hotels and Resorts.
Mr. Malek is also a director of American
Management Systems, Inc. (management consulting
and computer related services), Automatic Data
Processing, Inc., CB Commercial Group, Inc.
(real estate services), Choice Hotels

International (hotel and hotel
franchising), FPL Group, Inc. (electric
services), Integra, Inc. (bio-medical),
Manor Care, Inc. (health care), National
Education Corporation and Northwest
Airlines Inc. Mr. Malek is a director or
trustee of 27 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
Carl W. Schafer; 62 Trustee Mr. Schafer is president of the Atlantic
P.O. Box 1164 Foundation (charitable foundation sup-
Princeton, NJ 08542 porting mainly oceanographic exploration
and research). He is a director of Roadway
Express, Inc. (trucking), The Guardian
Group of Mutual Funds, Evans Systems, Inc.
(motor fuels, convenience store and
diversified company), Electronic Clearing
House, Inc., (financial transactions
processing), Wainoco Oil Corporation and
Nutraceutix, Inc. (biotechnology company).
Prior to January 1993, he was chairman of
the Investment Advisory Committee of the
Howard Hughes Medical Institute. Mr. Scha-
fer is a director or trustee of 27
investment companies for which Mitchell
Hutchins or PaineWebber serves as an
investment adviser.

T. Kirkham Barneby; 51 Vice President Mr. Barneby is a managing director and chief
(Investment Trust only) investment officer--quantitative investment
of Mitchell Hutchins. Prior to September
1994, he was a senior vice president at
Vantage Global Management. Prior to June
1993, he was a senior vice president at
Mitchell Hutchins. Mr. Barneby is a vice
president of four investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.

Julieanna Berry; 34 Vice President Ms. Berry is a first vice president and a
(Managed Trust only) portfolio manager of Mitchell Hutchins. Ms.
Berry is a vice president of two in-
vestment companies for which Mitchell
Hutchins or PaineWebber serves as in-
vestment adviser.

Karen L. Finkel; 40 Vice President Mrs. Finkel is a senior vice president and a
(Managed Trust only) portfolio manager of Mitchell Hutchins.
Mrs. Finkel is a vice president of two in-
vestment companies for which Mitchell
Hutchins serves as investment adviser.
</TABLE>

<PAGE>

Thomas J. Libassi; 39 Vice President Mr. Libassi is a senior vice president and
(Managed Trust only) portfolio manager of Mitchell Hutchins.
Prior to May 1994, he was a vice president
of Keystone Custodian Funds Inc. with
portfolio management responsibility. Mr.
Libassi is a vice president of four
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

Dennis McCauley; 51 Vice President (Investment Mr. McCauley is a managing director
Series only) and chief investment officer--fixed income
of Mitchell Hutchins. Prior to December
1994, he was director of fixed
income investments of IBM Corporation. Mr.
McCauley is a vice president of 18
investment companies for which Mitchell

Hutchins or PaineWebber serves as
investment adviser.

Ann E. Moran; 40 Vice President and Ms. Moran is a vice president and a manager
Assistant Treasurer of the mutual fund finance division of
Mitchell Hutchins. Ms. Moran is also a vice
president and assistant treasurer of 28
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

Dianne E. O'Donnell; 45 Vice President and Ms. O'Donnell is a senior vice president and
Secretary deputy general counsel of Mitchell
Hutchins. Ms. O'Donnell is a vice presi-
dent and secretary of 27 investment
companies and a vice president and as-
sistant secretary of one investment com-
pany for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>

<PAGE>

Victoria E. Schonfeld; 47 Vice President Ms. Schonfeld is a managing director and
general counsel of Mitchell Hutchins. Prior
to May 1994, she was a partner in the law
firm of Arnold & Porter. Ms. Schonfeld is a
vice president of 27 investment companies
and a vice president and secretary of one
investment company for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

Paul H. Schubert; 35 Vice President and Mr. Schubert is a first vice president and
Treasurer director of the mutual fund finance divi-
sion of Mitchell Hutchins. From August 1992
to August 1994, he was a vice president at
BlackRock Financial Management L.P. Prior
to August 1992, he
was an audit manager with Ernst & Young
LLP. Mr. Schubert is a vice president and
treasurer of 28 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.

Nirmal Singh; 41 Vice President Mr. Singh is a senior vice president and a
(Managed Trust only) portfolio manager of Mitchell Hutchins.
Prior to 1993, he was a member of the
portfolio management team at Merrill Lynch
Asset Management, Inc. Mr. Singh is a vice
president of four investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>

<PAGE>

Mark A. Tincher; 42 Vice President Mr. Tincher is a managing director and chief
(Investment Trust, investment officer--equities of Mitchell
Investment Trust II and Hutchins. Prior to March 1995, he was a
Managed Trust only) vice president and directed the U.S. funds
management and equity research areas of
Chase Manhattan Private Bank. Mr. Tincher
is a vice president of 13 investment
companies for which Mitchell Hutchins or

PaineWebber serves as investment adviser.

Craig M. Varrelman; 39 Vice President Mr. Varrelman is a senior vice president and
(Managed Trust only) a portfolio manager of Mitchell Hutchins.
Mr. Varrelman is a vice president of four
investment companies for which Mitchell
Hutchins or PaineWebber serves as in-
vestment adviser.

Stuart Waugh; 42 Vice President (Investment Mr. Waugh is a managing director and a
Series only) portfolio manager of Mitchell Hutchins
responsible for global fixed income invest-
ments and currency trading. Mr. Waugh is a
vice president of five investment compa-
nies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.

Keith A. Weller; 36 Vice President and Mr. Weller is a first vice president and as-
Assistant Secretary sociate general counsel of Mitchell
Hutchins. Prior to May 1995, he was an
attorney in private practice. Mr. Weller is
a vice president and assistant secretary of
27 investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
Ian W. Williams; 40 Vice President and Mr. Williams is a vice president and a man-
Assistant Treasurer ager of the mutual fund finance division of
Mitchell Hutchins. Prior to June 1992, he
was an audit senior accountant with Price
Waterhouse LLP. Mr. Williams is a vice
president and assistant treasurer of 28
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.

** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are 'interested persons' of each
Fund as defined in the 1940 Act by virtue of their positions with Mitchell
Hutchins, PaineWebber, and/or PW Group.

Board members are compensated as follows:

o MANAGED TRUST has six series and pays each trustee who is not an
'interested person' of the Trust $1,000 annually for each series.
Therefore, Managed Trust pays each such trustee $6,000 annually,
plus any additional amounts due for board or committee meetings.

o INVESTMENT TRUST II and INVESTMENT SERIES each pays board members
who are not 'interested persons' of the Trust $1,000 annually for
its sole series, plus any additional amounts due for board or
committee meetings.

o INVESTMENT TRUST has two series and pays each board member who is
not an 'interested person' of the Trust $1,000 annually for Global
Equity Fund and an additional $1,500 annually for its second series.
Therefore, Investment Trust pays each such board member $2,500
annually, plus any additional amounts due for board or committee
meetings.

Each Trust pays an additional $150 for each board meeting and each meeting
of a board committee (other than committee meetings held on the same day as a
board meeting). Each chairman of the audit and contract review committees of
individual funds within the PaineWebber fund complex receives additional
compensation, aggregating $15,000 annually, from the relevant funds. All board
members are reimbursed for any expenses incurred in attending meetings. Board
members and officers own in the aggregate less than 1% of the outstanding shares
of each Fund. Because PaineWebber, Mitchell Hutchins and, as applicable, a
Sub-Adviser perform substantially all the services necessary for the operation
of the Trusts and each Fund, the Trusts require no employees. No officer,
director or employee of Mitchell Hutchins or PaineWebber presently receives any
compensation from the Trusts for acting as a board member or officer.

<PAGE>

The table below includes certain information relating to the compensation
of the current board members who held office with the Trusts or with other

PaineWebber funds during the Funds' fiscal years ended October 31, 1997.

COMPENSATION TABLE+

<TABLE>
<CAPTION>
TOTAL
AGGREGATE AGGREGATE AGGREGATE COMPENSATION
AGGREGATE COMPENSATION COMPENSATION COMPENSATION FROM THE
COMPENSATION FROM FROM FROM TRUSTS AND
FROM MANAGED INVESTMENT INVESTMENT INVESTMENT THE FUND
NAME OF PERSON, POSITION TRUST * SERIES* TRUST* TRUST II* COMPLEX**
- --------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Richard Q. Armstrong,
Trustee........................ $7,300 $ $1,350 $1,350 $ 94,885
Richard R. Burt,
Trustee........................ $7,300 $ $1,350 $1,350 $ 87,085
Meyer Feldberg,
Trustee........................ $7,300 $ $2,295 $2,305 $117,853
George W. Gowen,
Trustee........................ $7,700 $ $1,350 $1,350 $101,567
Frederic V. Malek,
Trustee........................ $7,300 $ $1,350 $1,350 $ 95,845
Carl W. Schafer,
Trustee........................ $7,300 $ $1,350 $1,350 $ 94,885
</TABLE>

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

+ Only independent board members are compensated by the Trusts and identified
above; board members who are 'interested persons,' as defined by the 1940
Act, do not receive compensation.

** Represents total compensation paid to each board member during the calendar
ended December 31, 1997; no fund within the fund complex has a bonus,
pension, profit sharing or retirement plan.

PRINCIPAL HOLDERS OF SECURITIES

The following shareholders are shown in the indicated Fund's records as
owning more than 5% of its shares:

<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE
OF SHARES BENEFICIALLY
NAME AND ADDRESS* OWNED AS OF JANUARY 31, 1998
- ----------------------------------------------------------------------- ------------------------------------
<S> <C> <C>
ASIA PACIFIC GROWTH FUND:
[ ]
EMERGING MARKETS EQUITY FUND:

GLOBAL EQUITY FUND:
</TABLE>

- ------------------
* The shareholder(s) listed may be contacted c/o Mitchell Hutchins Asset
Management Inc., 1285 Avenue of the Americas, New York, New York 10019

INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS

INVESTMENT ADVISORY ARRANGEMENTS. Mitchell Hutchins acts as the investment
adviser and administrator to each Fund pursuant to separate contracts (each an
'Advisory Contract') with each Trust. Under the Advisory Contracts, each Fund
pays Mitchell Hutchins a fee, computed daily and paid monthly, at the annual
rates indicated below.

Under the terms of the Advisory Contracts, each Fund bears all expenses
incurred in its operation that are not specifically assumed by Mitchell
Hutchins. Expenses borne by each Fund include the following: (1) the cost
(including brokerage commissions) of securities purchased or sold by the Fund
and any losses incurred in connection therewith; (2) fees payable to and
expenses incurred on behalf of the Fund by Mitchell Hutchins; (3) organizational
expenses; (4) filing fees and expenses relating to the registration and
qualification of the Fund's shares under federal and state securities laws and
maintenance of such registrations and qualifications; (5) fees and salaries
payable to board members and officers who are not interested persons (as defined
in the 1940 Act) of the applicable Trust or Mitchell Hutchins; (6) all expenses
incurred in connection

<PAGE>

with the board members' 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 or fidelity
bonds; (9) any costs, expenses or losses arising out of a liability of or claim
for damages or other relief asserted against the applicable Trust or Fund for
violation of any law; (10) legal, accounting and auditing expenses, including

legal fees of special counsel for the independent board members; (11) charges of
custodians, transfer agents and other agents; (12) costs of preparing share
certificates; (13) expenses of setting in type and printing prospectuses,
statements of additional information and supplements thereto, reports and proxy
materials for existing shareholders, and costs of mailing such materials to
shareholders; (14) any extraordinary expenses (including fees and disbursements
of counsel) incurred by the Fund; (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 board members
and officers; and (18) costs of mailing, stationery and communications
equipment.

Under each Advisory Contract, Mitchell Hutchins will not be liable for any
error of judgment or mistake of law or for any loss suffered by a 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. Each Advisory Contract terminates
automatically upon assignment and is terminable at any time without penalty by
the Fund's board or by vote of the holders of a majority of the Fund's
outstanding voting securities on 60 days' written notice to Mitchell Hutchins,
or by Mitchell Hutchins on 60 days' written notice to the Fund.

ASIA PACIFIC GROWTH FUND. Mitchell Hutchins acts as the investment adviser
and administrator of Asia Pacific Growth Fund pursuant to an Investment Advisory
and Administration Contract with Managed Trust, dated April 21, 1988, made
applicable to the Fund by means of an Investment Advisory and Administration Fee
Agreement dated December 18, 1996 (together an 'Advisory Contract'). Under the
Advisory Contract, the Fund pays Mitchell Hutchins a fee, computed daily and
paid monthly, at the annual rate of 1.20% of the Fund's average daily net assets
up to and including $100 million and at an annual rate of 1.10% of its average
daily net assets in excess of $100 million. During the period March 25, 1997
(commencement of operations) through October 31, 1997, the Fund paid (or
accrued) to Mitchell Hutchins advisory and administrative fees of $533,412.

(commencement of operations) through October 31, 1997, Mitchell Hutchins (not
the Fund) paid (or accrued) Schroder Capital $[ ] in sub-advisory fees.

Under the Sub-Advisory Contract, Schroder Capital will not be liable for
any error of judgment or mistake of law or for any loss suffered by Managed
Trust, Asia Pacific Growth Fund, its shareholders or Mitchell Hutchins in
connection with the Sub-Advisory Contract, except any liability to Managed
Trust, the Fund, its shareholders or Mitchell Hutchins to which Schroder Capital
would otherwise be subject by reason of 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 the Sub-Advisory Contract.

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 Managed Trust's board or by vote of the holders of a majority of the
Fund's outstanding voting securities on 60 days' notice to Schroder Capital, or
by Schroder Capital on 120 days' written notice to Mitchell Hutchins. The
Sub-Advisory Contract may also be terminated by Mitchell Hutchins (1) upon
material breach by Schroder Capital of its representations and warranties, which
breach shall not have been cured within a 20-day period after notice of such
breach; (2) if the Sub-Adviser becomes unable to discharge its duties and
obligations under the Sub-Advisory Contract or (3) on 120 days' notice to
Schroder Capital.

33
<PAGE>

Prior to August 1, 1997, PaineWebber provided certain services to Asia
Pacific Growth Fund not otherwise provided by its transfer agent. Pursuant to an
agreement between PaineWebber and the Fund relating to those services, for the
period from March 25, 1997 (commencement of operations) through October 31,
1997, Asia Pacific Growth Fund paid (or accrued) to PaineWebber $[ ].

EMERGING MARKETS EQUITY FUND. Mitchell Hutchins acts as the investment
adviser and administrator of Emerging Markets Equity Fund pursuant to an
Advisory Contract with Investment Trust II dated February 25, 1997. Under the
Advisory Contract, the Fund pays Mitchell Hutchins a fee, computed daily and
paid monthly, at the annual rate of 1.20% of the Fund's average daily net
assets. During the four months ended October 31, 1996, and the fiscal years
ended June 30, 1996 and June 30, 1995, the Fund paid (or accrued) to Mitchell
Hutchins, under either the current or a prior contract, and/or to Kidder Peabody
Asset Management, Inc. ('KPAM') (the Fund's investment adviser prior to February
13, 1995) advisory and administrative fees of $438,676, $220,071, $867,093 and
$1,261,493, respectively.

During the fiscal year ended October 31, 1997, the four months ended
October 31, 1996 and the fiscal years ended June 30, 1996 and June 30, 1995,
Mitchell Hutchins waived part of its management fees and reimbursed Emerging
Markets Equity Fund in the amounts of $180,568, $142,160 and $538,618,
respectively; during these periods, certain expense limitations were applicable
which are no longer in effect. As of the date of this Statement of Additional
Information, Mitchell Hutchins was voluntarily waiving part of its management
fees and making reimbursements to Emerging Markets Equity Fund so that the
Fund's 'Total Operating Expenses' were as listed in the Expense Table in the
Prospectus. Mitchell Hutchins may discontinue these voluntary
waivers/reimbursements at any time.

The Advisory Contract authorizes Mitchell Hutchins to retain one or more
sub-advisers, but does not require Mitchell Hutchins to do so. Mitchell Hutchins
has entered into a separate contract with Schroder Capital, dated February 25,
1997 ('Sub-Advisory Contract'), pursuant to which Schroder Capital determines
what securities will be purchased, sold or held by Emerging Markets Equity Fund.
Under the Sub-Advisory Contract, Mitchell Hutchins (not the Fund) pays Schroder
Capital a fee, computed daily and paid monthly, at an annual rate of 0.70% of
the Fund's average daily net assets. Schroder Capital bears all expenses
incurred by it in connection with its services under the Sub-Advisory Contract.
During the fiscal year ended October 31, 1997, Mitchell Hutchins (not the Fund)
paid (or accrued) to Schroder Capital $161,715 in sub-advisory fees. Under
sub-advisory contracts with the Fund's former sub-adviser, Emerging Markets
Management from November 1, 1996 through February 24, 1997, for the four months
ended October 31, 1996 and the fiscal years ended June 30, 1996, and June 30,
1995, Mitchell Hutchins and/or KPAM paid (or accrued) fees of $86,731, $152,148,
$599,472 and $872,143, respectively, to Emerging Markets Management.

Under the Sub-Advisory Contract, Schroder Capital will not be liable for
any error of judgment or mistake of law or for any loss suffered by Investment
Trust II, Emerging Markets Equity Fund, its shareholders or Mitchell Hutchins in
connection with the Sub-Advisory Contract, except any liability to Investment
Trust II, the Fund, its shareholders or Mitchell Hutchins to which Schroder
Capital would otherwise be subject by reason of 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 the Sub-Advisory
Contract.

The Sub-Advisory Contract terminates automatically upon the assignment or
the termination of the Advisory Contract and is terminable at any time without
penalty by Investment Trust II's board or by vote of the holders of a majority
of the Fund's outstanding securities on 60 days' notice to Schroder Capital, or
by Schroder Capital on 60 days' written notice to Mitchell Hutchins. The
Sub-Advisory Contract may also be terminated by Mitchell Hutchins (1) upon
material breach by Schroder Capital of its representations and warranties, which
breach shall not have been cured within a 20-day period after notice of such

breach; (2) if the Sub-Adviser becomes unable to discharge its duties and
obligations under the Sub-Advisory Contract or (3) on 120 days' notice to
Schroder Capital.

GLOBAL EQUITY FUND. Mitchell Hutchins acts as the investment adviser and
administrator of Global Equity Fund pursuant to an Advisory Contract with
Investment Trust dated August 25, 1995. Under the Advisory Contract, the Fund
pays Mitchell Hutchins a fee, computed daily and paid monthly, at the annual
rate of 0.85% of the Fund's average daily net assets up to and including $500
million, 0.83% of amounts over $500 million and up to and including $1 billion,
and 0.805% of amounts over $1 billion. During the fiscal year ended October 31,
1997, the two months ended October 31, 1996 and for the fiscal years ended
August 31,

34
<PAGE>

1996 and August 31, 1995, the Fund paid (or accrued) to Mitchell Hutchins and/or
KPAM (the Fund's investment adviser prior to February 13, 1995) advisory and
administrative fees of $4,689,662, $794,518, $4,990,588 and $2,109,091,
respectively.

The Advisory Contract authorizes Mitchell Hutchins to retain one or more
sub-advisers, but does not require Mitchell Hutchins to do so. Mitchell Hutchins
has entered into a separate contract with GE Investment Management, dated August
25, 1995 ('Sub-Advisory Contract'), pursuant to which GE Investment Management
determines what securities will be purchased, sold or held by Global Equity
Fund. Under the Sub-Advisory Contract, Mitchell Hutchins (not the Fund) pays GE
Investment Management a fee, computed daily and paid monthly, at an annual rate
of 0.31% of the Fund's of its average daily net assets up to and including $500
million, 0.29% of amounts over $500 million up to and including $1 billion, and
0.265% of amounts over $1 billion. GE Investment Management bears all expenses
incurred by it in connection with its services under the Sub-Advisory Contract.
Under the Sub-Advisory Contract (or a prior sub-advisory contract between KPAM
and GE Investment Management) for the fiscal year ended October 31, 1997, the
two months ended October 31, 1996 and the fiscal years ended August 31, 1996 and
August 31, 1995, Mitchell Hutchins and/or KPAM paid (or accrued) fees of
$1,695,840, $287,688, $1,808,760 and $1,523,282, respectively, to GE Investment
Management.

Under the Sub-Advisory Contract, GE Investment Management will not be
liable for any error of judgment or mistake of law or for any loss suffered by
Investment Trust, Global Equity Fund, its shareholders or Mitchell Hutchins in
connection with the Sub-Advisory Contract, except any liability to the
Investment Trust, the Fund, its shareholders or Mitchell Hutchins to which GE
Investment Management would otherwise be subject by reason of 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 the
Sub-Advisory Contract.

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 Investment Trust's board or by vote of the holders of a majority of
the Fund's outstanding voting securities on 60 days' notice to GE Investment
Management and Mitchell Hutchins, or by GE Investment Management or Mitchell
Hutchins on 60 days' written notice to Investment Trust.

GLOBAL INCOME FUND. Mitchell Hutchins acts as the investment adviser and
administrator of Global Income Fund pursuant to an Advisory Contract with
Investment Series dated April 21, 1988. Under the Advisory Contract, the Fund
pays Mitchell Hutchins a fee, computed daily and paid monthly, at the annual
rate of 0.75% of the value of its average daily net assets up to and including
$500 million, 0.725% of amounts in excess of $500 million and up to $1 billion,
0.70% of amounts in excess of $1 billion and up to $1.5 billion, 0.675% of
amounts in excess of $1.5 billion and up to $2.0 billion, and 0.65% of amounts
over $2 billion. For the fiscal years ended October 31, 1997, October 31, 1996
and October 31, 1995, the Fund paid (or accrued) to Mitchell Hutchins advisory
and administrative fees of $[ ], $7,812,766 and $9,229,318, respectively.

Prior to August 1, 1997, PaineWebber provided certain services to Global
Income Fund not otherwise provided by its transfer agent. Pursuant to an
agreement between PaineWebber and the Fund relating to those services, for the
fiscal years ended October 31, 1997, October 31, 1996 and October 31, 1995,
Global Income Fund paid (or accrued) to PaineWebber $189,131, $305,944 and
$376,299, respectively.

ALL FUNDS. During its fiscal year ended October 31, 1997, the indicated
Fund paid (or accrued) the following fees to PaineWebber for its services as
securities lending agent:

<TABLE>
<CAPTION>
FUND AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
Asia Pacific Growth Fund.......................................................... $ 14,324
Emerging Markets Equity Fund...................................................... $ 5,582
Global Equity Fund................................................................ $ 42,125
Global Income Fund................................................................ $ 26,057
</TABLE>

<PAGE>

NET ASSETS. The following table shows the approximate net assets as of
January 31, 1998, sorted by category of investment objective, of the investment
companies as to which Mitchell Hutchins serves as adviser or sub-adviser. An
investment company may fall into more than one of the categories below.

<TABLE>
<CAPTION>
NET ASSETS
INVESTMENT CATEGORY ($ MIL)
- --------------------------------------------------------------------------------- ----------
<S> <C>
Domestic (excluding Money Market)................................................ $ [ ]
Global........................................................................... $ [ ]
Equity/Balanced.................................................................. $ [ ]
Fixed Income (excluding Money Market)............................................ $ [ ]
Taxable Fixed Income........................................................ $ [ ]
Tax-Free Fixed Income....................................................... $ [ ]
Money Market Funds............................................................... $ [ ]
</TABLE>

PERSONNEL TRADING POLICIES. Mitchell Hutchins personnel may invest in
securities for their own accounts pursuant to codes of ethics that describe the
fiduciary duty owed to shareholders of PaineWebber mutual funds and other
Mitchell Hutchins advisory accounts by all Mitchell Hutchins' directors,
officers and employees, establishes procedures for personal investing and
restricts certain transactions. For example, employee accounts generally must be
maintained at PaineWebber, personal trades in most securities require
pre-clearance and short-term trading and participation in initial public
offerings generally are prohibited. In addition, the code of ethics puts
restrictions on the timing of personal investing in relation to trades by
PaineWebber Funds and other Mitchell Hutchins advisory clients. Personnel of
each Sub-Adviser may also invest in securities for their own accounts pursuant
to comparable codes of ethics.

DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor of
each class of shares of each Fund under separate distribution contracts with
each Trust (collectively, 'Distribution Contracts'). Each Distribution Contract
requires Mitchell Hutchins to use its best efforts, consistent with its other
businesses, to sell shares of the applicable Fund. Shares of each Fund are
offered continuously. Under separate exclusive dealer agreements between
Mitchell Hutchins and PaineWebber relating to each class of shares of the Funds
(collectively, 'Exclusive Dealer Agreements'), PaineWebber and its correspondent
firms sell each Fund's shares.

Under separate plans of distribution pertaining to the Class A, Class B and
Class C shares of each Fund adopted by each Trust in the manner prescribed under
Rule 12b-1 under the 1940 Act (each, respectively, a 'Class A Plan,' 'Class B
Plan' and 'Class C Plan,' and collectively, 'Plans'), each Fund pays Mitchell
Hutchins a service fee, accrued daily and payable monthly, at the annual rate of
0.25% of the average daily net assets of each class of shares. Under the Class B
Plan, each Fund pays Mitchell Hutchins a distribution fee, accrued daily and
payable monthly, at the annual rate of 0.75% of the average daily net assets of
the Class B shares. Under the Class C Plan, each Fund pays Mitchell Hutchins a
distribution fee, accrued daily and payable monthly, at the annual rate of 0.75%
(in the case of Asia Pacific Growth Fund, Emerging Markets Equity Fund and
Global Equity Fund) or 0.50% (in the case of Global Income Fund) of the average
daily net assets of the Class C shares. There is no distribution plan with
respect to the Funds' Class Y shares.

Among other things, each Plan provides that (1) Mitchell Hutchins will
submit to the applicable board at least quarterly, and the board members will
review, reports regarding all amounts expended under the Plan and the purposes
for which such expenditures were made, (2) the Plan will continue in effect only
so long as it is approved at least annually, and any material amendment thereto
is approved, by the applicable board, including those board members who are not
'interested persons' of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or any agreement related to the Plan,
acting in person at a meeting called for that purpose, (3) payments by a Fund
under the Plan shall not be materially increased without the affirmative vote of
the holders of a majority of the outstanding shares of the relevant class and
(4) while the Plan remains in effect, the selection and nomination of board
members who are not 'interested persons' of the Trust shall be committed to the
discretion of the board members who are not 'interested persons' of that Trust.

In reporting amounts expended under the Plans to the board members,
Mitchell Hutchins allocates expenses attributable to the sale of each class of
each Fund's shares to such class based on the ratio of sales of shares of such
class to the sales of all three classes of shares. The fees paid by one class of
a Fund's shares will not be used to subsidize the sale of any other class of
Fund shares.

<PAGE>

The Funds paid (or accrued) the following fees to Mitchell Hutchins under
the Class A, Class B and Class C Plans during the fiscal year (or period) ended
October 31, 1997:

<TABLE>
<CAPTION>
ASIA PACIFIC EMERGING MARKETS
GROWTH FUND EQUITY FUND* GLOBAL EQUITY FUND GLOBAL INCOME FUND
------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Class A........................... $ 43,850 $ [ ] $ 789,664 $1,317,917
Class B........................... $ 167,837 $ [ ] $ 1,070,444 $1,847,036
Class C........................... $ 101,270 $ [ ] $ 650,447 $ 325,118
</TABLE>

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

*During the fiscal year shown above, Mitchell Hutchins waived [all or a
portion of] its distribution fees. If such waivers had not been made, the actual
fees that would have been paid by the Fund for the Class A, Class B and Class C
shares would have been $ , $ and $ , respectively.

Mitchell Hutchins estimates that it and its parent corporation,
PaineWebber, incurred the following shareholder service-related and
distribution-related expenses with respect to each Fund during the fiscal year
(or period) ended October 31, 1997:

<TABLE>
<CAPTION>
ASIA PACIFIC EMERGING MARKETS
GROWTH FUND EQUITY FUND GLOBAL EQUITY FUND GLOBAL INCOME FUND
------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
CLASS A
Marketing and advertising......... $ [ ] $ [ ] $ [ ] $ 247,364
Amortization of commissions....... $ [ ] $ [ ] $ [ ] $ 0
Printing of prospectuses and
statements of additional
information..................... $ [ ] $ [ ] $ [ ] $ 1,848
Branch network costs allocated and
interest expense................ $ [ ] $ [ ] $ [ ] $1,657,834
Service fees paid to PaineWebber
investment executives........... $ [ ] $ [ ] $ [ ] $ 383,602

CLASS B
Marketing and advertising......... $ [ ] $ [ ] $ [ ] $ 90,004
Amortization of commissions....... $ [ ] $ [ ] $ [ ] $ 457,674
Printing of prospectuses and
statements of additional
information..................... $ [ ] $ [ ] $ [ ] $ 1,848

Branch network costs allocated and
interest expense................ $ [ ] $ [ ] $ [ ] $ 577,347
Service fees paid to PaineWebber
investment executives........... $ [ ] $ [ ] $ [ ] $ 146,889

CLASS C
Marketing and advertising......... $ [ ] $ [ ] $ [ ] $ 20,459
Amortization of commissions....... $ [ ] $ [ ] $ [ ] $ 64,342
Printing of prospectuses and
statement of additional
information..................... $ [ ] $ [ ] $ [ ] $ 153
Branch network costs allocated and
interest expense................ $ [ ] $ [ ] $ [ ] $ 135,568
Service fees paid to PaineWebber
investment executives........... $ [ ] $ [ ] $ [ ] $ 32,171
</TABLE>

'Marketing and advertising' includes various internal costs allocated by
Mitchell Hutchins to its efforts at distributing the Funds' shares. These
internal costs encompass office rent, salaries and other overhead expenses of
various departments and areas of operations of Mitchell Hutchins. 'Branch
network costs allocated and interest expense' consist of an allocated portion of
the expenses of various PaineWebber departments involved in the distribution of
the Funds' shares, including the PaineWebber retail branch system.

In approving each Fund's overall Flexible Pricing(Service Mark) system of
distribution, the applicable board considered several factors, including that
implementation of Flexible Pricing would (1) enable investors to choose the
purchasing option best suited to their individual situation, thereby encouraging
current shareholders to make additional investments in the Fund and attracting
new investors and assets to the Fund to the benefit of the Fund and its
shareholders, (2) facilitate distribution of the Fund's shares and

37
<PAGE>

(3) maintain the competitive position of the Fund in relation to other funds
that have implemented or are seeking to implement similar distribution
arrangements.

In approving the Class A Plan, each board considered all the features of
the distribution system, including (1) the conditions under which initial sales
charges would be imposed and the amount of such charges, (2) Mitchell Hutchins'
belief that the initial sales charge combined with a service fee would be
attractive to PaineWebber investment executives and correspondent firms,
resulting in greater growth of the Fund than might otherwise be the case, (3)
the advantages to the shareholders of economies of scale resulting from growth
in the Fund's assets and potential continued growth, (4) the services provided

to the Fund and its shareholders by Mitchell Hutchins, (5) the services provided
by PaineWebber pursuant to its Exclusive Dealer Agreement with Mitchell Hutchins
and (6) Mitchell Hutchins' shareholder service-related expenses and costs.

In approving the Class B Plan, the board of each Fund considered all the
features of the distribution system, including (1) the conditions under which
contingent deferred sales charges would be imposed and the amount of such
charges, (2) the advantage to investors in having no initial sales charges
deducted from Fund purchase payments and instead having the entire amount of
their purchase payments immediately invested in Fund shares, (3) Mitchell
Hutchins' belief that the ability of PaineWebber investment executives and
correspondent firms to receive sales commissions when Class B shares are sold
and continuing service fees thereafter while their customers invest their entire
purchase payments immediately in Class B shares would prove attractive to the
investment executives and correspondent firms, resulting in greater growth of
the Fund than might otherwise be the case, (4) the advantages to the
shareholders of economies of scale resulting from growth in the Fund's assets
and potential continued growth, (5) the services provided to the Fund and its
shareholders by Mitchell Hutchins, (6) the services provided by PaineWebber
pursuant to its Exclusive Dealer Agreement with Mitchell Hutchins and (7)
Mitchell Hutchins' shareholder service- and distribution-related expenses and
costs. The board members also recognized that Mitchell Hutchins' willingness to
compensate PaineWebber and its investment executives, without the concomitant
receipt by Mitchell Hutchins of initial sales charges, was conditioned upon its
expectation of being compensated under the Class B Plan.

In approving the Class C Plan, each board considered all the features of
the distribution system, including (1) the advantage to investors in having no
initial sales charges deducted from Fund purchase payments and instead having
the entire amount of their purchase payments immediately invested in Fund
shares, (2) the advantage to investors in being free from contingent deferred
sales charges upon redemption for shares held more than one year and paying for
distribution on an ongoing basis, (3) Mitchell Hutchins' belief that the ability
of PaineWebber investment executives and correspondent firms to receive sales
compensation for their sales of Class C shares on an ongoing basis, along with
continuing service fees, while their customers invest their entire purchase
payments immediately in Class C shares and generally do not face contingent
deferred sales charges, would prove attractive to the investment executives and
correspondent firms, resulting in greater growth to the Fund than might
otherwise be the case, (4) the advantages to the shareholders of economies of
scale resulting from growth in the Fund's assets and potential continued growth,
(5) the services provided to the Fund and its shareholders by Mitchell Hutchins,
(6) the services provided by PaineWebber pursuant to its Exclusive Dealer
Agreement with Mitchell Hutchins and (7) Mitchell Hutchins' shareholder service-
and distribution-related expenses and costs. The board members also recognized
that Mitchell Hutchins' willingness to compensate PaineWebber and its investment
executives, without the concomitant receipt by Mitchell Hutchins of initial
sales charges or contingent deferred sales charges upon redemption, was
conditioned upon its expectation of being compensated under the Class C Plan.

With respect to each Plan, the boards considered all compensation that
Mitchell Hutchins would receive under the Plan and the Distribution Contract,
including service fees and, as applicable, initial sales charges, distribution
fees and contingent deferred sales charges. The boards also considered the
benefits that would accrue to Mitchell Hutchins under each Plan in that Mitchell
Hutchins would receive service, distribution and advisory fees that are
calculated based upon a percentage of the average net assets of a Fund, which
fees would increase if the Plan were successful and the Fund attained and
maintained significant asset levels.

Under the Distribution Contract between each Trust and Mitchell Hutchins
for the Class A shares for the fiscal years (or periods) set forth below,
Mitchell Hutchins earned the following approximate amounts of sales

<PAGE>

charges and retained the following approximate amounts, net of concessions to
PaineWebber as exclusive dealer.

<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1997
------------------
<S> <C> <C> <C> <C>
ASIA PACIFIC GROWTH FUND
Earned.......................................... $1,142,055
Retained........................................ $ 67,143
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
FOUR MONTHS JUNE 30,
FISCAL YEAR ENDED ENDED OCTOBER 31, --------------------
OCTOBER 31, 1997 1996 1996 1995
------------------ ----------------- -------- --------
<S> <C> <C> <C> <C>
EMERGING MARKETS EQUITY FUND
Earned.......................................... $ 10,030 $ 4,109 $ 25,696 $ 28,289
Retained........................................ $ 6,880 $ 251 $ 1,280 $ 225

<CAPTION>
FISCAL YEARS ENDED
TWO MONTHS AUGUST 31,
FISCAL YEAR ENDED ENDED OCTOBER 31, --------------------
OCTOBER 31, 1997 1996 1996 1995
------------------ ----------------- -------- --------
<S> <C> <C> <C> <C>

GLOBAL EQUITY FUND
Earned.......................................... $ 132,728 $ 22,360 $229,590 $130,094
Retained........................................ $ 8,400 $ 1,366 $ 10,949 $ 3,353

FISCAL YEARS ENDED OCTOBER 31,
---------------------------------------------------
1997 1996 1995
------------------ ----------------- --------
<S> <C> <C> <C> <C>

GLOBAL INCOME FUND
Earned.......................................... $ 29,617 $ 37,752 $ 43,136
Retained........................................ $ 2,950 $ 6,564 $ 12,003
</TABLE>

Mitchell Hutchins earned and retained the following contingent deferred
sales charges paid upon certain redemptions of shares for the fiscal year (or
period) ended October 31, 1997:

<TABLE>
<CAPTION>
ASIA PACIFIC EMERGING MARKETS
GROWTH FUND EQUITY FUND GLOBAL EQUITY FUND GLOBAL INCOME FUND
------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Class A........................... $ 0 $10,692 $ 0 $ [ ]
Class B........................... $ 7,821 $ 785 $ 249,534 $ [ ]
Class C........................... $10,620 $ 1,792 $ 2,641 $ [ ]
</TABLE>

<PAGE>

PORTFOLIO TRANSACTIONS

Subject to policies established by each board, Mitchell Hutchins or a
Sub-Adviser, as applicable, is responsible for the execution of each Fund's

portfolio transactions and the allocation of brokerage transactions. In
executing portfolio transactions, Mitchell Hutchins or the Sub-Adviser seeks to
obtain the best net results for a Fund, taking into account such factors as the
price (including the applicable brokerage commission or dealer spread), size of
order, difficulty of execution and operational facilities of the firm involved.
While Mitchell Hutchins and the Sub-Advisers generally seek reasonably
competitive commission rates, payment of the lowest commission is not
necessarily consistent with obtaining the best net results. 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 the time. The Funds may invest in securities traded
in the OTC market and will engage primarily in transactions directly with the
dealers who make markets in such securities, unless a better price or execution
could be obtained by using a broker. For the fiscal period March 25, 1997
(commencement of operations) to October 31, 1997, Asia Pacific Growth Fund paid
$[ ] in brokerage commissions. For the Fiscal year ended October 31, 1997,
the four months ended October 31, 1996, and the fiscal years ended June 30, 1996
and June 30, 1995, Emerging Markets Equity Fund paid $266,325, $80,726, $264,723
and $531,901, respectively, in brokerage commissions. For the fiscal year ended
October 31, 1997, the two months ended October 31, 1996 and the fiscal years
ended August 31, 1996 and August 31, 1995, Global Equity Fund paid $384,903,
$118,589, $1,472,329 and $850,531, respectively, in brokerage commissions. For
the fiscal years ended October 31, 1997, 1996 and 1995, Global Income Fund paid
$3,330, $0 and $0, respectively, in brokerage commissions.

The Funds have no obligation to deal with any broker or group of brokers in
the execution of portfolio transactions. The Funds contemplate that, consistent
with the policy of obtaining the best net results, brokerage transactions may be
conducted through Mitchell Hutchins or its affiliates, including PaineWebber, or
brokerage affiliates of Schroder Capital. Each board has adopted procedures in
conformity with Rule 17e-1 under the 1940 Act to ensure that all brokerage
commissions paid to PaineWebber or brokerage affiliates of Schroder Capital are
reasonable and fair. Specific provisions in the Advisory Contracts and the
applicable Sub-Advisory Contracts authorize Mitchell Hutchins and Schroder
Capital, respectively, and any of their affiliates that is a member of a
national securities exchange to effect portfolio transactions for the applicable
Funds on such exchange and to retain compensation in connection with such
transactions. Any such transactions will be effected and related compensation
paid only in accordance with applicable SEC regulations. [None of the Funds paid
brokerage commissions to PaineWebber or Schroder Capital's affiliates during its
last three fiscal years (or with respect to Asia Pacific Growth Fund, since
operations commenced).]

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

Consistent with the interests of the Funds and subject to the review of
each board, Mitchell Hutchins or a Sub-Adviser may cause a Fund to purchase and
sell portfolio securities through brokers who provide that Fund with research,
analysis, advice and similar services. In return for such services, the Funds
may pay to those brokers a higher commission than may be charged by other
brokers, provided that Mitchell Hutchins or the 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
Sub-Adviser, as applicable, to that Fund and its other clients, and that the
total commissions paid by the Fund will be reasonable in relation to the
benefits to the Fund over the long term. For the fiscal period March 25, 1997
(commencement of operations) to October 31, 1997, Schroder Capital directed
$[ ] in Asia Pacific Growth Fund's portfolio transactions to brokers
chosen because they provided research services, for which Asia Pacific Growth
Fund paid $[ ] in commissions. For the fiscal year ended October 31,
1997, Schroder Capital directed [none] of Emerging Markets Equity Fund's
portfolio transactions to brokers chosen for research services. For the fiscal
year ended October 31, 1997, GE Investment Management directed $[ ] in
portfolio transactions to brokers chosen because they provided research
services, for which Global Equity Fund paid

<PAGE>

$[ ] in commissions. For the fiscal year ended October 31, 1997,
Mitchell Hutchins directed none of Global Income Fund's portfolio transactions
to brokers chosen for research services.

For purchases or sales with broker-dealer firms that act as principal,
Mitchell Hutchins or the applicable Sub-Adviser seeks best execution. Although
Mitchell Hutchins and the Sub-Adviser may receive certain research or execution
services in connection with these transactions, Mitchell Hutchins and the
Sub-Advisers 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 and the
Sub-Advisers will not enter into any explicit soft dollar arrangements relating
to principal transactions and will not receive in principal transactions the
types of services that could be purchased for hard dollars. Mitchell Hutchins or
a Sub-Adviser 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 or the Sub-Adviser
receiving multiple quotes from dealers before executing the transactions on an
agency basis.

Information and research services furnished by brokers or dealers through
which or with which the Funds effect securities transactions may be used by
Mitchell Hutchins or a Sub-Adviser in advising other funds or accounts and,
conversely, research services furnished to Mitchell Hutchins or a Sub-Adviser by
brokers or dealers in connection with other funds or accounts that either of
them advises may be used in advising the Funds. Information and research
received from brokers or dealers will be in addition to, and not in lieu of, the
services required to be performed by Mitchell Hutchins under the Advisory
Contracts or the Sub-Advisers under the Sub-Advisory Contracts.

Investment decisions for a Fund and for other investment accounts managed
by Mitchell Hutchins or by a 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 Fund 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 that Fund and such
other account(s) as to amount according to a formula deemed equitable to the
Fund 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 the Funds
are concerned, or upon their ability to complete their entire order, in other
cases it is believed that coordination and the ability to participate in volume
transactions will be beneficial to the Funds.

The Funds will not purchase securities that are offered in underwritings in
which PaineWebber or an affiliate of a Sub-Adviser is a member of the
underwriting or selling group, except pursuant to procedures adopted by each
board pursuant to Rule 10f-3 under the 1940 Act. Among other things, these
procedures require that the spread or commission paid in connection with such a
purchase be reasonable and fair, 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 PaineWebber or any affiliate thereof or an affiliate of
a Sub-Adviser not participate in or benefit from the sale to the Funds.

PORTFOLIO TURNOVER. The Funds' annual portfolio turnover rates may vary
greatly from year to year, but they will not be a limiting factor when
management deems portfolio changes appropriate. The portfolio turnover rate is
calculated by dividing the lesser of a Fund'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 securities in the portfolio during the year.

<PAGE>

The Funds' respective portfolio turnover rates for the fiscal periods shown
were:

<TABLE>
<S> <C>
ASIA PACIFIC GROWTH FUND
Fiscal Period March 25, 1997 (commencement of operations) to October 31, 1997............................. 13%
EMERGING MARKETS EQUITY FUND
Fiscal Year ended October 31, 1997........................................................................ 87%
Four Months ended October 31, 1996........................................................................ 22%
Fiscal Year ended June 30, 1996........................................................................... 69%
GLOBAL EQUITY FUND
Fiscal Year ended October 31, 1997........................................................................ 86%
Two Months ended October 31, 1996......................................................................... 3%
Fiscal Year ended August 31, 1996......................................................................... 33%
GLOBAL INCOME FUND
Fiscal Year ended October 31, 1997........................................................................ 172%
Fiscal Year ended October 31, 1996........................................................................ 126%
</TABLE>

REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND REDEMPTION
INFORMATION AND OTHER SERVICES

COMBINED PURCHASE PRIVILEGE-CLASS A SHARES. Investors and eligible groups
of related Fund investors may combine purchases of Class A shares of the Funds
with concurrent purchases of Class A shares of any other PaineWebber mutual fund
and thus take advantage of the reduced sales charges indicated in the table of
sales charges for Class A shares in the Prospectus. The sales charge payable on
the purchase of Class A shares of the Funds and Class A shares of such other
funds will be at the rates applicable to the total amount of the combined
concurrent purchases.

An 'eligible group of related Fund investors' can consist of any
combination of the following:

(a) an individual, that individual's spouse, parents and children;

(b) an individual and his or her Individual Retirement Account
('IRA');

(c) an individual (or eligible group of individuals) and any company
controlled by the individual(s) (a person, entity or group that holds 25%
or more of the outstanding voting securities of a corporation will be
deemed to control the corporation, and a partnership will be deemed to be
controlled by each of its general partners);

(d) an individual (or eligible group of individuals) and one or more
employee benefit plans of a company controlled by the individual(s);

(e) an individual (or eligible group of individuals) and a trust
created by the individual(s), the beneficiaries of which are the individual
and/or the individual's spouse, parents or children;

(f) an individual and a Uniform Gifts to Minors Act/Uniform Transfers
to Minors Act account created by the individual or the individual's spouse;

(g) an employer (or group of related employers) and one or more
qualified retirement plans of such employer or employers (an employer
controlling, controlled by or under common control with another employer is
deemed related to that other employer); or

(h) individual accounts related together under one registered
investment adviser having full discretion and control over the accounts.
The registered investment adviser must communicate at least quarterly
through a newsletter or investment update establishing a relationship with
all of the accounts.

RIGHTS OF ACCUMULATIONS-CLASS A SHARES. Reduced sales charges are
available through a right of accumulation, under which investors and eligible
groups of related Fund investors (as defined above) are permitted to purchase
Class A shares of the Funds among related accounts at the offering price
applicable to the total of (1) the dollar amount then being purchased plus (2)
an amount equal to the then-current net asset value of the purchaser's combined
holdings of Class A Fund shares and Class A shares of any other PaineWebber
mutual fund. The purchaser must provide sufficient information to permit
confirmation of his or her holdings, and the acceptance of the purchase order is
subject to such confirmation. The right of accumulation may be amended or
terminated at any time.

<PAGE>

WAIVERS OF SALES CHARGES-CLASS B SHARES. Among other circumstances, the
contingent deferred sales charge on Class B shares is waived where a total or
partial redemption is made within one year following the death of the
shareholder. The contingent deferred sales charge waiver is available where the
decedent is either the sole shareholder or owns the shares with his or her
spouse as a joint tenant with right of survivorship. This waiver applies only to
redemption of shares held at the time of death.

ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION. As discussed in the
Prospectus, eligible shares of the Funds may be exchanged for shares of the
corresponding class of most other PaineWebber mutual funds. Shareholders will
receive at least 60 days' notice of any termination or material modification of
the exchange offer, except no notice need be given if, under extraordinary
circumstances, either redemptions are suspended under the circumstances
described below or a Fund temporarily delays or ceases the sales of its shares
because it is unable to invest amounts effectively in accordance with the Fund's

investment objective, policies and restrictions.

If conditions exist that make cash payments undesirable, each Fund reserves
the right to honor any request for redemption by making payment in whole or in
part in securities chosen by the Fund and valued in the same way as they would
be valued for purposes of computing the Fund's net asset value. Any such
redemption in kind will be made with readily marketable securities, to the
extent available. If payment is made in securities, a shareholder may incur
brokerage expenses in converting these securities into cash. Each Fund has
elected, however, to be governed by Rule 18f-1 under the 1940 Act, under which
it is obligated to redeem shares solely in cash up to the lesser of $250,000 or
1% of its net asset value during any 90-day period for one shareholder. This
election is irrevocable unless the SEC permits its withdrawal.

The Funds may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange ('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 a 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 a Fund's portfolio at the time.

AUTOMATIC INVESTMENT PLAN. Participation in the Automatic Investment Plan
enables an investor to use the technique of 'dollar cost averaging.' When an
investor invests the same dollar amount each month under the Plan, the investor
will purchase more shares when a Fund's net asset value per share is low and
fewer shares when the net asset value per share is high. Using this technique,
an investor's average purchase price per share over any given period will be
lower than if the investor purchased a fixed number of shares on a monthly basis
during the period. Of course, investing through the automatic investment plan
does not assure a profit or protect against loss in declining markets.
Additionally, because the automatic investment plan involves continuous
investing regardless of price levels, an investor should consider his or her
financial ability to continue purchases through periods of low price levels.

SYSTEMATIC WITHDRAWAL PLAN. An investor's participation in the systematic
withdrawal plan will terminate automatically if the 'Initial Account Balance' (a
term that means the value of the Fund account at the time the investor elects to
participate in the systematic withdrawal plan) less aggregate redemptions made
other than pursuant to the systematic withdrawal plan is less than $5,000 for
Class A and Class C shareholders or $20,000 for Class B shareholders. Purchases
of additional shares of a Fund concurrent with withdrawals are ordinarily
disadvantageous to shareholders because of tax liabilities and, for Class A
shares, initial sales charges. On or about the 20th of a month for monthly,
quarterly, semi-annual and annual plans, PaineWebber will arrange for redemption
by the Funds of sufficient Fund shares to provide the withdrawal payments
specified by participants in the Funds' systematic withdrawal plan. The payments
generally are mailed approximately five Business Days (defined under 'Valuation
of Shares') after the redemption date. Withdrawal payments should not be

considered dividends, but redemption proceeds, with the tax consequences
described under 'Dividends & Taxes' in the Prospectus. If periodic withdrawals
continually exceed reinvested dividends and other distributions, a shareholder's
investment may be correspondingly reduced. A shareholder may change the amount
of the systematic withdrawal or terminate participation in the systematic
withdrawal plan at any time without charge or penalty by written instructions
with signatures guaranteed to PaineWebber or PFPC Inc. ('Transfer Agent').
Instructions to participate in the plan, change the withdrawal amount or
terminate participation in the plan will not be effective until five days after
written

<PAGE>

instructions with signatures guaranteed are received by the Transfer Agent.
Shareholders may request the forms needed to establish a systematic withdrawal
plan from their PaineWebber investment executives, correspondent firms or the
Transfer Agent at 1-800-647-1568.

REINSTATEMENT PRIVILEGE-CLASS A SHARES. As described in the Prospectus,
shareholders who have redeemed Class A shares of a Fund may reinstate their
account without a sales charge. Shareholders may exercise the reinstatement
privilege by notifying the Transfer Agent of such desire and forwarding a check
for the amount to be purchased within 365 days after the date of redemption. The
reinstatement will be made at the net asset value per share next computed after
the notice of reinstatement and check are received. The amount of a purchase
under this reinstatement privilege cannot exceed the amount of the redemption
proceeds. Gain on a redemption is taxable regardless of whether the
reinstatement privilege is exercised; however, a loss arising out of a
redemption will not be deductible to the extent the reinstatement privilege is
exercised within 30 days after redemption, and an adjustment will be made to the
shareholder's tax basis for shares acquired pursuant to the reinstatement
privilege. Gain or loss on a redemption also will be adjusted for federal income
tax purposes by the amount of any sales charge paid on Class A shares, under the
circumstances and to the extent described in 'Dividends & Taxes' in the
Prospectus.

PAINEWEBBER RMA RESOURCE ACCUMULATION PLAN(SERVICE MARK);
PAINEWEBBER RESOURCE MANAGEMENT ACCOUNT(REGISTERED) (RMA)(REGISTERED)

Shares of PaineWebber mutual funds (each a 'PW Fund' and, collectively, the
'PW Funds') are available for purchase through the RMA Resource Accumulation
Plan ('Plan') by customers of PaineWebber and its correspondent firms who
maintain Resource Management Accounts ('RMA accountholders'). The Plan allows an
RMA accountholder to continually invest in one or more of the PW Funds at
regular intervals, with payment for shares purchased automatically deducted from
the client's RMA account. The client may elect to invest at monthly or quarterly
intervals and may elect either to invest a fixed dollar amount (minimum $100 per

period) or to purchase a fixed number of shares. A client can elect to have Plan
purchases executed on the first or fifteenth day of the month. Settlement occurs
three Business Days (defined under 'Valuation of Shares') after the trade date,
and the purchase price of the shares is withdrawn from the investor's RMA
account on the settlement date from the following sources and in the following
order: uninvested cash balances, balances in RMA money market funds, or margin
borrowing power, if applicable to the account.

To participate in the Plan, an investor must be an RMA accountholder, must
have made an initial purchase of the shares of each PW Fund selected for
investment under the Plan (meeting applicable minimum investment requirements)
and must complete and submit the RMA Resource Accumulation Plan Client Agreement
and Instruction Form available from PaineWebber. The investor must have received
a current prospectus for each PW Fund selected prior to enrolling in the Plan.
Information about mutual fund positions and outstanding instructions under the
Plan are noted on the RMA accountholder's account statement. Instructions under
the Plan may be changed at any time, but may take up to two weeks to become
effective.

The terms of the Plan, or an RMA accountholder's participation in the Plan,
may be modified or terminated at any time. It is anticipated that, in the
future, shares of other PW Funds and/or mutual funds other than the PW Funds may
be offered through the Plan.

PERIODIC INVESTING AND DOLLAR COST AVERAGING. Periodic investing in the PW
Funds or other mutual funds, whether through the Plan or otherwise, helps
investors establish and maintain a disciplined approach to accumulating assets
over time, de-emphasizing the importance of timing the market's highs and lows.
Periodic investing also permits an investor to take advantage of 'dollar cost
averaging.' By investing a fixed amount in mutual fund shares at established
intervals, an investor purchases more shares when the price is lower and fewer
shares when the price is higher, thereby increasing his or her earning
potential. Of course, dollar cost averaging does not guarantee a profit or
protect against a loss in a declining market, and an investor should consider
his or her financial ability to continue investing through periods of low share
prices. However, over time, dollar cost averaging generally results in a lower
average original investment cost than if an investor invested a larger dollar
amount in a mutual fund at one time.

PAINEWEBBER'S RESOURCE MANAGEMENT ACCOUNT. In order to enroll in the Plan,
an investor must have opened an RMA account with PaineWebber or one of its
correspondent firms. The RMA account is

<PAGE>

PaineWebber's comprehensive asset management account and offers investors a
number of features, including the following:

o monthly Premier account statements that itemize all account activity,
including investment transactions, checking activity and Gold
MasterCard(Registered) transactions during the period, and provide
unrealized and realized gain and loss estimates for most securities held

in the account;

o comprehensive preliminary 9-month and year-end summary statements that
provide information on account activity for use in tax planning and tax
return preparation;

o automatic 'sweep' of uninvested cash into the RMA accountholder's choice
of one of the six RMA money market funds-RMA Money Market Portfolio, RMA
U.S. Government Portfolio, RMA Tax-Free Fund, RMA California Municipal
Money Fund, RMA New Jersey Municipal Money Fund and RMA New York
Municipal Money Fund. Each money market fund attempts to maintain a
stable price per share of $1.00, although there can be no assurance that
it will be able to do so. Investments in the money market funds are not
insured or guaranteed by the U.S. government;

o check writing, with no per-check usage charge, no minimum amount on
checks and no maximum number of checks that can be written. RMA
accountholders can code their checks to classify expenditures. All
canceled checks are returned each month;

o Gold MasterCard, with or without a line of credit, which provides RMA
accountholders with direct access to their accounts and can be used with
automatic teller machines worldwide. Purchases on the Gold MasterCard are
debited to the RMA account once monthly, permitting accountholders to
remain invested for a longer period of time;

o 24-hour access to account information through toll-free numbers, and more
detailed personal assistance during business hours from the RMA Service
Center;

o expanded account protection to $100 million in the event of the
liquidation of PaineWebber. This protection does not apply to shares of
the RMA money market funds or the PW Funds because those shares are held
at the Transfer Agent and not through PaineWebber; and

o automatic direct deposit of checks into your RMA account and automatic
withdrawals from the account.

The annual account fee for an RMA account is $85, which includes the Gold
MasterCard, with an additional fee of $40 if the investor selects an optional
line of credit with the Gold MasterCard.

CONVERSION OF CLASS B SHARES

Class B shares of a Fund will automatically convert to Class A shares of
that Fund, based on the relative net asset values per share of the two classes,
as of the close of business on the first Business Day (as defined under
'Valuation of Shares') of the month in which the sixth anniversary of the
initial issuance of such Class B shares occurs. For the purpose of calculating
the holding period required for conversion of Class B shares, the date of
initial issuance shall mean (i) the date on which such Class B shares were

issued, or (ii) for Class B shares obtained through an exchange, or a series of
exchanges, the date on which the original Class B shares were issued. For
purposes of conversion to Class A shares, Class B shares purchased through the
reinvestment of dividends and other distributions paid in respect of Class B
shares will be held in a separate sub-account. Each time any Class B shares in
the shareholder's regular account (other than those in the sub-account) convert
to Class A shares, a pro rata portion of the Class B shares in the sub-account
will also convert to Class A shares. The portion will be determined by the ratio
that the shareholder's Class B shares converting to Class A shares bears to the
shareholder's total Class B shares not acquired through dividends and other
distributions.

The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A and Class B shares will not result in
'preferential dividends' under the Code and that the conversion of shares does
not constitute a taxable event. If the conversion feature ceased to be
available, the Class B shares would not be converted and would continue to be
subject to the higher ongoing expenses of the Class B shares beyond six years
from the date of purchase. Mitchell Hutchins has no reason to believe that this
condition for the availability of the conversion feature will not continue to be
met.

<PAGE>

VALUATION OF SHARES

Each Fund determines its net asset value per share separately for each
class of shares as of the close of regular trading (currently 4:00 p.m., Eastern
time) on the NYSE on each Business Day, which is defined as each Monday through
Friday when the NYSE is open. Currently the NYSE is closed on the observance of
the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.

Securities that are listed on U.S. and foreign stock exchanges are valued
at the last sale price on the day the securities are 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 or the Sub-Adviser as the primary
market. Securities traded in the OTC market and listed on the Nasdaq Stock
Market ('Nasdaq') are valued at the last trade price on Nasdaq at 4:00 p.m.,
Eastern time; other OTC securities are valued at the last bid price available
prior to valuation (other than short-term investments that mature in 60 days or
less which are valued as described further below). Securities and assets for
which market quotations are not readily available are valued at fair value as

determined in good faith by or under the direction of the applicable board. It
should be recognized that judgment often plays a greater role in valuing thinly
traded securities and lower rated bonds than is the case with respect to
securities for which a broader range of dealer quotations and last-sale
information is available. The amortized cost method of valuation generally is
used to value debt obligations with 60 days or less remaining until maturity,
unless the applicable board determines that this does not represent fair value.

All investments quoted in foreign currency will be valued daily in U.S.
dollars on the basis of the foreign currency exchange rate prevailing at the
time such valuation is determined by a Fund's custodian. Foreign currency
exchange rates are generally determined prior to the close of regular trading on
the NYSE. Occasionally events affecting the value of foreign investments and
such exchange rates occur between the time at which they are determined and the
close of trading on the NYSE, which events would not be reflected in the
computation of a Fund's net asset value on that day. If events materially
affecting the value of such investments or currency exchange rates occur during
such time period, the investments will be valued at their fair value as
determined in good faith by or under the direction of the applicable board. The
foreign currency exchange transactions of the Funds 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. Under normal market conditions this
rate differs from the prevailing exchange rate by less than one-tenth of one
percent due to the costs of converting from one currency to another.

<PAGE>

PERFORMANCE INFORMATION

The Funds' performance data quoted in advertising and other promotional
materials ('Performance Advertisements') represent past performance and are not
intended to indicate future performance. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.

TOTAL RETURN CALCULATIONS. Average annual total return quotes ('Standardized
Return') used in each Fund's Performance Advertisements are calculated according
to the following formula:

<TABLE>
<C> <S>
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares of a specified class
T = average annual total return of shares of that class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at the beginning of that period.
</TABLE>

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or 'T' in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
period. In calculating the ending redeemable value, for Class A shares, the
maximum 4.5% sales charge (4.0% for Global Income Fund) is deducted from the
initial $1,000 payment and, for Class B and Class C shares, the applicable
contingent deferred sales charge imposed on a redemption of Class B or Class C
shares held for the period is deducted. All dividends and other distributions
are assumed to have been reinvested at net asset value.

The Funds also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ('Non-Standardized Return'). The Funds calculate Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in Fund shares
and assuming the reinvestment of all dividends and other distributions. The rate
of return is determined by subtracting the initial value of the investment from
the ending value and by dividing the remainder by the initial value. Neither
initial nor contingent deferred sales charges are taken into account in
calculating Non-Standardized Return; the inclusion of those charges would reduce
the return.

Both Standardized Return and Non-Standardized Return for Class B shares for
periods of over six years reflect conversion of the Class B shares to Class A
shares at the end of the sixth year.

The following tables show performance information for each class of the
Funds' shares outstanding for the periods indicated. All returns for periods of
more than one year are expressed as an average return.

ASIA PACIFIC GROWTH FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Inception** to October 31, 1997:
Standardized Return*.................. (31.55 )% (33.54 )% (29.64 )%
Non-Standardized Return............... (23.82 )% (28.64 )% (29.64 )%
</TABLE>

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

* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5%. All Standardized Return figures for

Class B and Class C shares reflect deduction of the applicable contingent
deferred sales charges imposed on a redemption of shares held for the period.

** The inception date for Class A, Class B and Class C shares was March 25,
1997. There were no Class Y shares outstanding as of October 31, 1997.

<PAGE>
EMERGING MARKETS EQUITY FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended October 31, 1997:
Standardized Return*.................. (5.25)% (6.39)% (2.61)% (0.53)%
Non-Standardized Return............... (0.74)% (1.39)% (1.61)% (0.53)%
Inception** to October 31, 1997:
Standardized Return*.................. (7.27)% (1.76)% (6.85)% (5.90)%
Non-Standardized Return............... (6.13)% 0.34% (6.85)% (5.90)%
</TABLE>

- ------------------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5%. All Standardized Return figures for
Class B and Class C shares reflect deduction of the applicable contingent
deferred sales charges imposed on a redemption of shares held for the period.

** The inception date for each Class of shares is as follows: Class A--January
19, 1994, Class B-- December 5, 1995, Class C--January 19, 1994, and Class
Y--January 19, 1994.

GLOBAL EQUITY FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended October 31, 1997:
Standardized Return*.................. 3.98 % 3.05 % 7.05 % 9.31 %
Non-Standardized Return............... 8.87 % 8.05 % 8.05 % 9.31 %
Five Years ended October 31, 1997:
Standardized Return*.................. 11.00 % N/A N/A N/A
Non-Standardized Return............... 12.04 % N/A N/A N/A
Inception** to October 31, 1997:
Standardized Return*.................. 9.90 % 7.38 % 9.74 % 10.92 %
Non-Standardized Return............... 10.76 % 8.63 % 9.74 % 10.92 %
</TABLE>

** The inception date for each Class of shares is as follows: Class A--November
14, 1991, Class B-- August 25, 1995, and Class C--May 10, 1993 and Class
Y--May 10, 1993.

GLOBAL INCOME FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended October 31, 1997:
Standardized Return*.................. 0.75 % (0.89)% 3.73 % 5.20 %
Non-Standardized Return............... 4.99 % 4.11 % 4.48 % 5.20 %
Five years ended October 31, 1997:
Standardized Return*.................. 5.78 % 5.49 % 6.10 % 6.91 %
Non-Standardized Return............... 6.64 % 5.81 % 6.10 % 6.91 %
Inception** to October 31, 1997:
Standardized Return*.................. 6.55 % 9.02 % 5.82 % 7.43 %
Non-Standardized Return............... 7.23 % 9.02 % 5.82 % 7.43 %
</TABLE>

(Footnotes on next page)

<PAGE>

(Footnotes from previous page)
- ------------------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4%. All Standardized Return figures for Class
B and Class C shares reflect deduction of the applicable contingent deferred
sales charges imposed on a redemption of shares held for the period.

** The inception date for each Class of shares is as follows: Class A--July 1,
1991, Class B--March 20, 1987, and Class C-- July 2, 1992 and Class Y--August
26, 1991.

YIELD. Yields used in Global Income Fund's Performance Advertisements are
calculated by dividing the Fund's interest income attributable to a Class of
shares for a 30-day period ('Period'), net of expenses attributable to such
Class, by the average number of shares of such Class entitled to receive
dividends during the Period and expressing the result as an annualized
percentage (assuming semi-annual compounding) of the maximum offering price per
share (in the case of Class A shares) or the net asset value per share (in the
case of Class B and Class C shares) at the end of the Period. Yield quotations
are calculated according to the following formula:

a-b
YIELD = 2 [( --- +1 ) 6 -1 ]
cd

<TABLE>
<C> <S>
where: a = interest earned during the Period attributable to a Class of shares
b = expenses accrued for the Period attributable to a Class of shares (net of
reimbursements)
c = the average daily number of shares of a Class outstanding during the Period that were
entitled to receive dividends
d = the maximum offering price per share (in the case of Class A shares) or the net asset
value per share (in the case of Class B and Class C shares) on the last day of the
Period.
</TABLE>

Except as noted below, in determining interest income earned during the
Period (variable 'a' in the above formula), Global Income Fund calculates
interest earned on each debt obligation held by it during the Period by (1)
computing the obligation's yield to maturity, based on the market value of the
obligation (including actual accrued interest) on the last business day of the
Period or, if the obligation was purchased during the Period, the purchase price
plus accrued interest and (2) dividing the yield to maturity by 360, and
multiplying the resulting quotient by the market value of the obligation
(including actual accrued interest) to determine the interest income on the
obligation for each day of the period that the obligation is in the portfolio.
Once interest earned is calculated in this fashion for each debt obligation held
by the Fund, interest earned during the Period is then determined by totalling
the interest earned on all debt obligations. For purposes of these calculations,
the maturity of an obligation with one or more call provisions is assumed to be
the next date on which the obligation reasonably can be expected to be called
or, if none, the maturity date. With respect to Class A shares, in calculating
the maximum offering price per share at the end of the Period (variable 'd' in
the above formula) the Fund's current maximum 4% initial sales charge on Class A
shares is included. For the 30-day period ended October 31, 1997, the yields for
its Class A shares, Class B shares, Class C shares and Class Y shares were
6.06%, 5.52%, 5.63%, and 6.66% respectively.

OTHER INFORMATION. In Performance Advertisements, the Funds may compare
their Standardized Return and/or their Non-Standardized Return with data
published by Lipper Analytical Services, Inc. ('Lipper'), CDA Investment
Technologies, Inc. ('CDA'), Wiesenberger Investment Companies Service
('Wiesenberger'), Investment Company Data, Inc. ('ICD') or Morningstar Mutual
Funds ('Morningstar'), with the performance of recognized stock and other
indices, including (but not limited to) the Standard & Poor's 500 Composite
Stock Price Index ('S&P 500'), the Dow Jones Industrial Average, the
International Finance Corporation Global Total Return Index, the Nasdaq
Composite Index, the Russell 2000 Index, the Wilshire 5000 Index, the Lehman
Bond Index, the Lehman Brothers 20+ Year Treasury Bond Index, the Lehman
Brothers Government/Corporate Bond Index, other similar Lehman Brothers indices
or components thereof, 30-year and 10-year U.S. Treasury bonds, the Morgan

Stanley Capital International Perspective Indices, the Morgan Stanley Capital
International Energy Sources Index, the Standard & Poor's Oil Composite Index,
the Morgan Stanley Capital International World Index (including Asia Pacific
regional indices), the Salomon Brothers Non-U.S. Dollar Index, the Salomon
Brothers Non-U.S. World Government

49
<PAGE>

Bond Index, the Salomon Brothers World Government Index, other similar Salomon
Brothers indices or components thereof and changes in the Consumer Price Index
as published by the U.S. Department of Commerce. The Funds also may refer in
such materials to mutual fund performance rankings and other data, such as
comparative asset, expense and fee levels, published by Lipper, CDA,
Wiesenberger, ICD or Morningstar. Performance Advertisements also may refer to
discussions of the Funds and comparative mutual fund data and ratings reported
in independent periodicals, including (but not limited to) THE WALL STREET
JOURNAL, MONEY MAGAZINE, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S,
FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST AND THE
KIPLINGER LETTERS. Comparisons in Performance Advertisements may be in graphic
form.

The Funds may include discussions or illustrations of the effects of
compounding in Performance Advertisements. 'Compounding' refers to the fact
that, if dividends or other distributions on a Fund investment are reinvested in
additional Fund shares, any future income or capital appreciation of a Fund
would increase the value, not only of the original Fund investment, but also of
the additional Fund shares received through reinvestment. As a result, the value
of a Fund investment would increase more quickly than if dividends or other
distributions had been paid in cash.

The Funds may also compare their performance with the performance of bank
certificates of deposit (CDs) as measured by the CDA Certificate of Deposit
Index, the Bank Rate Monitor National Index and the averages of yields of CDs of
major banks published by Banxquote(Registered) Money Markets. In comparing the
Funds' performance to CD performance, investors should keep in mind that bank
CDs are insured in whole or in part by an agency of the U.S. government and
offer fixed principal and fixed or variable rates of interest, and that bank CD
yields may vary depending on the financial institution offering the CD and
prevailing interest rates. Shares of the Funds are not insured or guaranteed by
the U.S. government and returns and net asset values will fluctuate. The debt
securities held by the Funds generally have longer maturities than most CDs and
may reflect interest rate fluctuations for longer term debt securities. An
investment in any Fund involves greater risks than an investment in either a
money market fund or a CD.

50
<PAGE>

Each Fund may also compare its performance to general trends in the stock
and bond markets, as illustrated by the following graph prepared by Ibbotson
Associates, Chicago.

[CHART]

[TO BE FILED BY AMENDMENT]

The chart is shown for illustrative purposes only and does not represent any
Fund's performance. These returns consist of income and capital appreciation (or
depreciation) and should not be considered an indication or guarantee of future
investment results. Year-to-year fluctuations in certain markets have been
significant, and negative returns have been experienced in certain markets from
time to time. Stocks are measured by the S&P 500, an unmanaged weighted index
comprising 500 widely held common stock and varying in composition. Unlike
investors in bonds and U.S. Treasury bills, common stock investors do not
receive fixed income payments and are not entitled to repayment of principal.
These differences contribute to investment risk. Returns shown for long-term
government bonds are based on U.S. Treasury bonds with 20-year maturities.
Inflation is measured by the Consumer Price Index. The indexes are unmanaged and
are not available for investment.

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

Source: Stocks, Bonds, Bills and Inflation 1997 Yearbook(Trademark) Ibbotson
Assoc., Chi., (annual updates work by Roger G. Ibbotson & Rex A. Sinquefield).

Over time, stocks have outperformed all other investments by a wide margin,
offering a solid hedge against inflation. From 1926 to 1996, stocks beat all
other traditional asset classes. A $10 investment in the S&P 500 grew to
$ , significantly more than any other investment.

TAXES

In order to continue to qualify for treatment as a RIC under the Code, each
Fund 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 gains and net gains from certain foreign currency
transactions) ('Distribution Requirement') and must meet several additional
requirements. For each Fund, these requirements include the following: (1) the
Fund 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

51
<PAGE>

disposition of securities or foreign currencies, or other income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in securities or those currencies ('Income Requirement');

(2) at the close of each quarter of the Fund'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 Fund's total assets and that does not
represent more than 10% of the issuer's outstanding voting securities; and (3)
at the close of each quarter of the Fund'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. If a
Fund failed to qualify for treatment as a RIC for any taxable year, it would be
taxed as an ordinary corporation on its taxable income for that year (even if
that income was distributed to its shareholders) and all distributions out of
its earnings and profits would be taxable to its shareholders, as dividends
(that is, ordinary income).

Dividends and other distributions declared by a Fund 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 Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.

A portion of the dividends from each Fund's investment company taxable
income (whether paid in cash or additional shares) may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion may
not exceed the aggregate dividends received by a Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.

If shares of a Fund are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.

Investors also should be aware that if shares are purchased shortly before
the record date for any dividend or capital gain distribution, the shareholder
will pay full price for the shares and receive some portion of the price back as
a taxable distribution.

Dividends and interest received, and gains realized, by a Fund on foreign
securities may be subject to income, withholding or other taxes imposed by
foreign countries and U.S. possessions (collectively 'foreign taxes') that would
reduce the yield and/or total return on its securities. Tax conventions between
certain countries and the United States may reduce or eliminate foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of a
Fund's total assets at the close of its taxable year consists of securities of
foreign corporations, it will be eligible to, and may, file an election with the
Internal Revenue Service that will enable its shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to any foreign taxes
paid by it. Pursuant to the election, the Fund would treat those taxes as
dividends paid to its shareholders and each shareholder would be required to (1)

include in gross income, and treat as paid by him or her, his or her
proportionate share of those taxes, (2) treat his or her share of those taxes
and of any dividend paid by the Fund that represents income from foreign or U.S.
possessions sources as his or her own income from those sources, and (3) either
deduct the foreign taxes deemed paid by him or her in computing his or her
taxable income or, alternatively, use the foregoing information in calculating
the foreign tax credit against his or her federal income tax. If a Fund makes
this election, it will report to its shareholders, shortly after each taxable
year, their respective shares of the foreign taxes paid by the Fund on its
income from foreign countries and U.S. possession sources.

Each Fund will be subject to a nondeductible 4% excise tax ('Excise Tax')
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.

Each Fund may invest in the stock of 'passive foreign investment companies'
('PFICs') if such stock is a permissible investment. A PFIC is a foreign
corporation--other than a 'controlled foreign corporation' (i.e., a foreign
corporation of which, on any day during its taxable year, more than 50% of the
total voting power of its

<PAGE>

voting stock or the total value of all of its stock is owned, directly,
indirectly, or constructively, by 'U.S. shareholders,' defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which a Fund is U.S. shareholder (effective for their
taxable years beginning November 1, 1998)--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 Fund will be subject to
federal income tax on a portion of any 'excess distribution' received on the
stock of a PFIC or of any gain from disposition of such stock (collectively
'PFIC income'), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
will be included in the Fund'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 Fund invests in a PFIC and elects to treat the PFIC as
a 'qualified electing fund' ('QEF'), then in lieu of the foregoing tax and
interest obligation, the Fund will be required to include in income each year
its pro rata share of the QEF's annual ordinary earnings and net capital gain
(the excess of net long-term capital gain over net short-term capital
loss)--which may have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax--even if those earnings and
gain are not distributed to the Fund by the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain of

its requirements.

Effective for their taxable years beginning November 1, 1998, each Fund may
elect to 'mark to market' its stock in any PFIC. 'Marking-to-market,' in this
context, means including in ordinary income each taxable year the excess, if
any, of the fair market value of a PFIC's stock over a Fund's adjusted basis
therein as of the end of that year. Pursuant to the election, a Fund also would
be allowed to deduct (as an ordinary, not capital, loss) the excess, if any, of
its adjusted basis in PFIC stock over the fair market value thereof as of the
taxable year-end, but only to the extent of any net mark-to-market gains with
respect to that stock included by the Fund for prior taxable years. A Fund's
adjusted basis in each PFIC's stock with respect to which it has made this
election will be adjusted to reflect the amounts of income included and
deductions taken under the election. Regulations proposed in 1992 would provide
a similar election with respect to the stock of certain PFIC's.

The use of hedging strategies, such as writing (selling) and purchasing
options and futures contracts and entering into forward currency contracts,
involves complex rules that will determine for income tax purposes the amount,
character and timing of recognition of the gains and losses a Fund realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
options, futures and forward currency contracts derived by a Fund with respect
to its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement.

A Fund may acquire zero coupon securities issued with original issue
discount. A Fund must include in its gross income the portion of the original
issue discount that accrues on such securities during the taxable year, even if
the Fund receives no corresponding payment on them during the year. Because a
Fund annually must distribute substantially all of its investment company
taxable income, including any accrued original issue discount, to satisfy the
Distribution Requirement and avoid imposition of the Excise Tax, it may be
required in a particular year to distribute as a dividend an amount that is
greater than the total amount of cash it actually receives. Those distributions
will be made from the Fund's cash assets or from the proceeds of sales of
portfolio securities, if necessary. The Fund may realize capital gains or losses
from those sales, which would increase or decrease its investment company
taxable income and/or net capital gain.

OTHER INFORMATION

Each Trust is an entity of the type commonly known as a 'Massachusetts
business trust.' Under Massachusetts law, shareholders of a Fund could, under
certain circumstances, be held personally liable for the obligations of the Fund
or its Trust. However, each Trust's Declaration of Trust disclaims shareholder

liability for acts or obligations of the Trust or the Fund and requires that
notice of such disclaimer be given in each note, bond, contract, instrument,
certificate or undertaking made or issued by the board members or by any
officers or officer by or on behalf of the Trust or the Fund, the board members
or any of them in

<PAGE>

connection with the Trust. Each Declaration of Trust provides for
indemnification from the relevant Fund's property for all losses and expenses of
any shareholder held personally liable for the obligations of the Fund. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund 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 solely
by reason of being or having been a shareholder, the shareholder paying such
liability would be entitled to reimbursement from the general assets of the
relevant Fund. The board members intend to conduct each Fund's operations in
such a way as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund.

Prior to November 1, 1995, the name of Emerging Markets Equity Fund was
'Mitchell Hutchins/Kidder Peabody Emerging Markets Equity Fund.' Prior to
February 13, 1995, the name of the Fund was 'Kidder, Peabody Emerging Markets
Equity Fund.' Prior to November 10, 1995, the Fund's Class C shares were called
'Class B' shares, and the Fund's Class Y shares were called 'Class C'shares. New
Class B shares were not offered prior to December 5, 1995.

Prior to August 25, 1995, the name of Global Equity Fund was 'Mitchell
Hutchins/Kidder, Peabody Global Equity Fund.' Prior to February 13, 1995, the
name of the Fund was 'Kidder, Peabody Global Equity Fund.' Prior to November 10,
1995, the Fund's Class B shares were known as 'Class E' shares and its Class C
shares were known as 'Class B' shares, and the Fund's Class Y shares were known
as 'Class C' shares.

Prior to November 10, 1995, Global Income Fund's Class C shares were known
as 'Class D' shares, and the Fund's Class Y shares were known as 'Class C'
shares.

CLASS-SPECIFIC EXPENSES. Each Fund may determine to allocate certain of
its expenses (in addition to service and distribution fees) to the specific
classes of its shares to which those expenses are attributable. For example,

Class B and Class C shares bear higher transfer agency fees per shareholder
account than those borne by Class A or Class Y shares. The higher fee is imposed
due to the higher costs incurred by the Transfer Agent in tracking shares
subject to a contingent deferred sales charge because, upon redemption, the
duration of the shareholder's investment must be determined in order to
determine the applicable charge. Although the transfer agency fee will differ on
a per account basis as stated above, the specific extent to which the transfer
agency fees will differ between the classes as a percentage of net assets is not
certain, because the fee as a percentage of net assets will be affected by the
number of shareholder accounts in each class and the relative amounts of net
assets in each class.

COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the Funds.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.

AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for Asia Pacific Growth Fund, Emerging Markets
Equity Fund and Global Equity Fund. Price Waterhouse LLP, 1177 Avenue of the
Americas, New York, New York 10036, serves as independent accountants for Global
Income Fund.

FINANCIAL STATEMENTS

Each Fund's Annual Report to Shareholders for its last fiscal year (or
period) is a separate document supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors or independent accountants appearing therein are
incorporated herein by this reference.

<PAGE>

APPENDIX
RATINGS INFORMATION

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS

AAA. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as a
'gilt edged.' 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. Bonds which are rated Aa
are judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities or 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. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium-grade
obligations. 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. Bonds which are rated Baa are considered
as medium-grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payment 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. Bonds
which are rated Ba are 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. Bonds which are rated 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. Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest; CA. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings; C. Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.

Note: Moody's applies 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.

DESCRIPTION OF S&P CORPORATE DEBT RATINGS

AAA. An obligation rated AAA has the highest rating assigned by S&P. The

obligor's capacity to meet its financial commitment on the obligation is
extremely strong; AA. An obligation rated AA differs from the higher rated
issues only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong; A. An obligation rated A is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than obligations in higher rated categories. However, the
obligor's capacity to meet its financial commitment on the obligation is still
strong; BBB. An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation; BB, B, CCC, CC, C. Obligations rated BB, B, CCC, CC and C are
regarded as having significant speculative characteristics. BB indicates the
lowest degree of speculation and C the highest. While such debt will likely have
some quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions; BB. An obligation rated
BB is less vulnerable to nonpayment than other speculative issues. However, it
faces major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's inadequate capacity to
meet its financial commitment on the obligation; B. An obligation rated B is
more vulnerable to nonpayment than obligations rated BB, but the obligor
currently has the capacity to meet its financial commitment on the

A-1

<PAGE>

obligation. Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment on
the obligation; CCC. An obligation rated CCC is currently vulnerable to
nonpayment and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitments on the obligation.
In the event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation; CC. An obligation rated CC is currently highly vulnerable to
nonpayment; C. The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on this
obligation are being continued; D. An obligation rated D is in payment default.
The D rating category is used when payments on an obligation are not made on the
date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.

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.

R. This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

A-2

<PAGE>

[This page intentionally left blank]

<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THE PROSPECTUS OR IN THIS STATEMENT OF
ADDITIONAL INFORMATION IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY A FUND OR ITS DISTRIBUTOR. THE PROSPECTUS AND
THIS STATEMENT OF ADDITIONAL INFORMATION DO NOT CONSTITUTE AN OFFERING BY ANY
FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.

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

<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
Investment Policies and Restrictions........... 1
Hedging and Other Strategies Using Derivative
Instruments.................................. 16
Trustees and Officers; Principal Holders of
Securities................................... 24
Investment Advisory and Distribution
Arrangements................................. 32
Portfolio Transactions......................... 40
Reduced Sales Charges, Additional Exchange and
Redemption Information and Other Services.... 42
Conversion of Class B Shares................... 45
Valuation of Shares............................ 46
Performance Information........................ 47
Taxes.......................................... 51
Other Information.............................. 53
Financial Statements........................... 54
Appendix....................................... A-1
</TABLE>

PaineWebber
Asia Pacific
Growth Fund

PaineWebber
Emerging Markets
Equity Fund

PaineWebber
Global Equity Fund
- --------------------------------------------------------------------------------

PaineWebber
Global Income Fund

Statement of Additional Information
March 1, 1998

- --------------------------------------------------------------------------------
PAINEWEBBER

<PAGE>

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements: (to be filed)

PaineWebber Global Income Fund

Included in Part A of this Registration Statement:

Financial Highlights for one Class A share of the Fund for each of the
six years in the period ended October 31, 1997 and for the period July
1, 1991 (commencement of offering) to October 31, 1991.

Financial Highlights for one Class B share of the Fund for each of the
ten years in the period ended October 31, 1997.

Financial Highlights for one Class C share of the Fund for each of the
five years in the period ended October 31, 1997 and for the period July
2, 1992 (commencement of operations) to October 31, 1992.

Financial Highlights for one Class Y share of the Fund for each of the
six years in the period ended October 31, 1997 and for the period
August 26, 1991 (commencement of offering) to October 31, 1991.

Included in Part B of this Registration Statement through incorporation by
reference from the Registrant's Annual Report to Shareholders filed with the SEC
through EDGAR on January , 1998, Accession No.:

Portfolio of Investments at October 31, 1997.

Statement of Assets and Liabilities at October 31, 1997.

Statement of Operations for the year ended October 31, 1997.

Statement of Changes in Net Assets for each of the two years in the
period ended October 31, 1997.

Notes to Financial Statements.

Financial Highlights for one Class A, Class B, Class C and Class Y
share of the Fund for each of the five years in the period ended
October 31, 1997.

Report of Independent Accountants dated December , 1997.

(b) Exhibits:

(1) Amended and Restated Declaration of Trust (to be filed)
(2) Restated By-Laws (to be filed)
(3) Voting trust agreement - none
(4) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 1/
(5) (a) Investment Advisory and Administration Contract 2/
(6) (a) Distribution Contract with respect to Class A shares 3/
(b) Distribution Contract with respect to Class B shares 3/
(c) Distribution Contract with respect to Class C shares 4/
(d) Distribution Contract with respect to Class Y shares 4/
(e) Exclusive Dealer Agreement with respect to Class A shares 3/

<PAGE>

(f) Exclusive Dealer Agreement with respect to Class B shares 3/
(g) Exclusive Dealer Agreement with respect to Class C shares 4/
(h) Exclusive Dealer Agreement with respect to Class Y shares 4/
(7) Bonus, profit sharing or pension plans - none
(8) Custodian Agreement with respect to PaineWebber Global Income Fund 5/
(9) Form of Transfer Agency Agreement (to be filed)
(10) (a) Opinion and consent of counsel regarding Class A, B, and Y shares 6/
(b) Opinion and consent of counsel regarding Class C shares 7/
(11) Other opinions, appraisals, rulings and consents:
Accountants' Consent (to be filed)
(12) Financial statements omitted from Part B - none
(13) Letter of investment intent 8/

(14) Prototype Retirement Plan 9/

(15) (a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class A
shares 10/
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class B
shares 10/
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class C
shares 11/
(16) (a) Schedules for Computation of Total Return Quotations for Class B
shares 12/
(b) Schedules for Computation of Total Return Quotations for
Class A and Class Y shares 13/
(c) Schedules for Computation of Yield Quotations for Class A, Class B and
Class Y shares 13/
(d) Schedules for Computation of Total Return Quotations for Class C
shares 14/
(e) Schedule for Computation of Yield Quotations for Class C shares 14/
(17) and (27) Financial Data Schedule (to be filed)
(18) Plan pursuant to Rule 18f-3 15/
- -------------

<TABLE>
<S> <C>
1/ Incorporated by reference from Articles III, VIII, IX, X and XI of

Registrant's Amended and Restated Declaration of Trust, and from
Articles II, VII and X of Registrant's Restated By-Laws.

2/ Incorporated by reference from Post-Effective Amendment No. 3,
File No. 33-11025, filed April 29, 1988.

3/ Incorporated by reference from Post-Effective Amendment No.25, filed
March 1, 1994.

4/ Incorporated by reference from Post-Effective Amendment No.31,
File No. 33-11025, filed February 26, 1996.

5/ Incorporated by reference from Post-Effective Amendment No. 1,
File No. 33-11025, filed July 20, 1987.

6/ Incorporated by reference from Post-Effective Amendment No. 15,
File No. 33-11025, filed May 2, 1991.

7/ Incorporated by reference from Post-Effective Amendment No. 21,
File No. 33-11025, filed April 30, 1992.

8/ Incorporated by reference from Pre-Effective Amendment No. 2,
File No. 33-11025, filed March 20, 1987.

9/ Incorporated by reference from Post-Effective Amendment No. 20 to the
registration statement of PaineWebber Managed Investments Trust, SEC
File No. 2-91362, filed April 1, 1992.

10/ Incorporated by reference from Post-Effective Amendment No. 19,
File No. 33-11025, filed February 14, 1992.

11/ Incorporated by reference from Post-Effective Amendment No. 23,
File No. 33-11025, filed December 31, 1992.

12/ Incorporated by reference from Post-Effective Amendment No. 13,
File No. 33-11025, filed March 1, 1991.

13/ Incorporated by reference from Post-Effective Amendment No. 20,
File No. 33-11025, filed February 28 1992

14/ Incorporated by reference from Post-Effective Amendment No. 24,
File No. 33-11025, filed March 1, 1993.

15/ Incorporated by reference from Post-Effective Amendment No. 33,
File No. 33-11025, filed August 29, 1996.
</TABLE>

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

None

Item 26. Number of Holders of Securities

<TABLE>
<CAPTION>
Number of Record Holders as of
Title of Class November 30, 1997
-------------- ------------------------------
<S> <C>
Shares of beneficial interest
($.001 par value)

PaineWebber Global Income Fund

Class A shares 38,261

Class B shares 10,601

Class C shares 2,604

Class Y shares 192
</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 the
trustees and officers of the Registrant to the fullest extent permitted by law
against claims and expenses asserted against or incurred by them by virtue of
being or having been a trustee or officer; provided that no such person shall be
indemnified where there has been an adjudication or other determination, as
described in Article X, that such person is liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office or
did not act in good faith in the reasonable belief that his action was in the
best interest of the Registrant. Section 2 of "Indemnification" in Article X
also provides that the Registrant may maintain insurance policies covering such
rights of indemnification.

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

C-3
<PAGE>

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, for any act or omission in accordance with advice of counsel or

other experts, or for failing to follow such advice, with respect to the meaning
and operation of the Declaration of Trust.

Article IX 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 Registrant, or is or was serving at the request of the
Registrant as a trustee, officer or employee of a corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising out of his status as
such, whether or not the Registrant would have the power to indemnify him
against such liability to the Registrant or its shareholders, provided that the
Registrant may not purchase or maintain insurance that protects any such person
against any liability to which he 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 office.

Section 9 of the Investment Advisory and Administration Contract
("Contract") provides that Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins") shall not be liable for any error of judgment or mistake of law or
for any loss suffered by any series of the 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 any series or the Registrant under
the Contract and that Mitchell Hutchins shall look only to the assets and
property of the Registrant or appropriate series in settlement of such right or
claim and not to the assets and property of the trustees.

Section 9 of each Distribution Contract provides that the Registrant
will indemnify Mitchell Hutchins and its officers, directors and controlling
persons against all liabilities arising from any alleged untrue statement of
material fact in the Registration Statement or from any alleged omission to
state in the Registration Statement a material fact required to be stated in it
or necessary to make the statements in it, in light of the circumstances under
which they were made, not misleading, except insofar as liability arises from
untrue statements or omissions made in reliance upon and in conformity with
information furnished by Mitchell Hutchins to the Registrant for use in the
Registration Statement; and provided that this indemnity agreement shall not
protect any such persons against liabilities arising by reason of their bad
faith, gross negligence or willful misfeasance; and shall not inure to the
benefit of any such persons unless a court of competent jurisdiction or
controlling precedent determines that such result is not against public policy
as expressed in the Securities Act of 1933. Section 9 of each Distribution
Contract also provides that Mitchell Hutchins agrees to indemnify, defend and
hold the Registrant, its officers and trustees free and harmless of any claims
arising out of any alleged untrue statement or any alleged omission of material
fact contained in information furnished by Mitchell Hutchins for use in the
Registration Statement or arising out of an agreement between Mitchell Hutchins
and any retail dealer, or arising out of supplementary literature or advertising
used by Mitchell Hutchins in connection with each Distribution Contract.

Section 9 of each Exclusive Dealer Agreement contains provisions
similar to Section 9 of the relevant Distribution Contract, with respect to

PaineWebber Incorporated ("PaineWebber").

Section 10 of each Distribution Contract contains provisions similar to
Section 10 of the Investment Advisory and Administration Contract, applicable to
Mitchell Hutchins and PaineWebber, respectively.

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 Registrant, pursuant to the foregoing provisions or otherwise,
the Registrant 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
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding or payment pursuant to any insurance policy) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in

C-4
<PAGE>

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, a Delaware corporation, is a registered investment
adviser and is a wholly owned subsidiary of 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 as filed
with the Securities and Exchange Commission (registration number 801-13219) and
is incorporated herein by reference.

Item 29. Principal Underwriters

a) Mitchell Hutchins serves as principal underwriter and/or
investment adviser for the following investment companies:

ALL-AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND, INC.
GLOBAL SMALL CAP FUND, INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
MANAGED HIGH YIELD FUND INC.

MITCHELL HUTCHINS SERIES TRUST

PAINEWEBBER AMERICA FUND

PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.

PAINEWEBBER INDEX TRUST

PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST

STRATEGIC GLOBAL INCOME FUND INC.

2002 TARGET TERM TRUST INC.

b) Mitchell Hutchins is the Registrant's principal
underwriter. PaineWebber acts as exclusive dealer of the Registrant's shares.
The directors and officers of Mitchell Hutchins, their principal business
addresses, and their positions and offices with Mitchell Hutchins are
identified in its Form ADV as filed with the Securities and Exchange
Commission (registration number 801-13219). The directors and officers of
PaineWebber, their principal business addresses, and their positions and
offices with PaineWebber are identified in its Form ADV as filed with the
Securities and Exchange Commission (registration number 801-7163). The
foregoing information is hereby incorporated herein by reference. The
information set forth below is furnished for those directors and officers of
Mitchell Hutchins or PaineWebber who also serve as trustees or officers of the
Registrant. Unless otherwise indicated, the principal address of each is 1285
Avenue of the Americas, New York, New York 10019.

C-5
<PAGE>

<TABLE>
<CAPTION>
Positions and Offices With
Name Positions and Offices With Registrant Exclusive Dealer
---- ------------------------------------- ----------------
<S> <C> <C>

Margo N. Alexander President President and Chief Executive Officer and a
Director of Mitchell Hutchins; Director and
Executive Vice President of PaineWebber
Mary C. Farrell Trustee Managing Director, Senior Investment Strategist
and Member of Investment Policy Committee of

PaineWebber

Dennis McCauley Vice President Managing Director and Chief Investment Officer -
Fixed Income of Mitchell Hutchins

Ann E. Moran Vice President and Assistant Treasurer Vice President and a Manager of the Mutual Fund
Finance Division of Mitchell Hutchins

Dianne E. O'Donnell Vice President and Secretary Senior Vice President and Deputy General Counsel
of Mitchell Hutchins
Emil Polito Vice President Senior Vice President and Director of Operations
and Control of Mitchell Hutchins
Victoria E. Schonfeld Vice President Managing Director and General Counsel of Mitchell
Hutchins

Paul H. Schubert Vice President and Treasurer First Vice President and Director of the Mutual
Fund Finance Division of Mitchell Hutchins

Barney A. Taglialatela Vice President and Assistant Treasurer Vice President and a Manager of the Mutual Fund
Finance Division of Mitchell Hutchins

Stuart Waugh Vice President Managing Director and Portfolio Manager of
Mitchell Hutchins
Keith A. Weller Vice President and Assistant Secretary First Vice President and Associate General Counsel
of Mitchell Hutchins

Ian W. Williams Vice President and Assistant Treasurer Vice President and a Manager of the Mutual Fund
Finance Division of Mitchell Hutchins

</TABLE>

C) None

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 Portfolio Manager, 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 custodian.

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.

C-6
<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 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 29th day of December, 1997.

PAINEWEBBER INVESTMENT SERIES

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

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

Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Margo N.Alexander President and Trustee December 29, 1997
- ------------------------------------ (Chief Executive Officer)
Margo N. Alexander *

/s/ E. Garrett Bewkes, Jr. Trustee and Chairman December 29, 1997
- ------------------------------------ of the Board of Trustees
E. Garrett Bewkes, Jr. *

/s/ Richard Q. Armstrong Trustee December 29, 1997
- ------------------------------------
Richard Q. Armstrong *

/s/ Richard R. Burt Trustee December 29, 1997
- ------------------------------------
Richard R. Burt *

/s/ Mary C. Farrell Trustee December 29, 1997
- ------------------------------------
Mary C. Farrell *

/s/ Meyer Feldberg Trustee December 29, 1997
- ------------------------------------
Meyer Feldberg *

/s/ George W. Gowen Trustee December 29, 1997
- ------------------------------------
George W. Gowen *

/s/ Frederic V. Malek Trustee December 29, 1997
- ------------------------------------
Frederic V. Malek *

/s/ Carl W. Schafer Trustee December 29, 1997
- ------------------------------------
Carl W. Schafer *

/s/ Paul H. Schubert Vice President and Treasurer (Chief December 29, 1997
- -------------------- Financial and Accounting Officer)
Paul H. Schubert
</TABLE>

<PAGE>

SIGNATURES (Continued)

* Signature affixed by Elinor W. Gammon pursuant to powers of attorney
dated May 21, 1996 and incorporated by reference from Post-Effective
Amendment No. 30 to the registration statement of PaineWebber Managed
Municipal Trust, SEC File 2-89016, filed June 27, 1996.

<PAGE>
PAINEWEBBER INVESTMENT SERIES
EXHIBIT INDEX

Exhibit
Number
- -------
(1) Amended and Restated Declaration of Trust (to be filed)
(2) Restated By-Laws (to be filed)
(3) Voting trust agreement - none
(4) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 1/
(5) (a) Investment Advisory and Administration Contract 2/
(6) (a) Distribution Contract with respect to Class A shares 3/
(b) Distribution Contract with respect to Class B shares 3/
(c) Distribution Contract with respect to Class C shares 4/
(d) Distribution Contract with respect to Class Y shares 4/
(e) Exclusive Dealer Agreement with respect to Class A shares 3/
(f) Exclusive Dealer Agreement with respect to Class B shares 3/
(g) Exclusive Dealer Agreement with respect to Class C shares 4/
(h) Exclusive Dealer Agreement with respect to Class Y shares 4/
(7) Bonus, profit sharing or pension plans - none
(8) Custodian Agreement with respect to PaineWebber Global Income Fund 5/
(9) Form of Transfer Agency Agreement (to be filed)
(10) (a) Opinion and consent of counsel regarding Class A, B, and Y
shares 6/
(b) Opinion and consent of counsel regarding Class C shares 7/
(11) Other opinions, appraisals, rulings and consents:
Accountants' Consent (to be filed)
(12) Financial statements omitted from Part B - none
(13) Letter of investment intent 8/
(14) Prototype Retirement Plan 9/
(15) (a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class A
shares 10/
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class B
shares 10/
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class C
shares 11/
(16) (a) Schedules for Computation of Total Return Quotations for Class B
shares 12/
(b) Schedules for Computation of Total Return Quotations for Class A
and Class Y shares 13/
(c) Schedules for Computation of Yield Quotations for Class A, Class B
and Class Y shares 13/
(d) Schedules for Computation of Total Return Quotations for Class C
shares 14/
(e) Schedule for Computation of Yield Quotations for Class C shares 14/
(17) and (27) Financial Data Schedule (to be filed)
(18) Plan pursuant to Rule 18f-3 15/

- -------------
1/ Incorporated by reference from Articles III, VIII, IX, X and XI of
Registrant's Amended and Restated Declaration of Trust, and from
Articles II, VII and X of Registrant's Restated By-Laws.

2/ Incorporated by reference from Post-Effective Amendment No. 3, File No.
33-11025, filed April 29, 1988.

3/ Incorporated by reference from Post-Effective Amendment No.25, filed
March 1, 1994.

4/ Incorporated by reference from Post-Effective Amendment No.31, File No.
33-11025, filed February 26, 1996.

5/ Incorporated by reference from Post-Effective Amendment No. 1, File No.
33-11025, filed July 20, 1987.

<PAGE>

6/ Incorporated by reference from Post-Effective Amendment No. 15, File
No. 33-11025, filed May 2, 1991.

7/ Incorporated by reference from Post-Effective Amendment No. 21, File
No. 33-11025, filed April 30, 1992.

8/ Incorporated by reference from Pre-Effective Amendment No. 2, File No.
33-11025, filed March 20, 1987.

9/ Incorporated by reference from Post-Effective Amendment No. 20 to the
registration statement of PaineWebber Managed Investments Trust, SEC
File No. 2-91362, filed April 1, 1992.

10/ Incorporated by reference from Post-Effective Amendment No. 19, File
No. 33-11025, filed February 14, 1992.

11/ Incorporated by reference from Post-Effective Amendment No. 23, File
No. 33-11025, filed December 31, 1992.

12/ Incorporated by reference from Post-Effective Amendment No. 13, File
No. 33-11025, filed March 1, 1991.

13/ Incorporated by reference from Post-Effective Amendment No. 20, File
No. 33-11025, filed February 28 1992

14/ Incorporated by reference from Post-Effective Amendment No. 24, File
No. 33-11025, filed March 1, 1993.

15/ Incorporated by reference from Post-Effective Amendment No. 33, File
No. 33-11025, filed August 29, 1996.