<PAGE>
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PAINEWEBBER TACTICAL ALLOCATION FUND
1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019
PROSPECTUS -- JANUARY 1, 1996 (AS SUPPLEMENTED MARCH 13, 1996)
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Professional Management
Portfolio Diversification
Dividend and Capital Gain Reinvestment
Flexible Pricing'SM'
Low Minimum Investment
Automatic Investment Plan
Systematic Withdrawal Plan
Exchange Privileges
Suitable for Retirement Plans
The Fund is a series of PaineWebber Investment Trust ('Trust'). This Prospectus
concisely sets forth information a prospective investor should know about the
Fund before investing. Please retain this Prospectus for future reference. A
Statement of Additional Information dated January 1, 1996 (which is incorporated
by reference herein) has been filed with the Securities and Exchange Commission.
The Statement of Additional Information can be obtained without charge, and
further inquiries can be made, by contacting the Fund, your PaineWebber
investment executive or PaineWebber's correspondent firms or by calling
toll-free 1-800-647-1568.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Prospectus Page 1
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PAINEWEBBER TACTICAL ALLOCATION FUND
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
-----
<S> <C>
Prospectus Summary....................................................... 3
Financial Highlights..................................................... 7
Flexible Pricing System.................................................. 8
Investment Objective and Policies........................................ 9
Purchases................................................................ 16
Exchanges................................................................ 19
Redemptions.............................................................. 20
Conversion of Class B Shares............................................. 21
Other Services and Information........................................... 22
Dividends, Distributions and Taxes....................................... 23
Valuation of Shares...................................................... 24
Management............................................................... 24
Performance Information.................................................. 26
General Information...................................................... 27
</TABLE>
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Prospectus Page 2
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PAINEWEBBER TACTICAL ALLOCATION FUND
PROSPECTUS SUMMARY
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See the body of the Prospectus for more information on the topics discussed
in this summary.
<TABLE>
<S> <C>
The Fund: PaineWebber Tactical Allocation Fund ('Fund') is a diversified series of
PaineWebber Investment Trust ('Trust'), an open-end management investment
company.
Investment Objective and Total return, consisting o f long-term capital appreciation and current
Policies: income; utilizing a systematic investment strategy that actively allocates
the Fund's assets among common stocks, U.S. Treasury Notes and U.S. Treasury
Bills.
Total Net Assets at $55.8 million
November 30, 1995:
Investment Adviser and Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), an asset
Administrator: management subsidiary of PaineWebber Incorporated ('PaineWebber' or 'PW'),
manages over $44.7 billion in assets. See 'Management.'
Purchases: Shares of beneficial interest are available exclusively through PaineWebber
and its correspondent firms for investors who are clients of PaineWebber
or those firms PaineWebber clients') and, for other investors, through PFPC
Inc., the Fund's transfer agent ('Transfer Agent').
Flexible Pricing System: Investors may select Class A, Class B or Class C shares, each with a public
offering price that reflects different sales charges and expense levels. See
'Flexible Pricing System,' 'Purchases,' 'Redemptions' and 'Conversion of
Class B Shares.'
Class A Shares Offered at net asset value plus any applicable sales charge (maximum is
4.5% of the public offering price).
Class B Shares Offered at net asset value (a maximum contingent deferred sales charge
of 5% of redemption proceeds is imposed on certain redemptions made within
six years of date of purchase). Class B shares automatically convert into
Class A shares (which pay lower ongoing expenses) approximately six years
after purchase. Such Class B shares were not offered prior to January 1,
1996.
Class C Shares Offered at net asset value without an initial or contingent deferred sales
charge (a contingent deferred sales charge of 1% of redemption proceeds
is imposed on certain redemptions made within one year of purchase). Class C
shares pay higher ongoing expenses than Class A shares and do not convert
into another Class. Prior to November 10, 1995, these Class C shares were
called 'Class B' shares.
Exchanges: Shares may be exchanged for shares of the corresponding Class of most
PaineWebber mutual funds.
Redemptions: PaineWebber clients may redeem through PaineWebber; other shareholders
must redeem through the Transfer Agent.
Dividends: Declared and paid annually; net capital gain, if any, also is distributed
annually. See 'Dividends, Distributions and Taxes.'
Reinvestment: All dividends and capital gain distributions are paid in Fund shares of the
same Class at net asset value unless the shareholder has requested cash.
Minimum Purchase: $1,000 for first purchase; $100 for subsequent purchases.
Other Features:
Class A Shares Automatic investment plan Quantity discounts on initial sales charge
Systematic withdrawal plan 365-day reinstatement privilege
Rights of accumulation
Class B Shares Automatic investment plan Systematic withdrawal plan
Class C Shares Automatic investment plan Systematic withdrawal plan
</TABLE>
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Prospectus Page 3
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PAINEWEBBER TACTICAL ALLOCATION FUND
PROSPECTUS SUMMARY
(Continued)
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WHO SHOULD INVEST. The Fund follows a systematic investment strategy that
actively allocates the Fund's assets among common stocks, U.S. Treasury Notes
and U.S. Treasury Bills and is designed for investors who are seeking total
return, consisting of long-term capital appreciation and current income. The
Fund's risk factors are summarized below and are described in more detail under
'Investment Objective and Policies -- Risk Factors and Special Considerations.'
While the Fund is not intended to provide a complete or balanced investment
program, it can serve as one component of an investor's long-term program to
accumulate assets, for instance, for retirement, college tuition or other major
goals.
ASSET ALLOCATION STRATEGY. The Fund follows an asset allocation strategy
involving investing among the following asset categories ('Segments'): (1) the
common stocks primarily included in the Standard & Poor's 500 Composite Stock
Price Index (the 'S&P 500 Index') and derivative instruments relating thereto
(the 'Stock Segment'), the performance of which, before deduction of operating
expenses, is intended to replicate as closely as possible the aggregate price
and yield performance of the S&P 500 Index; (2) 30-day U.S. Treasury Bills (the
'Cash Segment'); and (3) five-year U.S. Treasury Notes and derivative
instruments relating thereto (the 'Note Segment'). Asset allocations are
determined by Mitchell Hutchins based on relative rates of return among the
Segments. See 'Investment Objective and Policies.' The Fund's asset allocation
strategy is designed to afford investors the opportunity to seek total return
during all economic and financial market cycles, with a degree of volatility
lower than that of the equity market, utilizing a systematic, cost effective
asset allocation strategy. The Fund allocates its assets among the Segments in
accordance with an Asset Allocation Model (the 'Allocation Model') utilized by
Mitchell Hutchins. See 'Investment Objective and Policies -- Asset Allocation
Strategy.'
RISK FACTORS. There can be no assurance that the Fund will achieve its
investment objective, and the Fund's net asset value will fluctuate based upon
changes in the value of its portfolio securities.
Although the Fund will seek long term total return consisting of both capital
appreciation and current income, the Fund may not achieve as high a level of
either capital appreciation or current income as a fund that has only one of
those objectives as its primary objective. Because the benefits of the
Allocation Model, on which the Fund's investment decisions are based, are
expected to be realized only if the recommendations are followed over several
market cycles, the Fund is intended to be a long term investment vehicle and is
not designed to provide investors with a means of speculating on short term
market movements. The investment results of the Fund (and the Stock Segment) at
any time may be greater or less than those of the S&P 500 Index. Deviations from
the performance of the S&P 500 Index may result from the proportion of assets
then allocated to the Stock Segment in accordance with the Allocation Model,
purchases and redemptions of shares of the Fund that occur daily, as well as
from brokerage and other expenses borne by the Fund. Thus, no assurance can be
given that the Fund's investment objective will be achieved. The Fund may also
be subject to certain risks in using investment techniques and strategies such
as entering into futures contracts and options on futures contracts, entering
into transactions involving options on stock indexes, purchasing securities on a
when-issued or delayed delivery basis and entering into repurchase agreements.
See 'Investment Objective and Policies -- Risk Factors and Special
Considerations' at page 13 of this Prospectus.
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Prospectus Page 4
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PAINEWEBBER TACTICAL ALLOCATION FUND
PROSPECTUS SUMMARY
(Continued)
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EXPENSES OF INVESTING IN THE FUND. The following tables are intended to assist
investors in understanding the expenses associated with investing in the Fund.
SHAREHOLDER TRANSACTION EXPENSES(1)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum sales charge on purchases of shares
(as a percentage of public offering price).... 4.5% None None
Sales charge on reinvested dividends........... None None None
Maximum contingent deferred sales charge
(as a percentage of redemption proceeds)...... None(2) 5% 1%(3)
</TABLE>
ANNUAL FUND OPERATING EXPENSES(4)
(as a percentage of average net assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Management fees........................... 0.50% 0.50% 0.50%
12b-1 fees(5)............................. 0.25 1.00 1.00
Other expenses............................ 0.71 0.72 0.72
------- ------- -------
Total operating expenses.................. 1.46% 2.22% 2.22%
------- ------- -------
------- ------- -------
</TABLE>
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(1) Sales charge waivers are available for Class A and Class B shares and
reduced sales charge purchase plans are available for Class A shares. The
maximum 5% contingent deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter, reaching zero after six years. See
'Purchases.'
(2) Purchases of Class A shares of $1 million or more are not subject to a sales
charge. If shares are redeemed within one year of purchase, a contingent
deferred sales charge of 1% will be applied to the redemption. See
'Purchases.'
(3) If Class C shares are redeemed within one year of purchase, a contingent
deferred sales charge of 1% will be applied to the redemption. See
'Purchases.'
(4) See 'Management' for additional information. All expenses, except for Class
B shares, are those actually incurred for the fiscal year ended August 31,
1995. Class B shares 'other expenses' are based on estimates for the Fund's
current fiscal year.
(5) 12b-1 fees have two components, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
12b-1 service fees............................. 0.25% 0.25% 0.25%
12b-1 distribution fees........................ 0.00 0.75 0.75
</TABLE>
12b-1 distribution fees are asset-based sales charges. Long-term Class B and
Class C shareholders may pay more in direct and indirect sales charges
(including distribution fees) than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
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Prospectus Page 5
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PAINEWEBBER TACTICAL ALLOCATION FUND
PROSPECTUS SUMMARY
(Continued)
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EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would directly or indirectly pay the following expenses on a $1,000
investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A Shares(1)........................................... $59 $89 $121 $212
Class B Shares:
Assuming a complete redemption at end of period(2)(3).. $73 $99 $139 $219
Assuming no redemption(3).............................. $23 $69 $119 $219
Class C Shares:
Assuming a complete redemption at end of period(2)...... $33 $69 $119 $255
Assuming no redemption................................. $23 $69 $119 $255
</TABLE>
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(1) Assumes deduction at the time of purchase of the maximum 4.5% initial sales
charge.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares at
end of sixth year.
This Example assumes that all dividends and other distributions are reinvested
and that the percentage amounts listed under Annual Fund Operating Expenses
remain the same in the years shown. The above tables and the assumption in the
Example of a 5% annual return are required by regulations of the Securities and
Exchange Commission ('SEC') applicable to all mutual funds; the assumed 5%
annual return is not a prediction of, and does not represent, the projected or
actual performance of any Class of the Fund's shares.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The actual expenses attributable to each Class of the Fund's shares will depend
upon, among other things, the level of average net assets and the extent to
which the Fund incurs variable expenses, such as transfer agency costs.
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Prospectus Page 6
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PAINEWEBBER TACTICAL ALLOCATION FUND
FINANCIAL HIGHLIGHTS
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The table below provides selected per share data and ratios for one Class A
share and one Class C share (prior to November 10, 1995, Class C shares were
called 'Class B' shares) of the Fund for each of the periods shown. No new Class
B shares were outstanding during such periods. This information is supplemented
by the financial statements and accompanying notes appearing in the Fund's
Annual Report to Shareholders for the fiscal year ended August 31, 1995, which
are incorporated by reference into the Statement of Additional Information. The
financial statements and notes, and the financial information for the fiscal
year ended August 31, 1995 appearing in the table below, have been audited by
Ernst & Young LLP, independent auditors, whose report thereon is included in the
Annual Report to Shareholders. The financial information for the year ended
August 31, 1994 and the periods prior thereto was audited by other auditors
whose report thereon was unqualified. Further information about the Fund's
performance is also included in the Annual Report to Shareholders, which may be
obtained without charge.
<TABLE>
<CAPTION>
CLASS A CLASS C#
------------------------------------- -----------------------------------------------
FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED MAY 10, ENDED JULY 22,
AUGUST 31, 1993`D' AUGUST 31, 1992`D'
-------------------- TO AUGUST 31, ------------------------------ TO AUGUST 31,
1995** 1994 1993 1995** 1994 1993 1992
---------- ------ -------------- ------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $13.78 $13.50 $12.90 $ 13.78 $ 13.49 $ 12.12 $ 12.00
---------- ------ ------ ------- ------- -------- -------
Net investment income....................... 0.22 0.24 0.08 0.12 0.13 0.18 0.03
Net realized and unrealized gains from
investment transactions................... 2.05 0.32 0.59 2.06 0.33 1.34 0.09
---------- ------ ------ ------- ------- -------- -------
Net increase from investment operations..... 2.27 0.56 0.67 2.18 0.46 1.52 0.12
---------- ------ ------ ------- ------- -------- -------
Dividends from net investment income........ (0.22) (0.24) (0.07) (0.12) (0.13) (0.15) --
Distributions from net realized gains from
investment transactions................... (0.97) (0.04) -- (0.97) (0.04) -- --
---------- ------ ------ ------- ------- -------- -------
Total dividends and distributions to
shareholders.............................. (1.19) (0.28) (0.07) (1.09) (0.17) (0.15) --
---------- ------ ------ ------- ------- -------- -------
Net asset value, end of period.............. $14.86 $13.78 $13.50 $ 14.87 $ 13.78 $ 13.59 $ 12.12
---------- ------ ------ ------- ------- -------- -------
---------- ------ ------ ------- ------- -------- -------
Total investment return(1).................. 18.43% 4.21% 5.17% 17.57% 3.46% 12.61% 0.98%
---------- ------ ------ ------- ------- -------- -------
---------- ------ ------ ------- ------- -------- -------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)....... $1,944 $1,801 $3,007 $48,105 $62,970 $107,761 $50,222
Ratios of expenses to average net assets.... 1.46% 1.13% 1.06%* 2.22% 1.88% 1.73% 1.75%*
Ratios of net investment income to average
net assets................................ 1.60% 1.64% 1.71%* 0.86% 0.89% 1.04% 2.42%*
Portfolio turnover rate..................... 53% 4% 0% 53% 4% 0% 0%
</TABLE>
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# Prior to November 10, 1995, called 'Class B' shares.
`D' Commencement of offering of shares.
* Annualized.
** Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and capital
gain distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results would be lower if sales charges were
included. Total returns for periods of less than one year have not been
annualized.
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Prospectus Page 7
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PAINEWEBBER TACTICAL ALLOCATION FUND
FLEXIBLE PRICING SYSTEM
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DIFFERENCES AMONG THE CLASSES
The primary distinctions among the Classes of the Fund's shares lie in
their initial and contingent deferred sales charge structures and in their
ongoing expenses, including asset-based sales charges in the form of
distribution fees. These differences are summarized in the table below. Each
Class has distinct advantages and disadvantages for different investors, and
investors may choose the Class that best suits their circumstances and
objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES (AS A % OF
SALES CHARGE AVERAGE DAILY NET ASSETS) OTHER INFORMATION
------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge Service fee of 0.25% Initial sales charge waived or
of 4.5% of the public offering reduced for certain purchases
price
CLASS B Maximum contingent deferred Service fee of 0.25%; Shares convert to Class A
sales charge of 5% of distribution fee of 0.75% shares approximately six years
redemption proceeds; declines after issuance
to zero after six years
CLASS C Contingent deferred sales Service fee of 0.25%; --
charge of 1% of redemption distribution fee of 0.75%
proceeds if redeem within
first year after purchase
</TABLE>
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES
In deciding which Class of shares to purchase, investors should consider the
cost of sales charges together with the cost of the ongoing annual expenses
described below, as well as any other relevant facts and circumstances:
SALES CHARGES. Class A shares are sold at net asset value plus an initial sales
charge of up to 4.5% of the public offering price. Because of this initial sales
charge, not all of a Class A shareholder's purchase price is invested in the
Fund. Class B shares are sold with no initial sales charge, but a contingent
deferred sales charge of up to 5% of the redemption proceeds applies to
redemptions made within six years of purchase. Class C shareholders pay no
initial sales charges, although a contingent deferred sales charge of 1.00%
applies to certain redemptions of Class C shares made within the first year
after purchase. Thus, the entire amount of a Class B or Class C shareholder's
purchase price is immediately invested in the Fund.
WAIVERS AND REDUCTIONS OF CLASS A SALES CHARGES. Class A share purchases over
$50,000 and Class A share purchases made under the Fund's reduced sales charge
schedule may be made at a reduced sales charge. In considering the combined cost
of sales charges and ongoing annual expenses, investors should take into account
any reduced sales charges on Class A shares for which they may be eligible.
The entire initial sales charge on Class A shares is waived for certain eligible
purchasers. Because Class A shares bear lower ongoing annual expenses than Class
B shares or Class C shares, investors eligible for complete waivers should
purchase Class A shares.
ONGOING ANNUAL EXPENSES. All three Classes of Fund shares pay an annual 12b-1
service fee of 0.25% of average daily net assets. Class B and Class C shares pay
an annual 12b-1 distribution
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Prospectus Page 8
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PAINEWEBBER TACTICAL ALLOCATION FUND
fee of 0.75% of average daily net assets. Annual 12b-1 distribution fees are a
form of asset-based sales charges. An investor should consider both ongoing
annual expenses and initial or contingent deferred sales charges in estimating
the costs of investing in the respective Classes of Fund shares over various
time periods.
For example, assuming a constant net asset value, the cumulative distribution
fees on the Class B or Class C shares and the 4.5% maximum initial sales charge
on the Class A shares would all be approximately equal if the shares were held
for six years. Because Class B shares convert to Class A shares (which do not
bear the expense of ongoing distribution fees) approximately six years after
purchase, an investor expecting to hold shares of the Fund for longer than six
years would generally pay lower cumulative expenses by purchasing Class A or
Class B shares than by purchasing Class C shares. An investor expecting to hold
shares of the Fund for less than six years would generally pay lower cumulative
expenses by purchasing Class C shares than by purchasing Class A shares, and,
due to the contingent deferred sales charges that would become payable on
redemption of Class B shares, such an investor would generally pay lower
cumulative expenses by purchasing Class C shares than Class B shares.
The foregoing examples do not reflect, among other variables, the cost or
benefit of bearing sales charges or distribution fees at the time of purchase,
upon redemption or over time, nor can they reflect fluctuations in the net asset
value of Fund shares, which will affect the actual amount of expenses paid.
Expenses borne by Classes may differ slightly because of the allocation of other
Class-specific expenses. The 'Example of Effect of Fund Expenses' under
'Prospectus Summary' shows the cumulative expenses an investor would pay over
time on a hypothetical investment in each Class of Fund shares, assuming an
annual return of 5%.
OTHER INFORMATION
PaineWebber investment executives may receive different levels of compensation
for selling one particular Class of Fund shares rather than another. Investors
should understand that distribution fees and initial and contingent deferred
sales charges all are intended to compensate Mitchell Hutchins for distribution
services.
See 'Purchases,' 'Redemptions' and 'Management' for a more complete description
of the initial and contingent deferred sales charges, service fees and
distribution fees for the three Classes of shares. See also 'Conversion of Class
B Shares,' 'Dividends, Distributions and Taxes,' 'Valuation of Shares' and
'General Information' for other differences among the three Classes.
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INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is total return, consisting of long-term capital
appreciation and current income. The Fund seeks to achieve its objective by
utilizing a systematic investment strategy that actively allocates the Fund's
assets among common stocks, U.S. Treasury Notes and U.S. Treasury Bills.
There can be no assurance that the Fund will achieve its investment objective.
The Fund's net asset value will fluctuate based upon changes in the value of its
portfolio securities. The Fund's investment objective and certain investment
limitations, as described in the Statement of Additional Information, are
fundamental policies and may not be changed without shareholder approval. All
other investment policies may be changed by the Trust's board of trustees
without shareholder approval.
ASSET ALLOCATION STRATEGY
The Fund is designed for investors seeking total return during all economic and
financial market cycles, with a degree of volatility lower than that of the
equity market, utilizing a systematic, cost-effective approach to allocating
assets among market segments. At the same time, the Fund provides individual
investors a means of dealing with the difficulties often associated with asset
allocation investing with an index component.
---------------------
Prospectus Page 9
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<PAGE>
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PAINEWEBBER TACTICAL ALLOCATION FUND
In seeking total return, the Fund follows an asset allocation strategy
contemplating shifts (sometimes frequent) among the following Segments: (i) the
Stock Segment, consisting primarily of the common stocks included in the S&P 500
Index and derivative instruments relating thereto, the performance of which,
before deduction of operating expenses, is intended to replicate as closely as
possible that of the S&P 500 Index; (ii) the Cash Segment, consisting of 30-day
U.S. Treasury Bills; and (iii) the Note Segment, consisting of five-year U.S.
Treasury Notes and derivative instruments relating thereto.
The Fund allocates its assets among the Segments in accordance with the
Allocation Model. The emphasis of the Allocation Model is to avoid or lower
exposure to the market in down economic cycles and to perform close to the broad
market in periods of strongly positive market performance. The asset allocation
mix for the Fund will be determined by Mitchell Hutchins at any given time on
the basis of the recommendations of the Allocation Model, except as described
below, which are determined in light of a quantitative assessment of the
expected performance of the Segments. The Fund is not managed as a balanced
portfolio, however, and may not maintain a portion of its investments in each of
the Segments at all times. Except for limited amounts always held in the Cash
Segment as described below, the Fund does not commit its assets simultaneously
to the Cash Segment and the Note Segment. Thus, during the course of a business
cycle, for example, the Fund may invest in the Stock Segment and the Cash
Segment, in the Stock Segment and the Note Segment, solely in the Stock Segment,
solely in the Cash Segment or solely in the Note Segment.
The Fund's assets are reallocated among the Segments at such times as are
mandated by the Allocation Model based on changes in projected rates of return.
If no reallocation is mandated, on the first business day of each month, any
material amounts in each Segment in excess of the amount mandated by the
Allocation Model resulting from appreciation or receipt of dividends,
distributions, interest payments and proceeds from securities maturing are
reallocated (or 'rebalanced') to the extent practicable among the Segments so as
to reestablish the recommended allocation among the Segments.
Cash inflows to the Fund during a month are invested in, and cash outflows from
the Fund during a month are derived from dispositions of assets in, each Segment
on a pro rata basis. In order to manage the Fund's portfolio most effectively,
cash flows into and out of the Stock Segment are managed to the extent
practicable through the use of stock index options, stock index futures
contracts and options on stock index futures contracts, as described below.
Similarly, cash flows into and out of the Note Segment are managed to the extent
practicable through the use of five-year U.S. Treasury Note futures contracts
and options thereon. See 'Investment Strategies and Techniques -- Derivative
Instruments' below.
The Fund deviates from the published recommendations of the Allocation Model
only to the extent necessary (1) to maintain a limited amount of assets (not
expected to exceed 2% of its total assets) in the Cash Segment in order to have
highly liquid short-term securities available to pay Fund operating expenses and
dividends and distributions on its shares and to meet anticipated redemptions of
its shares and (2) to qualify as a regulated investment company for Federal
income tax purposes. With regard to the latter, investors should be aware that
in order to so qualify, the Fund must, among other things, derive less than 30%
of its gross income from the sale or disposition of stocks, other securities and
certain financial instruments held for less than three months. Thus, this
requirement may preclude the Fund from reallocating its assets when otherwise
mandated by the Allocation Model. In such event, the Fund would reallocate its
assets in accordance with the then current recommendations of the Allocation
Model as soon as the reallocation could be accomplished without jeopardizing the
Fund's qualification as a regulated investment company.
TYPES OF PORTFOLIO INVESTMENTS
CASH SEGMENT. Assets committed to the Cash Segment are invested to the extent
practicable in U.S. Treasury Bills having remaining maturities of 30 days or, if
no such instruments are then available for purchase at favorable prices, these
assets will be invested in U.S. Treasury Bills having remaining maturities as
close as possible to 30 days. U.S. Treasury Bills are entitled to the full faith
and credit of the U.S. Government as to payment of interest and principal.
NOTE SEGMENT. Assets committed to the Note Segment are invested to the extent
practicable in (1) U.S. Treasury Notes having five years remain-
---------------------
Prospectus Page 10
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PAINEWEBBER TACTICAL ALLOCATION FUND
ing to maturity at the beginning of the then current calendar year or, if no
such instruments are then available for purchase at favorable prices, these
assets will be invested in U.S. Treasury Notes having remaining maturities as
close as possible to five years at the beginning of the then current calendar
year; and (2) five-year U.S. Treasury Note futures contracts and options
thereon. U.S. Treasury Notes are entitled to the full faith and credit of the
U.S. Government as to payment of interest and principal.
STOCK SEGMENT. With respect to assets committed to the Stock Segment, the Fund
attempts to duplicate, before deduction of operating expenses, the investment
results of the S&P 500 Index. The S&P 500 Index is an index compiled by Standard
& Poor's Corporation ('S&P') that emphasizes large-capitalization companies. The
Stock Segment is not managed according to traditional methods of 'active'
investment management, which involve the buying and selling of securities based
on economic, financial and market analysis and investment judgment. Instead,
utilizing a 'passive' or 'indexing' investment approach, the Fund attempts in
the Stock Segment to duplicate the investment performance of the S&P 500 Index
through statistical procedures that involve holding substantially all 500 stocks
in approximately the same relative proportions as they are represented in the
S&P 500 Index, except as described below.
The S&P 500 Index is composed of 500 common stocks that are chosen by S&P on a
statistical basis. The composition of the S&P 500 Index is determined by S&P
based on such factors as the market capitalization and trading activity of each
stock and its adequacy as a representative of stocks in a particular industry
group, and may be changed from time to time. Each stock in the S&P 500 Index is
weighted by its market capitalization, which is the market price per share of
the stock multiplied by the number of shares outstanding. While most of the
stocks in the S&P 500 Index are issued by companies that are among the 500
largest companies in terms of market capitalization, some stocks are included
for diversification and are not among the 500 largest market capitalization
stocks. The inclusion of a stock in the S&P 500 Index in no way implies that S&P
believes the stock to be an attractive investment.
While there can be no guarantee that the Stock Segment's investment results will
precisely match those of the S&P 500 Index, Mitchell Hutchins believes that,
before deduction of operating expenses, there will be a very high correlation
between the returns generated by the Stock Segment and the S&P 500 Index. The
Fund attempts to achieve a correlation between the performance of the Stock
Segment and that of its benchmark index of at least 0.95, before deduction of
operating expenses. A correlation of 1.00 would indicate perfect correlation,
which would be achieved when the Stock Segment's net asset value, including the
value of its dividend and capital gains distributions, increases or decreases in
exact proportion to changes in the S&P 500 Index. The Fund's ability to
correlate the performance of the Stock Segment with the S&P 500 Index may be
affected by, among other things, changes in securities markets, the manner in
which the S&P 500 Index is calculated by S&P and the timing of purchases and
redemptions. See 'Risk Factors and Special Considerations -- Index Investing and
Open-End Investment Companies' below. Mitchell Hutchins monitors the correlation
of the performance of the Stock Segment in relation to that of the S&P 500 Index
under the supervision of the Board of Trustees. In the unlikely event that a
high correlation is not achieved, the Board of Trustees will take appropriate
steps based on the reasons for the lower than expected correlation. S&P is
neither a sponsor of nor affiliated with the Fund.
INVESTMENT TECHNIQUES AND STRATEGIES
The Fund is authorized to engage in any one or more of the specialized
investment techniques and strategies described below:
DERIVATIVE INSTRUMENTS. The Fund anticipates that the Note Segment and the
Stock Segment will remain invested in five-year U.S. Treasury Notes or common
stocks, respectively, to the degree mandated by the Allocation Model. The Fund
may also invest its assets in stock index options, stock index futures contracts
and options on stock index futures contracts (with respect to the Stock Segment)
and five-year U.S. Treasury Note futures contracts and options thereon (with
respect to the Note Segment) in order to invest temporarily uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions or, in the case
of stock index options, to minimize trading costs. When the Fund has cash from
net new sales of Fund shares or holds a disproportionate amount of its assets in
the Cash Segment, it may enter into stock index futures or
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PAINEWEBBER TACTICAL ALLOCATION FUND
options thereon or five-year U.S. Treasury Note futures contracts or options
thereon to attempt to increase its exposure to the appropriate asset class prior
to purchasing securities to the degree mandated by the Allocation Model.
Strategies the Fund could use to accomplish this include entering into long
futures contracts, writing put options and purchasing call options. When the
Fund wishes to sell securities, because of shareholder redemptions or otherwise,
it may use futures contracts or options to hedge against market risk until the
sale can be completed. These strategies could include entering into short
futures contracts, writing call options and purchasing put options. It is
anticipated that the Fund will continue to close out positions in these
instruments on at least a quarterly basis and reconstitute its portfolio with
direct purchases or sales of securities in accordance with the then current
recommendations of the Allocation Model. The Fund does not enter into futures
contracts or options as part of a temporary defensive strategy, such as lowering
the Stock Segment's investment in common stocks to protect against potential
stock market declines, as this would be inconsistent with the Allocation Model.
See 'Stock Index Options' and 'Futures Contracts and Options on Futures
Contracts' below.
STOCK INDEX OPTIONS. The Fund may purchase and write put and call options on
stock indexes listed on domestic securities exchanges (which indexes include
securities held in the Fund's portfolio) as a means of pursuing the Stock
Segment's exposure in equity markets without making direct purchases of equity
securities.
A stock index measures the movement of a certain group of stocks by assigning
relative values to the common stocks included in the index. Options on stock
indexes are generally similar to options on specific securities. Unlike those on
securities, however, options on stock indexes do not involve the delivery of an
underlying security; the option in the case of an option on a stock index
represents the holder's right to obtain from the writer in cash a fixed multiple
of the amount by which the exercise price exceeds (in the case of a put) or is
less than (in the case of a call) the closing value of the underlying stock
index on the exercise date.
When the Fund writes an option on a stock index, it establishes a segregated
account with its custodian in which the Fund deposits cash or cash equivalents
or a combination of both in an amount equal to the market value of the option
and maintains the account while the option is open. If the Fund has written a
stock index option, it may terminate its obligation by effecting a closing
purchase transaction, which is accomplished by purchasing an option of the same
series as the option previously written.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may enter into
stock index futures contracts, and options on those contracts, as a means of
temporarily increasing or decreasing the Stock Segment's exposure to equity
markets in anticipation of purchases or sales of common stocks. Similarly, the
Fund may enter into five-year U.S. Treasury Note futures contracts, and options
on those contracts, as a means of temporarily increasing or decreasing the Note
Segment's exposure to five-year U.S. Treasury Notes in anticipation of purchase
or sales of these notes. A futures contract is an agreement to take or make
delivery of an amount of cash equal to the difference between the value of the
index or security at the beginning and at the end of the contract period. An
option on a futures contract, in contrast to a direct investment in the
contract, gives the purchaser the right, in return for the premium paid, to
assume a position in the underlying futures contract at a specified exercise
price at any time on or before the expiration date of the option.
The Fund may assume both 'long' and 'short' positions with respect to futures
contracts. A long position involves entering into a futures contract to buy a
commodity, whereas a short position involves entering into a futures contract to
sell a commodity. In entering into futures contracts, the Fund is required to
make initial 'margin' payments, which are payments in the nature of performance
bonds or good faith deposits, and to make 'variation' margin payments from time
to time as the values of the futures contracts fluctuate.
The Fund does not (1) enter into any futures contracts or options on futures
contracts if, immediately after the transactions, the aggregate of margin
deposits on all of the Fund's outstanding futures contracts and premiums paid on
its outstanding options on futures contracts would exceed 5% of the market value
of the total assets of the Fund after taking into account unrealized profits and
losses on any futures contracts or options on futures contracts or (2) enter
into any futures contracts or options on futures contracts if the aggregate of
the market value of the
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PAINEWEBBER TACTICAL ALLOCATION FUND
Fund's outstanding futures contracts and market value of the currencies and
futures contracts subject to outstanding options written by the Fund would
exceed 50% of the market value of the total assets of the Fund. Each short
position in a futures or options contract entered into by the Fund is secured by
the Fund's ownership of underlying securities. The Fund does not use leverage
when it enters into long futures or options contracts; the Fund places in a
segregated account with its custodian, or designated sub-custodian, with respect
to each of its long positions cash or short-term U.S. Treasury Bills having a
value equal to the underlying commodity value of the contract.
REPURCHASE AGREEMENTS. In order to manage cash flows resulting from the
continuous sale and redemption of the Fund's shares, the Fund may engage in
repurchase agreement transactions collateralized by U.S. Treasury obligations.
Although the amount of the Fund's assets that may be invested in repurchase
agreements terminable in less than seven days is not limited, repurchase
agreements maturing in more than seven days, together with other illiquid
securities, may not exceed 10% of the Fund's net assets. The Fund may engage in
repurchase agreement transactions with certain member banks of the Federal
Reserve System and with certain dealers listed on the Federal Reserve Bank of
New York's list of reporting dealers. Under the terms of a typical repurchase
agreement, the Fund would acquire an underlying debt obligation for a relatively
short period (usually not more than seven days) subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the securities
underlying a repurchase agreement of the Fund is monitored on an ongoing basis
by Mitchell Hutchins to ensure that the value is at least equal at all times to
the total amount of the repurchase obligation, including interest. Mitchell
Hutchins also monitors, on an ongoing basis to evaluate potential risks, the
creditworthiness of those banks and dealers with which the Fund enters into
repurchase agreements.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. To secure prices or yields deemed
advantageous at a particular time, the Fund may purchase securities on a
when-issued or delayed-delivery basis, in which case delivery of the securities
occurs beyond the normal settlement period; payment for or delivery of the
securities would be made prior to the reciprocal delivery or payment by the
other party to the transaction. The Fund enters into when-issued or
delayed-delivery transactions for the purpose of acquiring securities and not
for the purpose of leverage. When-issued securities purchased by the Fund may
include securities purchased on a 'when, as and if issued' basis under which the
issuance of the securities depends on the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization or debt restructuring. The
Fund will establish with its custodian, or with a designated sub-custodian, a
segregated account consisting of cash, securities issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities ('Government
Securities') or other liquid high-grade debt obligations in an amount equal to
the amount of its when-issued or delayed-delivery purchase commitments.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investing in the Fund involves risks and special considerations, such as those
described below:
LIMITS OF ASSET ALLOCATION STRATEGY. Although it seeks total return, consisting
of both capital appreciation and current income, in following its asset
allocation strategy, the Fund may not achieve as high a level of either capital
appreciation or current income as a fund that has only one of those objectives
as its primary objective. In addition, qualification as a regulated investment
company for federal income tax purposes may limit the Fund's ability to adhere
rigidly to the recommendations of the Allocation Model. See 'Asset Allocation
Strategy' above.
INVESTMENT IN COMMON STOCKS. Although the Allocation Model is designed to
reduce the volatility inherent in a common stock portfolio, to the extent the
Fund's assets are committed to the Stock Segement, the share price of the Fund
can be expected to be volatile and investors should be able to tolerate sudden,
sometimes substantial fluctuations in the value of their investment. Because of
the risks associated with common stock investments, the Fund is intended to be a
long term investment vehicle and is not designed to provide investors with a
means of
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PAINEWEBBER TACTICAL ALLOCATION FUND
speculating on short-term stock market movements.
INDEX INVESTING AND OPEN-END INVESTMENT COMPANIES. While the Fund through the
Stock Segment attempts to replicate, before deduction of operating expenses, the
investment results of the S&P 500 Index, the investment results of the Stock
Segment generally are not identical to those of the designated index. Deviations
from the performance of the S&P 500 Index may result from shareholder purchases
and redemptions of shares of the Fund that occur daily, as well as from the
expenses borne by the Fund. Shareholder purchases and redemptions result in
daily net cash inflows to or outflows from the Fund. To the extent that a cash
reserve is held to meet expected redemptions or pending investment in portfolio
securities, to the extent that portfolio securities must be sold to meet
redemption requests (with resulting brokerage costs), and to the extent that
purchases and sales of portfolio securities are made to conform the Stock
Segment's holdings more closely to the relative weightings of stocks in the S&P
500 Index in response to cash inflows or outflows and associated brokerage costs
are incurred, these daily inflows or outflows of cash may increase the deviation
between the Stock Segment's investment results and the price and yield
performance of the S&P 500 Index.
INVESTMENT IN FOREIGN SECURITIES. Since the S&P 500 Index includes common
stocks of foreign issuers, to the extent that Fund assets are committed to the
Stock Segment, the Fund is subject to considerations and potential risks not
typically associated with investing in securities issued exclusively by domestic
corporations. The values of foreign investments are affected by changes in
currency exchange rates or exchange control regulations, restrictions or
prohibitions on the repatriation of foreign currencies, application of foreign
tax laws, including withholding taxes, changes in governmental administration or
economic or monetary policy (in the United States or abroad) or changed
circumstances in dealings between nations. Investments in foreign companies
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.
STOCK INDEX OPTIONS. Stock index options are subject to position and exercise
limits and other regulations imposed by the exchange on which they are traded.
If the Fund writes a stock index option, it may terminate its obligation by
effecting a closing purchase transaction, which is accomplished by purchasing an
option of the same series as the option previously written. The ability of the
Fund to engage in closing purchase transactions with respect to stock index
options depends on the existence of a liquid secondary market. Although the Fund
generally purchases or writes stock index options only if a liquid secondary
market for the options purchased or sold appears to exist, no such secondary
market may exist, or the market may cease to exist at some future date, for some
options. No assurance can be given that a closing purchase transaction can be
effected when the Fund desires to engage in such a transaction.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. In entering into
transactions involving futures contracts and options on those contracts, the
Fund is subject to a number of risks and special considerations. The successful
use of futures contracts and options on those contracts draws upon Mitchell
Hutchins' special skills and experience with respect to those instruments.
Should markets move in an unexpected manner, the Fund may not achieve the
anticipated benefits of futures contracts or options on those contracts and thus
be in a less advantageous position than if those strategies had not been used.
For a number of reasons, the price of futures may not correlate perfectly with
the movement in the underlying index or security owing to certain market
distortions. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions that would distort the normal relationship between the underlying
index or security and the futures markets. Second, from the point of view of
speculators, the deposit requirements in the futures market are less onerous
than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market also may cause temporary
price distortions. Owing to the possibility of price distortions in the futures
market and because of the imperfect correlation between movements in the
underlying index or security and movements in the price of futures contracts,
even a correct forecast of general market trends may not result in a successful
hedging transaction.
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Certain futures contracts and options on futures contracts are subject to no
daily price fluctuation limits so that adverse market movements could continue
with respect to those instruments to an unlimited extent over a period of time.
The Fund's ability to dispose of its positions in futures contracts and options
on those contracts depends on the availability of active markets in those
instruments. Markets in options and futures with respect to a number of
securities are relatively new and still developing. Mitchell Hutchins cannot now
predict the amount of trading interest that may exist in the future in various
types of futures contracts and options. Futures and options may be closed out
only on the exchange on which the contract was entered (or a linked exchange) so
that no assurance can be given that the Fund will be able to utilize these
instruments effectively for the purposes described above. In addition, although
the Fund anticipates that its options and futures transactions does not prevent
the Fund from qualifying as a regulated investment company for federal income
tax purposes, the Fund's ability to engage in options and futures transactions
may be limited by this tax consideration. See 'Dividends, Distributions and
Taxes -- Taxes.' In writing options, the Fund is subject to the risk of loss
resulting from the difference between the premium received for the option and
the price of the futures contract underlying the option that the Fund must
purchase or deliver upon exercise of the option.
REPURCHASE AGREEMENTS. In entering into a repurchase agreement, the Fund bears
a risk of loss in the event that the other party to the transaction defaults on
its obligations and the Fund is delayed or prevented from exercising its rights
to dispose of the underlying securities, including the risk of a possible
decline in the value of the underlying securities during the period in which the
Fund seeks to assert its rights to them, the risk of incurring expenses
associated with asserting those rights and the risk of losing all or a part of
the income from the agreement.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. Securities purchased on a
when-issued or delayed-delivery basis may expose the Fund to risk because the
securities may experience fluctuations in value prior to their actual delivery.
The Fund does not accrue income with respect to a when-issued or
delayed-delivery security prior to its stated delivery date. Purchasing
securities on a when-issued or delayed-delivery basis can involve the additional
risk that the yield available in the market when the delivery takes place may be
higher than that obtained in the transaction itself. Purchases of securities on
a when-issued basis when the Fund is substantially fully invested may result in
increased fluctuations in the Fund's net asset value per share.
PORTFOLIO TRANSACTIONS AND TURNOVER
The Board of Trustees of the Trust has determined that, to the extent consistent
with applicable provisions of the 1940 Act and rules and exemptions thereunder,
transactions for the Fund may be executed through PaineWebber if, in the
judgment of Mitchell Hutchins, the use of PaineWebber is likely to result in
price and execution at least as favorable to the Fund as those obtainable
through other qualified broker-dealers, and if, in the transaction, PaineWebber
charges the Fund a fair and reasonable rate consistent with that charged to
comparable unaffiliated customers in similar transactions.
The Fund retains the right to sell securities in accordance with recommendations
generated by the Allocation Model irrespective of how long they have been held.
For the fiscal years ended August 31, 1995 and August 31, 1994, the Fund's
portfolio turnover rates were 53.02% and 4.17%, respectively. An annual turnover
rate of 100% would occur if all of the securities held by the Fund are replaced
once during a period of one year. Higher portfolio turnover rates can result in
corresponding increases in transaction costs, may make it more difficult for the
Fund to qualify as a regulated investment company for federal income tax
purposes and may cause shareholders of the Fund to recognize gains for federal
income tax purposes. See 'Dividends, Distributions and Taxes -- Taxes.'
Assuming that the Allocation Model does not recommend a reallocation of assets
among the Segments, securities are sold from the Stock Segment only to reflect
certain administrative changes in the S&P 500 Index (including mergers or
changes in the composition of the S&P 500 Index) or to accommodate cash flows
into and out of the Fund while maintaining the similarity of the Stock Segment
to its benchmark. Similarly, assets are purchased or sold for each Segment
monthly, as described above, in order to accommodate cash flows and to rebalance
assets among the Segments.
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PURCHASES
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GENERAL. Class A shares are sold to investors subject to an initial sales
charge. Class B shares are sold without an initial sales charge but are subject
to higher ongoing expenses than Class A shares and a contingent deferred sales
charge payable upon certain redemptions. Class B shares automatically convert to
Class A shares approximately six years after issuance. Class C shares are sold
without an initial sales charge but are subject to a 1% contingent deferred
sales charge for redemptions made within one year and to higher ongoing expenses
than Class A shares and do not convert into another Class. See 'Flexible Pricing
System' and 'Conversion of Class B Shares.'
Shares of the Fund are available through PaineWebber and its correspondent firms
or, for shareholders who are not PaineWebber clients, through the Transfer
Agent. Investors may contact a local PaineWebber office to open an account. The
minimum initial investment is $1,000, and the minimum for additional purchases
is $100. These minimums may be waived or reduced for investments by employees of
PaineWebber or its affiliates, certain pension plans and retirement accounts and
participants in the Fund's automatic investment plan. Purchase orders will be
priced at the net asset value per share next determined (see 'Valuation of
Shares') after the order is received by PaineWebber's New York City offices or
by the Transfer Agent, plus any applicable sales charge for Class A shares. The
Fund and Mitchell Hutchins reserve the right to reject any purchase order and to
suspend the offering of Fund shares for a period of time.
When placing purchase orders, investors should specify whether the order is for
Class A, Class B or Class C shares. All share purchase orders that fail to
specify a Class will automatically be invested in Class A shares.
PURCHASES THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS. Purchases through
PaineWebber investment executives or correspondent firms may be made in person
or by mail, telephone or wire; the minimum wire purchase is $1 million.
Investment executives and correspondent firms are responsible for transmitting
purchase orders to PaineWebber's New York City offices promptly. Investors may
pay for purchases with checks drawn on U.S. banks or with funds held in
brokerage accounts at PaineWebber or its correspondent firms. Payment is due on
the third Business Day after the order is received at PaineWebber's New York
City offices. A 'Business Day' is any day, Monday through Friday, on which the
New York Stock Exchange, Inc. ('NYSE') is open for business.
PURCHASES THROUGH THE TRANSFER AGENT. Investors who are not PaineWebber clients
may purchase shares of the Fund through the Transfer Agent. Shares of the Fund
may be purchased, and an account with the Fund established, by completing and
signing the purchase application at the end of this Prospectus and mailing it,
together with a check to cover the purchase, to the Transfer Agent: PFPC Inc.,
Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington, Delaware 19899.
Subsequent investments need not be accompanied by an application.
INITIAL SALES CHARGE -- CLASS A SHARES. The public offering price of Class A
shares is the next determined net asset value, plus any applicable sales charge,
which will vary with the size of the purchase as shown in the table below.
Mitchell Hutchins may at times agree to reallow higher discounts to PaineWebber,
as exclusive dealer for the Fund's shares, than those shown in the table below.
To the extent PaineWebber or any dealer receives 90% or more of the sales
charge, it may be deemed an 'underwriter' under the 1933 Act.
INITIAL SALES CHARGE SCHEDULE --
CLASS A SHARES
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE DISCOUNT TO
OF SELECTED DEALERS
----------------------------- AS A PERCENTAGE
OFFERING NET AMOUNT INVESTED OF OFFERING
AMOUNT OF PURCHASE PRICE (NET ASSET VALUE) PRICE
- ------------------------ -------- ------------------- ----------------
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.25%
$50,000 to $99,999 4.00 4.17 3.75
$100,000 to $249,999 3.50 3.63 3.25
$250,000 to $499,999 2.50 2.56 2.25
$500,000 to $999,999 1.75 1.78 1.50
$1,000,000 and over (1) None None 1.00
</TABLE>
- ------------------------
(1) Mitchell Hutchins pays compensation to PaineWebber out of its own resources.
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SALES CHARGE WAIVERS -- CLASS A SHARES. Class A shares of the Fund are
available without a sales charge through exchanges for Class A shares of most
other PaineWebber mutual funds. See 'Exchanges.' In addition, Class A shares may
be purchased without a sales charge by employees, directors and officers of
PaineWebber or its affiliates, directors or trustees and officers of any
PaineWebber mutual fund, their spouses, parents and children and advisory
clients of Mitchell Hutchins. Class A shares may also be purchased without a
sales charge by employee benefit plans qualified under section 401 or 403(b) of
the Internal Revenue Code (the 'Code'), including salary reduction plans
qualified under section 401(k) of the Code, subject to minimum requirements
established by Mitchell Hutchins with respect to number of employees or amount
of purchase. Currently, the employers establishing the plan must have 100 or
more eligible employees or the amount invested or to be invested during the
subsequent 13-month period in the Fund or any other PaineWebber mutual fund must
total at least $1 million. If investments by an employee benefit plan without a
sales charge are made through a dealer (including PaineWebber) who has executed
a dealer agreement with Mitchell Hutchins, Mitchell Hutchins may make a payment,
out of its own resources, to the dealer in an amount not to exceed 1% of the
amount invested.
Class A shares also may be purchased without a sales charge if the purchase is
made through a PaineWebber investment executive who formerly was employed as a
broker with another firm registered as a broker-dealer with the SEC, provided
(1) the purchaser was the investment executive's client at the competing
brokerage firm, (2) within 90 days of the purchase of Class A shares the
purchaser redeemed shares of one or more mutual funds for which that competing
firm or its affiliates was principal underwriter, provided the purchaser either
paid a sales charge to invest in those funds, paid a contingent deferred sales
charge upon redemption or held shares of those funds for the period required not
to pay the otherwise applicable contingent deferred sales charge and (3) the
total amount of shares of all PaineWebber mutual funds purchased under this
sales charge waiver does not exceed the amount of the purchaser's redemption
proceeds from the competing firm's funds. To take advantage of this waiver, an
investor must provide satisfactory evidence that all the above-noted conditions
are met. Qualifying investors should contact their PaineWebber investment
executives for more information.
Certificate holders of unit investment trusts ('UITs') sponsored by PaineWebber
may acquire Class A shares of the Fund without regard to minimum investment
requirements and without sales charges by electing to have dividends and other
distributions from their UIT investment automatically invested in Class A
shares.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES. Purchases of Class A shares
of $1 million or more may be made without a sales charge. Purchases of Class A
shares of two or more PaineWebber mutual funds may be combined for the purpose,
and the right of accumulation also applies to such purchases. See 'Reduced Sales
Charge Plans -- Class A Shares' below. If a shareholder redeems any Class A
shares that were purchased without a sales charge by reason of a purchase of $1
million or more within one year after the date of purchase, a contingent
deferred sales charge will be applied to the redemption. The Class A contingent
deferred sales charge will be equal to 1% of the lower of (a) the net asset
value of the shares at the time of purchase or (b) the net asset value of the
shares at the time of redemption. Class A shares of the Fund held one year or
longer, and Class A shares of the Fund acquired through reinvestment of
dividends or capital gains distributions will not be subject to this contingent
deferred sales charge. The contingent deferred sales charge for Class A shares
of the Fund will be waived for redemptions in connection with the systematic
withdrawal plan, subject to the limitations described below under 'Other
Services and Information -- Systematic Withdrawal Plan.' This contingent
deferred sales charge does not apply to redemptions of Class A shares purchased
prior to November 10, 1995.
Class A shares of the Fund that are purchased without a sales charge may be
exchanged for Class A shares of another PaineWebber mutual fund without the
imposition of a contingent deferred sales charge, although contingent deferred
sales charges may apply to the Class A shares acquired through an exchange. For
federal income tax purposes, the amount of the contingent deferred sales charge
will reduce the gain or increase the loss, as the case may be, on the amount
realized on the redemption. The
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amount of any contingent deferred sales charge will be paid to Mitchell
Hutchins.
REDUCED SALES CHARGE PLANS -- CLASS A SHARES. If an investor or eligible group
of related Fund investors purchases Class A shares of the Fund concurrently with
Class A shares of other PaineWebber mutual funds, the purchases may be combined
to take advantage of the reduced sales charge applicable to larger purchases. In
addition, the right of accumulation permits a Fund investor or eligible group of
related Fund investors to pay the lower sales charge applicable to larger
purchases by basing the sales charge on the dollar amount of Class A shares
currently being purchased, plus the net asset value of the investor's or group's
total existing Class A shareholdings in other PaineWebber mutual funds.
An 'eligible group of related Fund investors' includes an individual, the
individual's spouse, parents and children, the individual's individual
retirement account ('IRA'), certain companies controlled by the individual and
employee benefit plans of those companies, and trusts or Uniform Gifts to Minors
Act/Uniform Transfers to Minors Act accounts created by the individual or
eligible group of individuals for the benefit of the individual and/or the
individual's spouse, parents or children. The term also includes a group of
related employers and one or more qualified retirement plans of such employers.
For more information, an investor should consult the Statement of Additional
Information or contact a PaineWebber investment executive or correspondent firm
or the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES. The public offering price
of the Class B shares of the Fund is the next determined net asset value, and no
initial sales charge is imposed. A contingent deferred sales charge, however, is
imposed upon certain redemptions of Class B shares.
Class B shares that are redeemed will not be subject to a contingent deferred
sales charge to the extent that the value of such shares represents (1)
reinvestment of dividends or capital gain distributions or (2) shares redeemed
more than six years after their purchase. Otherwise, redemptions of Class B
shares will be subject to a contingent deferred sales charge. The amount of any
applicable contingent deferred sales charge will be calculated by multiplying
the lower of (a) the net asset value of the shares at the time of purchase or
(b) the net asset value of the shares at the time of redemption by the
applicable percentage shown in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
REDEMPTION SALES CHARGE
DURING APPLICABLE
- ------------------------------------ --------------------
<S> <C>
1st Year Since Purchase............. 5%
2nd Year Since Purchase............. 4
3rd Year Since Purchase............. 3
4th Year Since Purchase............. 2
5th Year Since Purchase............. 2
6th Year Since Purchase............. 1
7th Year Since Purchase............. None
</TABLE>
In determining the applicability and rate of any contingent deferred sales
charge, it will be assumed that a redemption is made first of Class B shares
representing capital appreciation, next of shares representing the reinvestment
of dividends and capital gain distributions and finally of other shares held by
the shareholder for the longest period of time. The holding period of Class B
shares acquired through an exchange with another PaineWebber mutual fund will be
calculated from the date that the Class B shares were initially acquired in one
of the other PaineWebber funds, and Class B shares being redeemed will be
considered to represent, as applicable, capital appreciation or dividend and
capital gain distribution reinvestments in such other funds. This will result in
any contingent deferred sales charge being imposed at the lowest possible rate.
For federal income tax purposes, the amount of the contingent deferred sales
charge will reduce the gain or increase the loss, as the case may be, realized
on the redemption. The amount of any contingent deferred sales charge will be
paid to Mitchell Hutchins.
SALES CHARGE WAIVERS -- CLASS B SHARES. The contingent deferred sales charge
will be waived for exchanges, as described below, and for redemptions in
connection with the Fund's systematic withdrawal plan; In addition, the
contingent deferred sales charge will be waived for a total or partial
redemption made within one year of the death of the shareholder. The contingent
deferred sales charge waiver is available where the decedent is either the sole
shareholder or owns the shares with his or her spouse as a joint tenant with
right of survivorship. This waiver applies only to redemption of shares held at
the time of death. The contingent deferred sales charge will also be waived in
connection with a lump-sum or other distribution in the case of an IRA, a
self-employed individual retirement plan (so-called 'Keogh Plan') or a custodial
account
---------------------
Prospectus Page 18
<PAGE>
<PAGE>
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PAINEWEBBER TACTICAL ALLOCATION FUND
under Section 403(b) of the Internal Revenue Code following attainment of age
591/2; any total or partial redemption resulting from a distribution following
retirement in the case of a tax-qualified retirement plan; and a redemption
resulting from a tax-free return of an excess contribution to an IRA.
Contingent deferred sales charge waivers will be granted subject to confirmation
(by PaineWebber in the case of shareholders who are PaineWebber clients or by
the Transfer Agent in the case of all other shareholders) of the shareholder's
status or holdings, as the case may be.
PURCHASES OF CLASS C SHARES. The public offering price of the Class C shares is
the next determined net asset value. No initial or contingent deferred sales
charge is imposed.
CONTINGENT DEFERRED SALES CHARGE -- CLASS C SHARES. If a shareholder redeems
Class C shares within a year after the date of the purchase, a contingent
deferred sales charge will be applied to the redemption. The contingent deferred
sales charge on Class C shares will be equal to 1.00% of the lower of: (a) the
net asset value of the shares at the time of purchase or (b) the net asset value
of the shares at the time of redemption. Class C shares of the Fund held one
year or longer and Class C shares of the Fund acquired through reinvestment of
dividends or capital gains distributions will not be subject to the contingent
deferred sales charge. The contingent deferred sales charge for Class C shares
of the Fund will be waived for redemptions in connection with the systematic
withdrawal plan, subject to the limitations described below under 'Other
Services and Information -- Systematic Withdrawal Plan.' This contingent
deferred sales charge does not apply to redemptions of Class C shares purchased
prior to November 10, 1995.
Class C shares of the Fund that are purchased without a sales charge may be
exchanged for Class C shares of another PaineWebber mutual fund without the
imposition of a contingent deferred sales charge, although contingent deferred
sales charges may apply to the Class C shares acquired through an exchange. For
federal income tax purposes, the amount of the contingent deferred sales charge
will reduce the gain or increase the loss, as the case may be, on the amount
realized on the redemption. The amount of any contingent deferred sales charge
will be paid to Mitchell Hutchins.
- --------------------------------------------------------------------------------
EXCHANGES
- --------------------------------------------------------------------------------
Shares of the Fund may be exchanged for shares of the corresponding Class of the
PaineWebber mutual funds listed below, or may be acquired through an exchange of
shares of the corresponding Class of those funds. No initial sales charge is
imposed on the shares being acquired, and no contingent deferred sales charge is
imposed on the shares being disposed of, through an exchange. However,
contingent deferred sales charges may apply to redemptions of Class B shares of
PaineWebber mutual funds acquired through an exchange. Exchanges may be subject
to minimum investment requirements of the fund into which exchanges are made.
Exchanges are permitted between the Fund and other PaineWebber mutual funds,
including:
INCOME FUNDS
PW Global Income Fund
PW High Income Fund
PW Investment Grade Income Fund
PW Low Duration U.S. Government
Income Fund
PW Strategic Income Fund
PW U.S. Government Income Fund
TAX-FREE INCOME FUNDS
PW California Tax-Free Income Fund
PW Municipal High Income Fund
PW National Tax-Free Income Fund
PW New York Tax-Free Income Fund
---------------------
Prospectus Page 19
<PAGE>
<PAGE>
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PAINEWEBBER TACTICAL ALLOCATION FUND
GROWTH FUNDS
PW Capital Appreciation Fund
PW Emerging Markets Equity Fund
PW Global Equity Fund
PW Growth Fund
PW Regional Financial Growth Fund
PW Small Cap Value Fund
PW Small Cap Growth Fund
GROWTH AND INCOME FUNDS
PW Balanced Fund
PW Growth and Income Fund
PW Utility Income Fund
PAINEWEBBER MONEY MARKET FUND
PaineWebber clients must place exchange orders through their PaineWebber
investment executives or correspondent firms unless the shares to be exchanged
are held in certificated form. Shareholders who are not PaineWebber clients or
who hold their shares in certificated form must place exchange orders in writing
with the Transfer Agent: PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box
8950, Wilmington, Delaware 19899. All exchanges will be effected based on the
relative net asset values per share next determined after the exchange order is
received at PaineWebber's New York City offices or by the Transfer Agent. See
'Valuation of Shares.' Shares of the Fund purchased through PaineWebber or its
correspondent firms may be exchanged only after the settlement date has passed
and payment for such shares has been made.
OTHER EXCHANGE INFORMATION. This exchange privilege may be modified or
terminated at any time, upon at least 60 days' notice when such notice is
required by SEC rules. See the Statement of Additional Information for further
details. This exchange privilege is available only in those jurisdictions where
the sale of the PaineWebber mutual fund shares to be acquired may be legally
made. Before making any exchange, shareholders should contact their PaineWebber
investment executives or correspondent firms or the Transfer Agent to obtain
more information and prospectuses of the PaineWebber mutual funds to be acquired
through the exchange.
- --------------------------------------------------------------------------------
REDEMPTIONS
- --------------------------------------------------------------------------------
As described below, Fund shares may be redeemed at their net asset value
(subject to any applicable contingent deferred sales charge) and redemption
proceeds will be paid after receipt of a redemption request as described below.
PaineWebber clients may redeem non-certificated shares through PaineWebber or
its correspondent firms; all other shareholders must redeem through the Transfer
Agent. If a redeeming shareholder owns shares of more than one Class, the shares
will be redeemed in the following order unless the shareholder specifically
requests otherwise: Class C shares, then Class A shares, and finally Class B
shares.
REDEMPTION THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS. PaineWebber clients may
submit redemption requests to their investment executives or correspondent firms
in person or by telephone, mail or wire. As the Fund's agent, PaineWebber may
honor a redemption request by repurchasing Fund shares from a redeeming
shareholder at the shares' net asset value next determined after receipt of the
request by PaineWebber's New York City offices. Within three Business Days after
receipt of the request, repurchase proceeds (less any applicable contingent
deferred sales charge) will be paid by check or credited to the shareholder's
brokerage account at the election of the shareholder. PaineWebber investment
executives and correspondent firms are responsible for promptly forwarding
redemption requests to PaineWebber's New York City offices.
PaineWebber reserves the right not to honor any redemption request, in which
case PaineWebber promptly will forward the request to the Transfer Agent for
treatment as described below.
REDEMPTION THROUGH THE TRANSFER AGENT. Fund shareholders who are not
PaineWebber clients or who wish to redeem certificated shares must
---------------------
Prospectus Page 20
<PAGE>
<PAGE>
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PAINEWEBBER TACTICAL ALLOCATION FUND
redeem their shares through the Transfer Agent by mail; other shareholders also
may redeem Fund shares through the Transfer Agent. Shareholders should mail
redemption requests directly to the Transfer Agent: PFPC Inc., Attn: PaineWebber
Mutual Funds, P.O. Box 8950, Wilmington, Delaware 19899. A redemption request
will be executed at the net asset value next computed after it is received in
'good order' and redemption proceeds will be paid within seven days of the
receipt of the request. 'Good order' means that the request must be accompanied
by the following: (1) a letter of instruction or a stock assignment specifying
the number of shares or amount of investment to be redeemed (or that all shares
credited to a Fund account be redeemed), signed by all registered owners of the
shares in the exact names in which they are registered, (2) a guarantee of the
signature of each registered owner by an eligible institution acceptable to the
Transfer Agent and in accordance with SEC rules, such as a commercial bank,
trust company or member of a recognized stock exchange, (3) other supporting
legal documents for estates, trusts, guardianships, custodianships, partnerships
and corporations and (4) duly endorsed share certificates, if any. Shareholders
are responsible for ensuring that a request for redemption is received in 'good
order.'
ADDITIONAL INFORMATION ON REDEMPTIONS. A shareholder who holds non-certificated
Fund shares may have redemption proceeds of $1 million or more wired to the
shareholder's PaineWebber brokerage account or a commercial bank account
designated by the shareholder. Questions about this option, or redemption
requirements generally, should be referred to the shareholder's PaineWebber
investment executive or correspondent firm, or to the Transfer Agent if the
shares are not held in a PaineWebber brokerage account. If a shareholder
requests redemption of shares which were purchased recently, the Fund may delay
payment until it is assured that good payment has been received. In the case of
purchases by check, this can take up to 15 days.
Because the Fund incurs certain fixed costs in maintaining shareholder accounts,
the Fund reserves the right to redeem all Fund shares in any shareholder account
of less than $500 net asset value. If the Fund elects to do so, it will notify
the shareholder and provide the shareholder the opportunity to increase the
amount invested to $500 or more within 60 days of the notice. The Fund will not
redeem accounts that fall below $500 solely as a result of a reduction in net
asset value per share.
Shareholders who have redeemed Class A shares may reinstate their Fund account
without a sales charge up to the dollar amount redeemed by purchasing Class A
Fund shares within 365 days of the redemption. To take advantage of this
reinstatement privilege, shareholders must notify their PaineWebber investment
executive or correspondent firm at the time the privilege is exercised.
- --------------------------------------------------------------------------------
CONVERSION OF CLASS B SHARES
- --------------------------------------------------------------------------------
A shareholder's Class B shares will automatically convert to Class A shares
approximately six years after the date of issuance, together with a pro rata
portion of all Class B shares representing dividends and other distributions
paid in additional Class B shares. The Class B shares so converted will no
longer be subject to the higher expenses borne by Class B shares. The conversion
will be effected at the relative net asset values per share of the two Classes
on the first Business Day of the month in which the sixth anniversary of the
issuance of the Class B shares occurs. See 'Valuation of Shares.' If a
shareholder effects one or more exchanges among Class B shares of the
PaineWebber mutual funds during the six-year period, the holding periods for the
shares so exchanged will be counted toward the six-year period.
---------------------
Prospectus Page 21
<PAGE>
<PAGE>
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PAINEWEBBER TACTICAL ALLOCATION FUND
- --------------------------------------------------------------------------------
OTHER SERVICES AND INFORMATION
- --------------------------------------------------------------------------------
Investors interested in the services described below should consult their
PaineWebber investment executives or correspondent firms or call the Transfer
Agent toll-free at 1-800-647-1568.
AUTOMATIC INVESTMENT PLAN. Shareholders may purchase shares of the Fund through
an automatic investment plan, under which an amount specified by the shareholder
of $50 or more each month will be sent to the Transfer Agent from the
shareholder's bank for investment in the Fund. In addition to providing a
convenient and disciplined manner of investing, participation in the automatic
investment plan enables the investor to use the technique of 'dollar cost
averaging.' When under the plan a shareholder invests the same dollar amount
each month, the shareholder will purchase more shares when the Fund's net asset
value per share is low and fewer shares when the net asset value per share is
high. Using this technique, a shareholder's average purchase price per share
over any given period will be lower than if the shareholder purchased a fixed
number of shares on a monthly basis during the period. Of course, investing
through the automatic investment plan does not assure a profit or protect
against loss in declining markets. Additionally, since the automatic investment
plan involves continuous investing regardless of price levels, an investor
should consider his or her financial ability to continue purchases through
periods of low price levels.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders who own Class A or Class C shares with
a value of $5,000 or more or non-certificated Class B shares with a value of
$20,000 or more may have PaineWebber redeem a portion of their shares monthly,
quarterly or semi-annually under the systematic withdrawal plan. No contingent
deferred sales charge will be imposed on such withdrawals for Class B shares.
The minimum amount for all withdrawals of Class A or Class C shares is $100, and
minimum monthly, quarterly and semi-annual withdrawal amounts for Class B shares
are $200, $400 and $600, respectively. Quarterly withdrawals are made in March,
June, September and December, and semi-annual withdrawals are made in June and
December. A Class B shareholder may not withdraw an amount exceeding 12%
annually of his or her 'Initial Account Balance,' a term that means the value of
the Fund account at the time the shareholder elects to participate in the
systematic withdrawal plan. A shareholder's participation in the systematic
withdrawal plan will terminate automatically if the Initial Account Balance
(plus the net asset value on the date of purchase of Fund shares acquired after
the election to participate in the systematic withdrawal plan), less aggregate
redemptions made other than pursuant to the systematic withdrawal plan, is less
than $20,000 in the case of Class B shares and $5,000 in the case of Class A or
Class C shares. No contingent deferred sales charge will be imposed on such
withdrawals within the first year after purchase for Class A shares purchased
pursuant to the sales charge waiver for purchases of $1 million or more or Class
C shares, provided that the Class A or Class C shareholder does not withdraw an
amount exceeding 12% in the first year after purchase of his or her Initial
Account Balance. Shareholders who receive dividends or other distributions in
cash may not participate in the systematic withdrawal plan. Purchases of
additional Fund shares concurrently with withdrawals are ordinarily
disadvantageous to shareholders because of tax liabilities and, for Class A
shares, sales charges.
INDIVIDUAL RETIREMENT ACCOUNTS. Shares of the Fund may be purchased through
IRAs available through the Fund. In addition, a Self-Directed IRA is available
through PaineWebber under which investments may be made in the Fund as well as
in other investments available through PaineWebber. Investors considering
establishing an IRA should review applicable tax laws and should consult their
tax advisers.
TRANSFER OF ACCOUNTS. If a shareholder holding shares of the Fund in a
PaineWebber brokerage account transfers his brokerage account to another firm,
the Fund shares normally will be transferred to an account with the Transfer
Agent. However, if the other firm has entered into a selected dealer agreement
with Mitchell Hutchins relating to the Fund, the shareholder may be able to hold
Fund shares in an account with the other firm.
---------------------
Prospectus Page 22
<PAGE>
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PAINEWEBBER TACTICAL ALLOCATION FUND
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. Dividends from net investment income and
distributions of net realized capital gains of the Fund, if any, are distributed
annually. Unless a shareholder instructs the Fund that dividends and capital
gains distributions on shares of any Class should be paid in cash and credited
to the shareholder's Account, dividends and capital gains distributions are
reinvested automatically at net asset value in additional shares of the same
Class. The Fund is subject to a 4% nondeductible excise tax measured with
respect to certain undistributed amounts of net investment income and capital
gains. If necessary to avoid the imposition of this tax, and if in the best
interests of its shareholders, the Fund will declare and pay dividends of its
net investment income and distributions of its net capital gains more frequently
than stated above. The per share dividends and distributions on Class A shares
are higher than those on Class B and Class C shares, as a result of the
distribution fees borne by Class B and Class C shares. Dividends on each Class
also might be affected differently by the allocation of other Class-specific
expenses. See 'Fee Table,' 'Purchase of Shares,' 'Distributor' and 'General
Information.'
TAXES. The Fund has qualified for the fiscal year ended August 31, 1995 to be
treated as a regulated investment company within the meaning of the Code and
intends to qualify for this treatment for each year. To qualify as a regulated
investment company for federal income tax purposes, the Fund limits its income
and investments so that (1) less than 30% of its gross income is derived from
the sale or disposition of stocks, other securities and certain financial
instruments (including certain forward contracts) that were held for less than
three months and (2) at the close of each quarter of the taxable year (a) not
more than 25% of the market value of the Fund's total assets is invested in the
securities (other than Government Securities) of a single issuer or of two or
more issuers controlled by the Fund that are engaged in the same or similar
trades or businesses or in related trades or businesses and (b) at least 50% of
the market value of the Fund's total assets is represented by (i) cash and cash
items, (ii) Government Securities and (iii) other securities limited in respect
of any one issuer to an amount not greater in value than 5% of the market value
of the Fund's total assets and to not more than 10% of the outstanding voting
securities of the issuer. The requirements for qualification may cause the Fund
to restrict the degree to which it sells or otherwise disposes of stocks, other
securities and certain financial instruments held for less than three months. If
the Fund qualifies as a regulated investment company and meets certain
distribution requirements, the Fund will not be subject to federal income tax on
its net investment income and net realized capital gains that it distributes to
its shareholders.
Dividends paid by the Fund out of net investment income and distributions of net
realized short-term capital gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested in additional Fund shares.
Distributions of net realized long-term capital gains are taxable to
shareholders as long-term capital gain, regardless of how long shareholders have
held their shares and whether the distributions are received in cash or
reinvested in additional shares. Dividends and distributions paid by the Fund
generally do not qualify for the federal dividends received deduction for
corporate shareholders.
Statements as to the tax status of each Fund shareholder's dividends and
distributions are mailed annually. Shareholders also receive, as appropriate,
various written notices after the close of the Fund's taxable year regarding the
tax status of certain dividends and distributions that were paid (or that are
treated as having been paid) by the Fund to its shareholders during the
preceding taxable year, including the amount of dividends that represent
interest derived from Government Securities.
Shareholders are urged to consult their tax advisors regarding the application
of federal, state, local and foreign tax laws to their specific situations
before investing in the Fund.
---------------------
Prospectus Page 23
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PAINEWEBBER TACTICAL ALLOCATION FUND
- --------------------------------------------------------------------------------
VALUATION OF SHARES
- --------------------------------------------------------------------------------
Each Class' net asset value per share is calculated by , the Fund's
custodian, on each day, Monday through Friday, except that net asset value is
not computed on a day in which no orders to purchase, sell, exchange or redeem
Fund shares have been received, any day on which there is not sufficient trading
in the Fund's portfolio securities that the Fund's net asset values per share
might be materially affected by changes in the value of such portfolio
securities or on days on which the NYSE is not open for trading. The NYSE is
currently scheduled to be closed on New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas,
and on the preceding Friday when one of those holidays falls on a Saturday or on
the subsequent Monday when one of those holidays falls on a Sunday.
Net asset value per share of a Class is determined as of the close of regular
trading on the NYSE, and is computed by dividing the value of the Fund's net
assets attributable to that Class by the total number of shares outstanding of
that Class. Generally, the Fund's investments are valued at market value or, in
the absence of a market value, at fair value as determined by or under the
direction of the Trustees.
A security that is primarily traded on a stock exchange is valued at the last
sale price on that exchange or, if no sales occurred during the day, at the
current quoted bid price. Short-term investments that mature in 60 days or less
are valued on the basis of amortized cost (which involves valuing an investment
at its cost and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the effect of fluctuating interest rates on
the market value of the investment) when the Board of Trustees has determined
that amortized cost represents fair value. An option that is written by the Fund
is generally valued at the last sale price or, in the absence of the last sale
price, the last offer price. An option that is purchased by the Fund is
generally valued at the last sale price or, in the absence of the last sale
price, the last bid price. The value of a futures contract is equal to the
unrealized gain or loss on the contract that is determined by marking the
contract to the current settlement price for a like contract on the valuation
date of the futures contract. A settlement price may not be used if the market
makes a limit move with respect to a particular futures contract or if the
securities underlying the futures contract experience significant price
fluctuations after the determination of the settlement price. When a settlement
price cannot be used, futures contracts will be valued at their fair market
value as determined by or under the direction of the Board of Trustees.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
The Trust's board of trustees, as part of its overall management responsibility,
oversees various organizations responsible for the Fund's day-to-day management.
Mitchell Hutchins, the Fund's investment adviser and administrator, supervises
all aspects of the Fund's operations. Mitchell Hutchins receives a monthly fee
for its services, computed daily and payable monthly, at an annual rate of .50%
of the Fund's average daily net assets on assets up to but not including $250
million and .45% thereafter.
The Fund incurs other expenses and, for the fiscal year ended August 31, 1995,
the Fund's total expenses for its Class A and Class C shares, stated as a
percentage of average net assets were 1.46% and 2.22%, respectively.
Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New York
10019. It is a wholly owned subsidiary of PaineWebber, which is in turn a wholly
owned subsidiary of Paine Webber Group Inc., a publicly owned financial
---------------------
Prospectus Page 24
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<PAGE>
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PAINEWEBBER TACTICAL ALLOCATION FUND
services holding company. As of November 30, 1995, Mitchell Hutchins was adviser
or sub-adviser of 38 investment companies with 70 separate portfolios and
aggregate assets of over $29.6 billion.
As the Fund's investment adviser, Mitchell Hutchins manages the Fund's portfolio
in accordance with the investment objective and stated policies of the Fund and
makes investment decisions for the Fund. Mitchell Hutchins also provides the
Fund with investment officers who are authorized by the Trustees to determine
purchases and sales of securities on behalf of the Fund and employs a
professional staff of portfolio managers who draw upon a variety of sources for
research information for the Fund.
T. Kirkham Barneby is responsible for the asset allocation decisions for the
Fund. Mr. Barneby is a Managing Director and Chief Investment Officer --
Quantitative Investments of Mitchell Hutchins. Mr. Barneby rejoined Mitchell
Hutchins in 1994, after being with Vantage Global Management for one year.
During the eight years that Mr. Barneby was previously with Mitchell Hutchins,
he was Senior Vice President responsible for quantitative management and asset
allocation models. Before joining Mitchell Hutchins, Mr. Barneby served as
Director of Pension Investment Strategy at the Continental Group in Stamford,
Connecticut and has held positions in the Economics Department at both Citibank,
N.A. and Merrill Lynch.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by Mitchell Hutchins, investments of the type the
Fund may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by Mitchell Hutchins are prepared to invest in, or
desire to dispose of, the same security, available investments or opportunities
for sales are allocated in a manner believed by Mitchell Hutchins to be
equitable to each. In some cases, this procedure may adversely affect the price
paid or received by the Fund or the size of the position obtained or disposed of
by the Fund.
Mitchell Hutchins investment personnel 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.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins is the distributor of Fund shares
and has appointed PaineWebber as the exclusive dealer for the sale of those
shares. Under separate plans of distribution pertaining to the Class A shares,
Class B shares and Class C shares ('Class A Plan,' 'Class B Plan' and 'Class C
Plan,' collectively, 'Plans'), the Fund pays Mitchell Hutchins monthly service
fees at the annual rate of 0.25% of the average daily net assets of each Class
of shares. The Fund pays Mitchell Hutchins monthly distribution fees at the
annual rate of 0.75% of the average daily net assets of the Class B shares and
Class C shares.
Under all three Plans, Mitchell Hutchins uses the service fees primarily to pay
PaineWebber for shareholder servicing, currently at the annual rate of 0.25% of
the aggregate investment amounts maintained in the Fund by PaineWebber clients.
PaineWebber passes on a portion of these fees to its investment executives to
compensate them for shareholder servicing that they perform and retains the
remainder to offset its own expenses in servicing and maintaining shareholder
accounts. These expenses may include costs of the PaineWebber branch office in
which the investment executive is based, such as rent, communications equipment,
employee salaries and other overhead costs.
Mitchell Hutchins uses the distribution fees under the Class B and Class C Plans
to offset the commissions it pays to PaineWebber for selling the Fund's Class B
and Class C shares. PaineWebber passes on to its investment executives a portion
of these commissions and retains the remainder to offset its expenses in selling
Class B and Class C shares. These expenses may include the branch office costs
noted above. In addition, Mitchell Hutchins uses the distribution fees under the
Class B and Class C Plans to offset the Fund's marketing costs attributable to
such Classes, such as preparation of sales literature, advertising and printing
and distributing prospectuses and other shareholder materials to prospective
investors. Mitchell Hutchins also may use the distribution fees to pay
additional compensation to PaineWebber and other costs allocated to Mitchell
Hutchins' and PaineWebber's distribution activities, including employee
salaries, bonuses and other overhead expenses.
Mitchell Hutchins expects that, from time to time, PaineWebber will pay
shareholder servicing fees and sales commissions to its investment executives at
the time of sale of Class C shares of the Fund. If PaineWebber makes such
payments, it will retain the service and distribution fees on
---------------------
Prospectus Page 25
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<PAGE>
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PAINEWEBBER TACTICAL ALLOCATION FUND
Class C shares until it has been reimbursed for its sales commissions and
thereafter will pass a portion of the service and distribution fees on Class C
shares on to its investment executives.
Mitchell Hutchins receives the proceeds of the initial sales charge paid upon
the purchase of Class A shares and the contingent deferred sales charge paid
upon certain redemptions of Class B shares, and may use these proceeds for any
of the distribution expenses described above. See 'Purchases'.
During the period they are in effect, the Plans and related distribution
contracts pertaining to each Class of shares ('Distribution Contracts') obligate
the Fund to pay service and distribution fees to Mitchell Hutchins as
compensation for its service and distribution activities, not as reimbursement
for specific expenses incurred. Thus, even if Mitchell Hutchins' expenses exceed
its service or distribution fees, the Fund will not be obligated to pay more
than those fees and, if Mitchell Hutchins' expenses are less than such fees, it
will retain its full fees and realize a profit. The Fund will pay the service
and distribution fees to Mitchell Hutchins until either the applicable Plan or
Distribution Contract is terminated or not renewed. In that event, Mitchell
Hutchins' expenses in excess of service and distribution fees received or
accrued through the termination date will be Mitchell Hutchins' sole
responsibility and not obligations of the Fund. In their annual consideration of
the continuation of the Fund's Plans, the board of trustees will review the Plan
and Mitchell Hutchins' corresponding expenses for each Class separately from the
Plans and corresponding expenses for the other two Classes.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The Fund performs a standardized computation of annualized total return and may
show this return in advertisements or promotional materials. Standardized return
shows the change in value of an investment in the Fund as a steady compound
annual rate of return. Actual year-by-year returns fluctuate and may be higher
or lower than standardized return. Standardized return for Class A shares
reflects deduction of the Fund's maximum initial sales charge at the time of
purchase, and standardized return for Class B and Class C shares reflect
deduction of the applicable contingent deferred sales charge imposed on a
redemption of shares held for the period. One-, five- and ten-year periods will
be shown, unless the class has been in existence for a shorter period. Total
return calculations assume reinvestment of dividends and other distributions.
The Fund may use other total return presentations in conjunction with
standardized return. These may cover the same or different periods as those used
for standardized return and may include cumulative returns, average annual
rates, actual year-by-year rates or any combination thereof. Non-standardized
return does not reflect initial or contingent deferred sales charges and would
be lower if such charges were included.
The Fund will include performance data for Class A, Class B and Class C shares
in any advertisements or promotional materials including Fund performance data.
Total return and yield information reflects past performance and does not
necessarily indicate future results. Investment return and principal values will
fluctuate, and proceeds upon redemption may be more or less than a shareholder's
cost.
---------------------
Prospectus Page 26
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PAINEWEBBER TACTICAL ALLOCATION FUND
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST. The Trust was formed as a business trust pursuant to
a Declaration of Trust, as amended from time to time (the 'Declaration'), under
the laws of The Commonwealth of Massachusetts on March 28, 1991. The Fund
commenced operations on July 22, 1992. The Declaration authorizes the Trust's
Board of Trustees to create separate series, and within each series separate
Classes, of an unlimited number of shares of beneficial interest, par value
$.001 per share. As of the date of this Prospectus, the Trustees have
established several such series, representing interests in the Fund described in
this Prospectus and in several other series.
When issued, Fund shares will be fully paid and non-assessable. Shares are
freely transferable and have no pre-emptive, subscription or conversion rights.
Each Class represents an identical interest in the Fund's investment portfolio.
As a result, the Classes have the same rights, privileges and preferences,
except with respect to: (1) the designation of each Class; (2) the effect of the
respective sales charges, if any, for each Class; (3) the distribution and/or
service fees, if any, borne by each Class; (4) the expenses allocable
exclusively to each Class; (5) voting rights on matters exclusively affecting a
single Class; and (6) the exchange privilege of each Class. The Board of
Trustees does not anticipate that there will be any conflicts among the
interests of the holders of the different Classes. The Trustees, on an ongoing
basis, will consider whether any conflict exists and, if so, take appropriate
action. Certain aspects of the shares may be changed, upon notice to Fund
shareholders, to satisfy certain tax regulatory requirements, if the change is
deemed necessary by the Trustees.
Shareholders of the 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 the aggregate shares of the
Trust may elect all of the Trustees. Generally, shares of the Trust will be
voted on a Trust-wide basis on all matters except those affecting only the
interests of one series, such as the Fund's management and investment advisory
agreement. In turn, shares of the Fund will be voted on a Fund-wide basis on all
matters except those affecting only the interests of one Class, such as the
terms of the Plan as it relates to a Class.
The Trust intends to hold no annual meetings of shareholders for the purpose of
electing Trustees unless, and until such time as, less than a majority of the
Trustees holding office have been elected by shareholders. Shareholders of
record of no less than two-thirds of the outstanding shares of the Trust may
remove a Trustee 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 for the
purpose of voting on the removal of a Trustee at the written request of holders
of 10% of the Trust's outstanding shares. Shareholders of the Fund who satisfy
certain criteria will be assisted by the Trust in communicating with other
shareholders in seeking the holding of the meeting.
To avoid additional operating costs and for investor convenience, the Fund does
not issue share certificates. Ownership of the Fund's shares is recorded on a
stock register by the Transfer Agent and shareholders have the same rights of
ownership with respect to such shares as if certificates had been issued.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One Heritage
Drive, North Quincy, Massachusetts 02171, is the custodian of the Fund's assets.
PFPC Inc., a subsidiary of PNC Bank, National Association, whose principal
business address is 400 Bellevue Parkway, Wilmington, Delaware 19809, is the
Fund's transfer and dividend disbursing agent.
CONFIRMATIONS AND STATEMENTS. Shareholders receive confirmations of purchases
and redemptions of Fund shares. PaineWebber clients receive statements at least
quarterly that report their Fund activity and consolidated year-end statements
that show all Fund transactions for that year. Shareholders who are not
PaineWebber clients receive quarterly statements from the Transfer Agent.
Shareholders also receive audited annual and unaudited semi-annual financial
statements of the Fund.
---------------------
Prospectus Page 27
<PAGE>
<PAGE>
Application Form
The PaineWebber [ ] [ ] - [ ] [ ] [ ] [ ] [ ] - [ ] [ ]
MUTUAL FUNDS PAINEWEBBER ACCOUNT NO.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTRUCTIONS DO NOT USE THIS FORM IF YOU WOULD LIKE YOUR ACCOUNT SERVICED THROUGH PAINEWEBBER. INSTEAD, CALL
YOUR PAINEWEBBER INVESTMENT EXECUTIVE (OR YOUR LOCAL PAINEWEBBER OFFICE TO OPEN AN ACCOUNT).
ALSO, DO NOT USE THIS FORM TO OPEN A RETIREMENT PLAN Return this completed form to:
ACCOUNT. FOR RETIREMENT PLAN FORMS OR FOR ASSISTANCE IN PFPC Inc.
COMPLETING THIS FORM CONTACT PFPC INC. AT 1-800-647-1568. P.O. Box 8950
Wilmington, Delaware 19899
ATTN: PaineWebber Mutual Funds
PLEASE PRINT
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<C> <S>
1 INITIAL INVESTMENT ($1,000 MINIMUM)
ENCLOSED IS A CHECK FOR:
$ (payable to PaineWebber Tactical Allocation Fund) to purchase Class A [ ] Class B [ ]
or Class C [ ] shares.
(Check one; if no Class is specified, Class A shares will be purchased)
A separate check is required for your investment in each Fund.
2 ACCOUNT REGISTRATION
</TABLE>
<TABLE>
<C> <S> <C> <C>
1. Individual
First Name Last Name MI Soc. Sec. No.
2. Joint Tenancy
First Name Last Name MI Soc. Sec. No.
('Joint Tenants with Rights of Survivorship' unless otherwise specified)
3. Gifts to Minors
Minor's Name Soc. Sec. No.
Under the Uniform Gifts Uniform Transfers
State of Residence of Minor to Minors Act to Minors Act
4. Other Registrations
Name Tax Ident. No.
5. If Trust, Date of Trust Instrument:
</TABLE>
Not valid without signature and Soc. Sec.
or Tax ID # on accompanying Form W-9
-- As joint tenants, use Lines 1 and 2
-- As custodian for a minor, use Lines 1
and 3
-- in the name of a corporation, trust
or other organization or any fiduciary
capacity, use Line 4
<TABLE>
<C> <S> <C> <C>
3 ADDRESS
U.S. Citizen [ ] Yes [ ] No*
Street
City State Zip Code *Country of Citizenship
4 DISTRIBUTION OPTIONS See Prospectus
Please select one of the following
[ ] Reinvest both dividends and capital gain distributions in additional shares
[ ] Pay dividends to my address above; reinvest capital gain distributions
[ ] Pay both dividends and capital gain distributions in cash to my address above
[ ] Reinvest dividends and pay capital gain distributions in cash to my address above
NOTE: If a selection is not made, both dividends and capital gain distributions will be
paid in additional Fund shares of the same Class.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<C> <S> <C> <C>
5 SPECIAL OPTIONS (For More Information -- Check Appropriate Box)
[ ] Prototype IRA Application [ ] Automatic Investment Plan [ ] Systematic Withdrawal Plan
6 RIGHTS OF ACCUMULATION -- CLASS A SHARES See Prospectus
Indicate here any other account(s) in the group of funds that qualify for the
cumulative quantity discount as outlined in the Prospectus.
</TABLE>
<TABLE>
<C> <S> <C> <C>
Fund Name Account No. Registered Owner
Fund Name Account No. Registered Owner
Fund Name Account No. Registered Owner
7 PLEASE INDICATE BELOW IF YOU ARE AFFILIATED WITH PAINEWEBBER
'Affiliated' persons are defined as officers, directors/trustees and employees of the
PaineWebber funds, PaineWebber or its affiliates, and their parents, spouses and children.
Nature of Relationship
8 SIGNATURE(S) AND TAX CERTIFICATION
I Warrant that I have full authority and am of legal age to purchase shares of the Fund(s)
specified and have received and read a current Prospectus of the Fund(s) and agree to its
terms. The Fund(s) and their Transfer Agent will not be liable for acting upon instructions
or inquiries believed genuine. Under penalties of perjury, I certify that (1) my taxpayer
identification number provided in this application is correct and (2) I am not subject to
backup withholding because (i) I have not been notified that I am subject to backup
withholding as a result of failure to report interest or dividends or (ii) the IRS has
notified me that I am no longer subject to backup withholding (STRIKE OUT CLAUSE (2) IF
INCORRECT).
</TABLE>
<TABLE>
<C> <S> <C> <C>
Individual (or custodian) Joint Registrant (if any) Date
Corporate Officer, Partner, Trustee, etc. Title
Date
9 INVESTMENT EXECUTIVE IDENTIFICATION (To Be Completed By Investment Executive Only)
Broker No./Name Branch Wire Code
( )
Branch Address Telephone
10 CORRESPONDENT FIRM IDENTIFICATION (To Be Completed By Correspondent Firm Only)
Name Address
MAIL COMPLETED FORM TO YOUR PAINEWEBBER INVESTMENT EXECUTIVE OR CORRESPONDENT FIRM OR TO:
PFPC INC., P.O. BOX 8950, WILMINGTON, DELAWARE 19899.
</TABLE>
<PAGE>
<PAGE>
Shares of the Fund can be exchanged for shares of the following PaineWebber
Mutual Funds:
INCOME FUNDS
PW Global Income Fund
PW High Income Fund
PW Investment Grade Income Fund
PW Low Duration U.S. Government Income Fund
PW Strategic Income Fund
PW U.S. Government Income Fund
TAX-FREE INCOME FUNDS
PW California Tax-Free Income Fund
PW Municipal High Income Fund
PW National Tax-Free Income Fund
PW New York Tax-Free Income Fund
GROWTH FUNDS
PW Capital Appreciation Fund
PW Emerging Markets Equity Fund
PW Global Equity Fund
PW Growth Fund
PW Regional Financial Growth Fund
PW Small Cap Value Fund
PW Small Cap Growth Fund
GROWTH AND INCOME FUNDS
PW Balanced Fund
PW Growth and Income Fund
PW Utility Income Fund
PAINEWEBBER MONEY MARKET FUND
----------------
A prospectus containing more complete information for any of the above funds,
including charges and expenses, can be obtained from a PaineWebber investment
executive or correspondent firm. Read the prospectus carefully before investing.
'c'1996 PaineWebber Incorporated
[Recycled Logo] Printed on recycled paper
PAINEWEBBER
TACTICAL ALLOCATION FUND
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
PROSPECTUS
January 1, 1996 (as supplemented
March 13, 1996)
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PAINEWEBBER TACTICAL ALLOCATION FUND
CLASS Y SHARES
1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019
PROSPECTUS -- JANUARY 1, 1996 (AS SUPPLEMENTED MARCH 13, 1996)
- --------------------------------------------------------------------------------
Professional Management
Portfolio Diversification
Dividend and Capital Gain Reinvestment
Low Minimum Investment
Suitable for Retirement Plans
The Fund is a series of PaineWebber Investment Trust ('Trust'). This Prospectus
concisely sets forth information a prospective investor should know about the
Fund before investing. Please retain this Prospectus for future reference. A
Statement of Additional Information dated January 1, 1996 (which is incorporated
by reference herein) has been filed with the Securities and Exchange Commission.
The Statement of Additional Information can be obtained without charge, and
further inquiries can be made, by contacting the Fund, your PaineWebber
investment executive or PaineWebber's correspondent firms or by calling toll-
free 1-800-647-1568.
The Class Y shares described in this Prospectus are currently offered for sale
primarily to participants in the INSIGHT Investment Advisory Program
('INSIGHT'), when purchased through that program. See 'Purchases.'
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
---------------------
Prospectus Page 1
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PAINEWEBBER TACTICAL ALLOCATION FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Prospectus Summary..................................................... 3
Financial Highlights................................................... 5
Investment Objective and Policies...................................... 6
Purchases.............................................................. 12
Redemptions............................................................ 13
Dividends, Distributions and Taxes..................................... 14
Valuation of Shares.................................................... 15
Management............................................................. 16
Performance Information................................................ 16
General Information.................................................... 17
</TABLE>
---------------------
Prospectus Page 2
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PAINEWEBBER TACTICAL ALLOCATION FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
See the body of the Prospectus for more information on topics discussed in
this summary.
WHO SHOULD INVEST. The Fund follows a systematic investment strategy that
actively allocates the Fund's assets among common stocks, U.S. Treasury Notes
and U.S. Treasury Bills and is designed for investors who are seeking total
return, consisting of long-term capital appreciation and current income. The
Fund's risk factors are summarized below and are described in more detail under
'Investment Objective and Policies -- Risk Factors and Special Considerations.'
While the Fund is not intended to provide a complete or balanced investment
program, it can serve as one component of an investor's long-term program to
accumulate assets, for instance, for retirement, college tuition or other major
goals.
ASSET ALLOCATION STRATEGY. The Fund follows an asset allocation strategy
involving investing among the following asset categories ('Segments'): (1) the
common stocks primarily included in the Standard & Poor's 500 Composite Stock
Price Index (the 'S&P 500 Index') and derivative instruments relating thereto
(the 'Stock Segment'), the performance of which, before deduction of operating
expenses, is intended to replicate as closely as possible the aggregate price
and yield performance of the S&P 500 Index; (2) 30-day U.S. Treasury Bills (the
'Cash Segment'); and (3) five-year U.S. Treasury Notes and derivative
instruments relating thereto (the 'Note Segment'). Asset allocations are
determined by Mitchell Hutchins based on relative rates of return among the
Segments. See 'Investment Objective and Policies.' The Fund's asset allocation
strategy is designed to afford investors the opportunity to seek total return
during all economic and financial market cycles, with a degree of volatility
lower than that of the equity market, utilizing a systematic, cost effective
asset allocation strategy. The Fund allocates its assets among the Segments in
accordance with an Asset Allocation Model (the 'Allocation Model') utilized by
Mitchell Hutchins. See 'Investment Objective and Policies -- Asset Allocation
Strategy.'
RISK FACTORS. There can be no assurance that the Fund will achieve its
investment objective, and the Fund's net asset value will fluctuate based upon
changes in the value of its portfolio securities.
Although the Fund will seek long term total return consisting of both capital
appreciation and current income, the Fund may not achieve as high a level of
either capital appreciation or current income as a fund that has only one of
those objectives as its primary objective. Because the benefits of the
Allocation Model, on which the Fund's investment decisions are based, are
expected to be realized only if the recommendations are followed over several
market cycles, the Fund is intended to be a long term investment vehicle and is
not designed to provide investors with a means of speculating on short term
market movements. The investment results of the Fund (and the Stock Segment) at
any time may be greater or less than those of the S&P 500 Index. Deviations from
the performance of the S&P 500 Index may result from the proportion of assets
then allocated to the Stock Segment in accordance with the Allocation Model,
purchases and redemptions of shares of the Fund that occur daily, as well as
from brokerage and other expenses borne by the Fund. Thus, no assurance can be
given that the Fund's investment objective will be achieved. The Fund may also
be subject to certain risks in using investment techniques and strategies such
as entering into futures contracts and options on futures contracts, entering
into transactions involving options on stock indexes, purchasing securities on a
when-issued or delayed delivery basis and entering into repurchase agreements.
See 'Investment Objective and Policies -- Risk Factors and Special
Considerations' at page 10 of this Prospectus.
---------------------
Prospectus Page 3
<PAGE>
<PAGE>
- -------------------------------------------------------------------------------
PAINEWEBBER TACTICAL ALLOCATION FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
EXPENSES OF INVESTING IN THE FUND. The following tables are intended to assist
investors in understanding the expenses associated with investing in the Fund.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum sales charge on purchases of shares (as a percentage
of public offering price)............................................. None
Sales charge on reinvested dividends................................... None
Maximum contingent deferred sales charge (as a percentage of
redemption proceeds).................................................. None
Maximum Annual Investment Advisory Fee Payable by Shareholders
through INSIGHT (as a percentage of average daily value
of shares held)....................................................... 1.50%
</TABLE>
ANNUAL FUND OPERATING EXPENSES(1)
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C>
Management fees......................................................... 0.50%
12b-1 fees.............................................................. 0.00
Other expenses.......................................................... 0.73
----
Total operating expenses................................................ 1.23%
----
----
</TABLE>
- ------------
(1) See 'Management' for additional information.
EXAMPLE OF EFFECT OF FUND EXPENSES
An investor would directly or indirectly pay the following expenses on a $1,000
investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C>
$ 28 $85 $144 $ 306
</TABLE>
This Example assumes that all dividends and other distributions are reinvested
and that the percentage amounts listed under Annual Fund Operating Expenses
remain the same in the years shown. The above tables and the assumption in the
Example of a 5% annual return are required by regulations of the Securities and
Exchange Commission ('SEC') applicable to all mutual funds; the assumed 5%
annual return is not a prediction of, and does not represent, the projected or
actual performance of Class Y shares of the Fund.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The actual expenses attributable to Class Y shares of the Fund will depend upon,
among other things, the level of average net assets and the extent to which the
Fund incurs variable expenses, such as transfer agency costs.
---------------------
Prospectus Page 4
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PAINEWEBBER TACTICAL ALLOCATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below provides selected per share data and ratios for one Class Y
share (prior to November 10, 1995, called 'Class C' shares) of the Fund for each
of the periods shown. This information is supplemented by the financial
statements and accompanying notes appearing in the Fund's Annual Report to
Shareholders for the fiscal year ended August 31, 1995, which are incorporated
by reference into the Statement of Additional Information. The financial
statements and notes, and the financial information for the fiscal year ended
August 31, 1995 appearing in the table below, have been audited by Ernst & Young
LLP, independent auditors, whose report thereon is included in the Annual Report
to Shareholders. The financial information for the year ended August 31, 1994
and the period prior thereto was audited by other auditors whose report thereon
was unqualified. Further information about the Fund's performance is also
included in the Annual Report to Shareholders, which may be obtained without
charge.
<TABLE>
<CAPTION>
CLASS Y#
-------------------------------------
FOR THE YEAR FOR THE PERIOD
ENDED MAY 10,
AUGUST 31, 1993`D'
-------------------- TO AUGUST 31,
1995** 1994 1993
---------- ------ --------------
<S> <C> <C> <C>
Net asset value, beginning of period......... $13.79 $13.52 $12.90
---------- ------ ------
Net investment income........................ 0.23 0.25 0.09
Net realized and unrealized gains from
investment transactions..................... 2.09 0.33 0.60
---------- ------ ------
Net increase from investment operations...... 2.32 0.58 0.69
---------- ------ ------
Dividends from net investment income......... (0.26) (0.27) (0.07)
Distributions from net realized gains
from investment transactions................ (0.97) (0.04) --
---------- ------ ------
Total dividends and distributions to
shareholders................................ (1.23) (0.31) (0.07)
---------- ------ ------
Net asset value, end of period............... $14.88 $13.79 $13.52
---------- ------ ------
---------- ------ ------
Total investment return(1)................... 18.79% 4.41% 5.30%
---------- ------ ------
---------- ------ ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........ $2,506 $3,880 $3,379
Ratios of expenses to average net assets..... 1.23% 0.88% 0.81%*
Ratios of net investment income to average
net assets.................................. 1.86% 1.90% 1.96%*
Portfolio turnover rate...................... 53% 4% 0%
</TABLE>
- ------------
# Prior to November 10, 1995, called 'Class C' shares.
`D' Commencement of offering of shares.
* Annualized.
** Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and capital
gain distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. Total returns for
periods of less than one year have not been annualized.
---------------------
Prospectus Page 5
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PAINEWEBBER TACTICAL ALLOCATION FUND
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
OBJECTIVE
The Fund's investment objective is total return, consisting of long-term capital
appreciation and current income. The Fund seeks to achieve its objective by
utilizing a systematic investment strategy that actively allocates the Fund's
assets among common stocks, U.S. Treasury Notes and U.S. Treasury Bills.
There can be no assurance that the Fund will achieve its investment objective.
The Fund's net asset value will fluctuate based upon changes in the value of its
portfolio securities. The Fund's investment objective and certain investment
limitations, as described in the Statement of Additional Information, are
fundamental policies and may not be changed without shareholder approval. All
other investment policies may be changed by the Trust's board of trustees
without shareholder approval.
ASSET ALLOCATION STRATEGY
The Fund is designed for investors seeking total return during all economic and
financial market cycles, with a degree of volatility lower than that of the
equity market, utilizing a systematic, cost-effective approach to allocating
assets among market segments. At the same time, the Fund provides individual
investors a means of dealing with the difficulties often associated with asset
allocation investing with an index component.
In seeking total return, the Fund follows an asset allocation strategy
contemplating shifts (sometimes frequent) among the following Segments: (i) the
Stock Segment, consisting primarily of the common stocks included in the S&P 500
Index and derivative instruments relating thereto, the performance of which,
before deduction of operating expenses, is intended to replicate as closely as
possible that of the S&P 500 Index; (ii) the Cash Segment, consisting of 30-day
U.S. Treasury Bills; and (iii) the Note Segment, consisting of five-year U.S.
Treasury Notes and derivative instruments relating thereto.
The Fund allocates its assets among the Segments in accordance with the
Allocation Model. The emphasis of the Allocation Model is to avoid or lower
exposure to the market in down economic cycles and to perform close to the broad
market in periods of strongly positive market performance. The asset allocation
mix for the Fund will be determined by Mitchell Hutchins at any given time on
the basis of the recommendations of the Allocation Model, except as described
below, which are determined in light of a quantitative assessment of the
expected performance of the Segments. The Fund is not managed as a balanced
portfolio, however, and may not maintain a portion of its investments in each of
the Segments at all times. Except for limited amounts always held in the Cash
Segment as described below, the Fund does not commit its assets simultaneously
to the Cash Segment and the Note Segment. Thus, during the course of a business
cycle, for example, the Fund may invest in the Stock Segment and the Cash
Segment, in the Stock Segment and the Note Segment, solely in the Stock Segment,
solely in the Cash Segment or solely in the Note Segment.
The Fund's assets are reallocated among the Segments at such times as are
mandated by the Allocation Model based on changes in projected rates of return.
If no reallocation is mandated, on the first business day of each month, any
material amounts in each Segment in excess of the amount mandated by the
Allocation Model resulting from appreciation or receipt of dividends,
distributions, interest payments and proceeds from securities maturing are
reallocated (or 'rebalanced') to the extent practicable among the Segments so as
to reestablish the recommended allocation among the Segments.
Cash inflows to the Fund during a month are invested in, and cash outflows from
the Fund during a month are derived from dispositions of assets in, each Segment
on a pro rata basis. In order to manage the Fund's portfolio most effectively,
cash flows into and out of the Stock Segment are managed to the extent
practicable through the use of stock index options, stock index futures
contracts and options on stock index futures contracts, as described below.
Simi-
---------------------
Prospectus Page 6
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PAINEWEBBER TACTICAL ALLOCATION FUND
larly, cash flows into and out of the Note Segment are managed to the extent
practicable through the use of five-year U.S. Treasury Note futures contracts
and options thereon. See 'Investment Strategies and Techniques -- Derivative
Instruments' below.
The Fund deviates from the published recommendations of the Allocation Model
only to the extent necessary (1) to maintain a limited amount of assets (not
expected to exceed 2% of its total assets) in the Cash Segment in order to have
highly liquid short-term securities available to pay Fund operating expenses and
dividends and distributions on its shares and to meet anticipated redemptions of
its shares and (2) to qualify as a regulated investment company for Federal
income tax purposes. With regard to the latter, investors should be aware that
in order to so qualify, the Fund must, among other things, derive less than 30%
of its gross income from the sale or disposition of stocks, other securities and
certain financial instruments held for less than three months. Thus, this
requirement may preclude the Fund from reallocating its assets when otherwise
mandated by the Allocation Model. In such event, the Fund would reallocate its
assets in accordance with the then current recommendations of the Allocation
Model as soon as the reallocation could be accomplished without jeopardizing the
Fund's qualification as a regulated investment company.
TYPES OF PORTFOLIO INVESTMENTS
CASH SEGMENT. Assets committed to the Cash Segment are invested to the extent
practicable in U.S. Treasury Bills having remaining maturities of 30 days or, if
no such instruments are then available for purchase at favorable prices, these
assets will be invested in U.S. Treasury Bills having remaining maturities as
close as possible to 30 days. U.S. Treasury Bills are entitled to the full faith
and credit of the U.S. Government as to payment of interest and principal.
NOTE SEGMENT. Assets committed to the Note Segment are invested to the extent
practicable in (1) U.S. Treasury Notes having five years remaining to maturity
at the beginning of the then current calendar year or, if no such instruments
are then available for purchase at favorable prices, these assets will be
invested in U.S. Treasury Notes having remaining maturities as close as possible
to five years at the beginning of the then current calendar year; and (2)
five-year U.S. Treasury Note futures contracts and options thereon. U.S.
Treasury Notes are entitled to the full faith and credit of the U.S. Government
as to payment of interest and principal.
STOCK SEGMENT. With respect to assets committed to the Stock Segment, the Fund
attempts to duplicate, before deduction of operating expenses, the investment
results of the S&P 500 Index. The S&P 500 Index is an index compiled by Standard
& Poor's Corporation ('S&P') that emphasizes large-capitalization companies. The
Stock Segment is not managed according to traditional methods of 'active'
investment management, which involve the buying and selling of securities based
on economic, financial and market analysis and investment judgment. Instead,
utilizing a 'passive' or 'indexing' investment approach, the Fund attempts in
the Stock Segment to duplicate the investment performance of the S&P 500 Index
through statistical procedures that involve holding substantially all 500 stocks
in approximately the same relative proportions as they are represented in the
S&P 500 Index, except as described below.
The S&P 500 Index is composed of 500 common stocks that are chosen by S&P on a
statistical basis. The composition of the S&P 500 Index is determined by S&P
based on such factors as the market capitalization and trading activity of each
stock and its adequacy as a representative of stocks in a particular industry
group, and may be changed from time to time. Each stock in the S&P 500 Index is
weighted by its market capitalization, which is the market price per share of
the stock multiplied by the number of shares outstanding. While most of the
stocks in the S&P 500 Index are issued by companies that are among the 500
largest companies in terms of market capitalization, some stocks are included
for diversification and are not among the 500 largest market capitalization
stocks. The inclusion of a stock in the S&P 500 Index in no way implies that S&P
believes the stock to be an attractive investment.
While there can be no guarantee that the Stock Segment's investment results will
precisely match those of the S&P 500 Index, Mitchell Hutchins believes that,
before deduction of operating expenses, there will be a very high correlation
between the returns generated by the Stock Segment and the S&P 500 Index. The
Fund attempts to achieve a correlation between the performance of the Stock
Segment and that of its benchmark index of at least 0.95, before
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PAINEWEBBER TACTICAL ALLOCATION FUND
deduction of operating expenses. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the Stock Segment's net asset value,
including the value of its dividend and capital gains distributions, increases
or decreases in exact proportion to changes in the S&P 500 Index. The Fund's
ability to correlate the performance of the Stock Segment with the S&P 500 Index
may be affected by, among other things, changes in securities markets, the
manner in which the S&P 500 Index is calculated by S&P and the timing of
purchases and redemptions. See 'Risk Factors and Special Considerations -- Index
Investing and Open-End Investment Companies' below. Mitchell Hutchins monitors
the correlation of the performance of the Stock Segment in relation to that of
the S&P 500 Index under the supervision of the Board of Trustees. In the
unlikely event that a high correlation is not achieved, the Board of Trustees
will take appropriate steps based on the reasons for the lower than expected
correlation. S&P is neither a sponsor of nor affiliated with the Fund.
INVESTMENT TECHNIQUES AND STRATEGIES
The Fund is authorized to engage in any one or more of the specialized
investment techniques and strategies described below:
DERIVATIVE INSTRUMENTS. The Fund anticipates that the Note Segment and the
Stock Segment will remain invested in five-year U.S. Treasury Notes or common
stocks, respectively, to the degree mandated by the Allocation Model. The Fund
may also invest its assets in stock index options, stock index futures contracts
and options on stock index futures contracts (with respect to the Stock Segment)
and five-year U.S. Treasury Note futures contracts and options thereon (with
respect to the Note Segment) in order to invest temporarily uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions or, in the case
of stock index options, to minimize trading costs. When the Fund has cash from
net new sales of Fund shares or holds a disproportionate amount of its assets in
the Cash Segment, it may enter into stock index futures or options thereon or
five-year U.S. Treasury Note futures contracts or options thereon to attempt to
increase its exposure to the appropriate asset class prior to purchasing
securities to the degree mandated by the Allocation Model. Strategies the Fund
could use to accomplish this include entering into long futures contracts,
writing put options and purchasing call options. When the Fund wishes to sell
securities, because of shareholder redemptions or otherwise, it may use futures
contracts or options to hedge against market risk until the sale can be
completed. These strategies could include entering into short futures contracts,
writing call options and purchasing put options. It is anticipated that the Fund
will continue to close out positions in these instruments on at least a
quarterly basis and reconstitute its portfolio with direct purchases or sales of
securities in accordance with the then current recommendations of the Allocation
Model. The Fund does not enter into futures contracts or options as part of a
temporary defensive strategy, such as lowering the Stock Segment's investment in
common stocks to protect against potential stock market declines, as this would
be inconsistent with the Allocation Model. See 'Stock Index Options' and
'Futures Contracts and Options on Futures Contracts' below.
STOCK INDEX OPTIONS. The Fund may purchase and write put and call options on
stock indexes listed on domestic securities exchanges (which indexes include
securities held in the Fund's portfolio) as a means of pursuing the Stock
Segment's exposure in equity markets without making direct purchases of equity
securities.
A stock index measures the movement of a certain group of stocks by assigning
relative values to the common stocks included in the index. Options on stock
indexes are generally similar to options on specific securities. Unlike those on
securities, however, options on stock indexes do not involve the delivery of an
underlying security; the option in the case of an option on a stock index
represents the holder's right to obtain from the writer in cash a fixed multiple
of the amount by which the exercise price exceeds (in the case of a put) or is
less than (in the case of a call) the closing value of the underlying stock
index on the exercise date.
When the Fund writes an option on a stock index, it establishes a segregated
account with its custodian in which the Fund deposits cash or cash equivalents
or a combination of both in an amount equal to the market value of the option
and maintains the account while the option is open. If the Fund has written a
stock index option, it may terminate its obligation by effecting a closing
purchase transaction, which is accomplished by purchasing an option of the same
series as the option previously written.
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PAINEWEBBER TACTICAL ALLOCATION FUND
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may enter into
stock index futures contracts, and options on those contracts, as a means of
temporarily increasing or decreasing the Stock Segment's exposure to equity
markets in anticipation of purchases or sales of common stocks. Similarly, the
Fund may enter into five-year U.S. Treasury Note futures contracts, and options
on those contracts, as a means of temporarily increasing or decreasing the Note
Segment's exposure to five-year U.S. Treasury Notes in anticipation of purchase
or sales of these notes. A futures contract is an agreement to take or make
delivery of an amount of cash equal to the difference between the value of the
index or security at the beginning and at the end of the contract period. An
option on a futures contract, in contrast to a direct investment in the
contract, gives the purchaser the right, in return for the premium paid, to
assume a position in the underlying futures contract at a specified exercise
price at any time on or before the expiration date of the option.
The Fund may assume both 'long' and 'short' positions with respect to futures
contracts. A long position involves entering into a futures contract to buy a
commodity, whereas a short position involves entering into a futures contract to
sell a commodity. In entering into futures contracts, the Fund is required to
make initial 'margin' payments, which are payments in the nature of performance
bonds or good faith deposits, and to make 'variation' margin payments from time
to time as the values of the futures contracts fluctuate.
The Fund does not (1) enter into any futures contracts or options on futures
contracts if, immediately after the transactions, the aggregate of margin
deposits on all of the Fund's outstanding futures contracts and premiums paid on
its outstanding options on futures contracts would exceed 5% of the market value
of the total assets of the Fund after taking into account unrealized profits and
losses on any futures contracts or options on futures contracts or (2) enter
into any futures contracts or options on futures contracts if the aggregate of
the market value of the Fund's outstanding futures contracts and market value of
the currencies and futures contracts subject to outstanding options written by
the Fund would exceed 50% of the market value of the total assets of the Fund.
Each short position in a futures or options contract entered into by the Fund is
secured by the Fund's ownership of underlying securities. The Fund does not use
leverage when it enters into long futures or options contracts; the Fund places
in a segregated account with its custodian, or designated sub-custodian, with
respect to each of its long positions cash or short-term U.S. Treasury Bills
having a value equal to the underlying commodity value of the contract.
REPURCHASE AGREEMENTS. In order to manage cash flows resulting from the
continuous sale and redemption of the Fund's shares, the Fund may engage in
repurchase agreement transactions collateralized by U.S. Treasury obligations.
Although the amount of the Fund's assets that may be invested in repurchase
agreements terminable in less than seven days is not limited, repurchase
agreements maturing in more than seven days, together with other illiquid
securities, may not exceed 10% of the Fund's net assets. The Fund may engage in
repurchase agreement transactions with certain member banks of the Federal
Reserve System and with certain dealers listed on the Federal Reserve Bank of
New York's list of reporting dealers. Under the terms of a typical repurchase
agreement, the Fund would acquire an underlying debt obligation for a relatively
short period (usually not more than seven days) subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the securities
underlying a repurchase agreement of the Fund is monitored on an ongoing basis
by Mitchell Hutchins to ensure that the value is at least equal at all times to
the total amount of the repurchase obligation, including interest. Mitchell
Hutchins also monitors, on an ongoing basis to evaluate potential risks, the
creditworthiness of those banks and dealers with which the Fund enters into
repurchase agreements.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. To secure prices or yields deemed
advantageous at a particular time, the Fund may purchase securities on a
when-issued or delayed-delivery basis, in which case delivery of the securities
occurs beyond the normal settlement period; payment for or delivery of the
securities would be made prior to the reciprocal delivery or payment by the
other party to the transaction. The Fund enters into when-issued or
delayed-delivery trans-
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PAINEWEBBER TACTICAL ALLOCATION FUND
actions for the purpose of acquiring securities and not for the purpose of
leverage. When-issued securities purchased by the Fund may include securities
purchased on a 'when, as and if issued' basis under which the issuance of the
securities depends on the occurrence of a subsequent event, such as approval of
a merger, corporate reorganization or debt restructuring. The Fund will
establish with its custodian, or with a designated sub-custodian, a segregated
account consisting of cash, securities issued or guaranteed by the U.S.
Government, its agencies, authorities or instrumentalities ('Government
Securities') or other liquid high-grade debt obligations in an amount equal to
the amount of its when-issued or delayed-delivery purchase commitments.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investing in the Fund involves risks and special considerations, such as those
described below:
LIMITS OF ASSET ALLOCATION STRATEGY. Although it seeks total return, consisting
of both capital appreciation and current income, in following its asset
allocation strategy, the Fund may not achieve as high a level of either capital
appreciation or current income as a fund that has only one of those objectives
as its primary objective. In addition, qualification as a regulated investment
company for federal income tax purposes may limit the Fund's ability to adhere
rigidly to the recommendations of the Allocation Model. See 'Asset Allocation
Strategy' above.
INVESTMENT IN COMMON STOCKS. Although the Allocation Model is designed to
reduce the volatility inherent in a common stock portfolio, to the extent the
Fund's assets are committed to the Stock Segement, the share price of the Fund
can be expected to be volatile and investors should be able to tolerate sudden,
sometimes substantial fluctuations in the value of their investment. Because of
the risks associated with common stock investments, the Fund is intended to be a
long term investment vehicle and is not designed to provide investors with a
means of speculating on short-term stock market movements.
INDEX INVESTING AND OPEN-END INVESTMENT COMPANIES. While the Fund through the
Stock Segment attempts to replicate, before deduction of operating expenses, the
investment results of the S&P 500 Index, the investment results of the Stock
Segment generally are not identical to those of the designated index. Deviations
from the performance of the S&P 500 Index may result from shareholder purchases
and redemptions of shares of the Fund that occur daily, as well as from the
expenses borne by the Fund. Shareholder purchases and redemptions result in
daily net cash inflows to or outflows from the Fund. To the extent that a cash
reserve is held to meet expected redemptions or pending investment in portfolio
securities, to the extent that portfolio securities must be sold to meet
redemption requests (with resulting brokerage costs), and to the extent that
purchases and sales of portfolio securities are made to conform the Stock
Segment's holdings more closely to the relative weightings of stocks in the S&P
500 Index in response to cash inflows or outflows and associated brokerage costs
are incurred, these daily inflows or outflows of cash may increase the deviation
between the Stock Segment's investment results and the price and yield
performance of the S&P 500 Index.
INVESTMENT IN FOREIGN SECURITIES. Since the S&P 500 Index includes common
stocks of foreign issuers, to the extent that Fund assets are committed to the
Stock Segment, the Fund is subject to considerations and potential risks not
typically associated with investing in securities issued exclusively by domestic
corporations. The values of foreign investments are affected by changes in
currency exchange rates or exchange control regulations, restrictions or
prohibitions on the repatriation of foreign currencies, application of foreign
tax laws, including withholding taxes, changes in governmental administration or
economic or monetary policy (in the United States or abroad) or changed
circumstances in dealings between nations. Investments in foreign companies
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.
STOCK INDEX OPTIONS. Stock index options are subject to position and exercise
limits and other regulations imposed by the exchange on which they are traded.
If the Fund writes a stock index option, it may terminate its obligation by
effecting a closing purchase transaction, which is accomplished by purchasing an
option of the same series as the option previously written. The ability of the
Fund to engage in closing purchase transactions with respect to stock index
options depends on the existence of a liquid secondary
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PAINEWEBBER TACTICAL ALLOCATION FUND
market. Although the Fund generally purchases or writes stock index options only
if a liquid secondary market for the options purchased or sold appears to exist,
no such secondary market may exist, or the market may cease to exist at some
future date, for some options. No assurance can be given that a closing purchase
transaction can be effected when the Fund desires to engage in such a
transaction.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. In entering into
transactions involving futures contracts and options on those contracts, the
Fund is subject to a number of risks and special considerations. The successful
use of futures contracts and options on those contracts draws upon Mitchell
Hutchins' special skills and experience with respect to those instruments.
Should markets move in an unexpected manner, the Fund may not achieve the
anticipated benefits of futures contracts or options on those contracts and thus
be in a less advantageous position than if those strategies had not been used.
For a number of reasons, the price of futures may not correlate perfectly with
the movement in the underlying index or security owing to certain market
distortions. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions that would distort the normal relationship between the underlying
index or security and the futures markets. Second, from the point of view of
speculators, the deposit requirements in the futures market are less onerous
than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market also may cause temporary
price distortions. Owing to the possibility of price distortions in the futures
market and because of the imperfect correlation between movements in the
underlying index or security and movements in the price of futures contracts,
even a correct forecast of general market trends may not result in a successful
hedging transaction.
Certain futures contracts and options on futures contracts are subject to no
daily price fluctuation limits so that adverse market movements could continue
with respect to those instruments to an unlimited extent over a period of time.
The Fund's ability to dispose of its positions in futures contracts and options
on those contracts depends on the availability of active markets in those
instruments. Markets in options and futures with respect to a number of
securities are relatively new and still developing. Mitchell Hutchins cannot now
predict the amount of trading interest that may exist in the future in various
types of futures contracts and options. Futures and options may be closed out
only on the exchange on which the contract was entered (or a linked exchange) so
that no assurance can be given that the Fund will be able to utilize these
instruments effectively for the purposes described above. In addition, although
the Fund anticipates that its options and futures transactions does not prevent
the Fund from qualifying as a regulated investment company for federal income
tax purposes, the Fund's ability to engage in options and futures transactions
may be limited by this tax consideration. See 'Dividends, Distributions and
Taxes -- Taxes.' In writing options, the Fund is subject to the risk of loss
resulting from the difference between the premium received for the option and
the price of the futures contract underlying the option that the Fund must
purchase or deliver upon exercise of the option.
REPURCHASE AGREEMENTS. In entering into a repurchase agreement, the Fund bears
a risk of loss in the event that the other party to the transaction defaults on
its obligations and the Fund is delayed or prevented from exercising its rights
to dispose of the underlying securities, including the risk of a possible
decline in the value of the underlying securities during the period in which the
Fund seeks to assert its rights to them, the risk of incurring expenses
associated with asserting those rights and the risk of losing all or a part of
the income from the agreement.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. Securities purchased on a
when-issued or delayed-delivery basis may expose the Fund to risk because the
securities may experience fluctuations in value prior to their actual delivery.
The Fund does not accrue income with respect to a when-issued or
delayed-delivery security prior to its stated delivery date. Purchasing
securities on a when-issued or delayed-delivery basis can involve the additional
risk that the yield available in the market when the delivery takes place may be
higher than that obtained in the transaction itself. Purchases of securities on
a when-issued basis when the Fund is substantially fully invested may result in
increased fluctuations in the Fund's net asset value per share.
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PAINEWEBBER TACTICAL ALLOCATION FUND
PORTFOLIO TRANSACTIONS AND TURNOVER
The Board of Trustees of the Trust has determined that, to the extent consistent
with applicable provisions of the 1940 Act and rules and exemptions thereunder,
transactions for the Fund may be executed through PaineWebber if, in the
judgment of Mitchell Hutchins, the use of PaineWebber is likely to result in
price and execution at least as favorable to the Fund as those obtainable
through other qualified broker-dealers, and if, in the transaction, PaineWebber
charges the Fund a fair and reasonable rate consistent with that charged to
comparable unaffiliated customers in similar transactions.
The Fund retains the right to sell securities in accordance with recommendations
generated by the Allocation Model irrespective of how long they have been held.
For the fiscal years ended August 31, 1995 and August 31, 1994, the Fund's
portfolio turnover rates were 53.02% and 4.17%, respectively. An annual turnover
rate of 100% would occur if all of the securities held by the Fund are replaced
once during a period of one year. Higher portfolio turnover rates can result in
corresponding increases in transaction costs, may make it more difficult for the
Fund to qualify as a regulated investment company for federal income tax
purposes and may cause shareholders of the Fund to recognize gains for federal
income tax purposes. See 'Dividends, Distributions and Taxes -- Taxes.'
Assuming that the Allocation Model does not recommend a reallocation of assets
among the Segments, securities are sold from the Stock Segment only to reflect
certain administrative changes in the S&P 500 Index (including mergers or
changes in the composition of the S&P 500 Index) or to accommodate cash flows
into and out of the Fund while maintaining the similarity of the Stock Segment
to its benchmark. Similarly, assets are purchased or sold for each Segment
monthly, as described above, in order to accommodate cash flows and to rebalance
assets among the Segments.
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PURCHASES
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Class Y shares (prior to November 10, 1995, called 'Class C' shares) are sold to
eligible investors at the net asset value next determined (see 'Valuation of
Shares') after the purchase order is received at PaineWebber's New York City
offices. No initial or contingent deferred sales charge is imposed, nor are
Class Y shares subject to Rule 12b-1 distribution or service fees. The Fund and
Mitchell Hutchins reserve the right to reject any purchase order and to suspend
the offering of the Class Y shares for a period of time.
INSIGHT. An investor who purchases $50,000 or more of shares of the PaineWebber
mutual funds that are in the Flexible Pricing System may participate 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, professional investment
advice regarding investment among the funds by portfolio specialists, 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 another of their PaineWebber accounts or billed
separately.
ACQUISITION OF CLASS Y SHARES BY OTHERS. Present holders of Class Y shares who
are not current INSIGHT participants may acquire Class A shares of the Fund
without a sales charge. This category includes former employees of Kidder,
Peabody & Co. Incorporated ('Kidder, Peabody'), their associated accounts,
present and former directors and trustees of the former Kidder, Peabody mutual
funds. The Fund is authorized to offer Class Y shares to employee benefit and
retirement plans of Paine Webber Group,
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Inc., and its affiliates and certain other investment advisory programs that are
sponsored by PaineWebber and that may invest in PaineWebber mutual funds. At
present, however, INSIGHT participants are the only purchasers in these two
categories.
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REDEMPTIONS
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As described below, Class Y shares may be redeemed at their net asset value and
redemption proceeds will be paid after receipt of a redemption request as
described below.
REDEMPTION THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS. PaineWebber clients may
submit redemption requests to their investment executives or correspondent firms
in person or by telephone, mail or wire. As the Fund's agent, PaineWebber may
honor a redemption request by repurchasing Fund shares from a redeeming
shareholder at the shares' net asset value next determined after receipt of the
request by PaineWebber's New York City offices. Within three Business Days after
receipt of the request, repurchase proceeds (less any applicable contingent
deferred sales charge) will be paid by check or credited to the shareholder's
brokerage account at the election of the shareholder. PaineWebber investment
executives and correspondent firms are responsible for promptly forwarding
redemption requests to PaineWebber's New York City offices.
PaineWebber reserves the right not to honor any redemption request, in which
case PaineWebber promptly will forward the request to the Transfer Agent for
treatment as described below.
REDEMPTION THROUGH THE TRANSFER AGENT. Fund shareholders who are not
PaineWebber clients or who wish to redeem certificated shares must redeem their
shares through the Transfer Agent by mail; other shareholders also may redeem
Fund shares through the Transfer Agent. Shareholders should mail redemption
requests directly to the Transfer Agent: PFPC Inc., Attn: PaineWebber Mutual
Funds, P.O. Box 8950, Wilmington, Delaware 19899. A redemption request will be
executed at the net asset value next computed after it is received in 'good
order' and redemption proceeds will be paid within seven days of the receipt of
the request. 'Good order' means that the request must be accompanied by the
following: (1) a letter of instruction or a stock assignment specifying the
number of shares or amount of investment to be redeemed (or that all shares
credited to a Fund account be redeemed), signed by all registered owners of the
shares in the exact names in which they are registered, (2) a guarantee of the
signature of each registered owner by an eligible institution acceptable to the
Transfer Agent and in accordance with SEC rules, such as a commercial bank,
trust company or member of a recognized stock exchange, (3) other supporting
legal documents for estates, trusts, guardianships, custodianships, partnerships
and corporations and (4) duly endorsed share certificates, if any. Shareholders
are responsible for ensuring that a request for redemption is received in 'good
order.'
ADDITIONAL INFORMATION ON REDEMPTIONS. A shareholder may have redemption
proceeds of $1 million or more wired to the shareholder's PaineWebber brokerage
account or a commercial bank account designated by the shareholder. Questions
about this option, or redemption requirements generally, should be referred to
the shareholder's PaineWebber investment executive or correspondent firm, or to
the Transfer Agent if the shares are not held in a PaineWebber brokerage
account. If a shareholder requests redemption of shares which were purchased
recently, the Fund may delay payment until it is assured that good payment has
been received. In the case of purchases by check, this can take up to 15 days.
Because the Fund incurs certain fixed costs in maintaining shareholder accounts,
the Fund reserves the right to redeem all Fund shares in any shareholder account
of less than $500 net asset value. If the Fund elects to do so, it will notify
the shareholder and provide the shareholder the opportunity to increase the
amount invested to $500 or more within 60 days of the notice. The Fund will not
redeem accounts that fall below $500 solely as a result of a reduction in net
asset value per share.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
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DIVIDENDS AND DISTRIBUTIONS. Dividends from net investment income and
distributions of net realized capital gains of the Fund, if any, are distributed
annually. Unless a shareholder instructs the Fund that dividends and capital
gains distributions on shares should be paid in cash and credited to the
shareholder's Account, dividends and capital gains distributions are reinvested
automatically at net asset value in additional shares. The Fund is subject to a
4% nondeductible excise tax measured with respect to certain undistributed
amounts of net investment income and capital gains. If necessary to avoid the
imposition of this tax, and if in the best interests of its shareholders, the
Fund will declare and pay dividends of its net investment income and
distributions of its net capital gains more frequently than stated above.
TAXES. The Fund has qualified for the fiscal year ended August 31, 1995 to be
treated as a regulated investment company within the meaning of the Code and
intends to qualify for this treatment for each year. To qualify as a regulated
investment company for federal income tax purposes, the Fund limits its income
and investments so that (1) less than 30% of its gross income is derived from
the sale or disposition of stocks, other securities and certain financial
instruments (including certain forward contracts) that were held for less than
three months and (2) at the close of each quarter of the taxable year (a) not
more than 25% of the market value of the Fund's total assets is invested in the
securities (other than Government Securities) of a single issuer or of two or
more issuers controlled by the Fund that are engaged in the same or similar
trades or businesses or in related trades or businesses and (b) at least 50% of
the market value of the Fund's total assets is represented by (i) cash and cash
items, (ii) Government Securities and (iii) other securities limited in respect
of any one issuer to an amount not greater in value than 5% of the market value
of the Fund's total assets and to not more than 10% of the outstanding voting
securities of the issuer. The requirements for qualification may cause the Fund
to restrict the degree to which it sells or otherwise disposes of stocks, other
securities and certain financial instruments held for less than three months. If
the Fund qualifies as a regulated investment company and meets certain
distribution requirements, the Fund will not be subject to federal income tax on
its net investment income and net realized capital gains that it distributes to
its shareholders.
Dividends paid by the Fund out of net investment income and distributions of net
realized short-term capital gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested in additional Fund shares.
Distributions of net realized long-term capital gains are taxable to
shareholders as long-term capital gain, regardless of how long shareholders have
held their shares and whether the distributions are received in cash or
reinvested in additional shares. Dividends and distributions paid by the Fund
generally do not qualify for the federal dividends received deduction for
corporate shareholders.
Statements as to the tax status of each Fund shareholder's dividends and
distributions are mailed annually. Shareholders also receive, as appropriate,
various written notices after the close of the Fund's taxable year regarding the
tax status of certain dividends and distributions that were paid (or that are
treated as having been paid) by the Fund to its shareholders during the
preceding taxable year, including the amount of dividends that represent
interest derived from Government Securities.
Shareholders are urged to consult their tax advisors regarding the application
of federal, state, local and foreign tax laws to their specific situations
before investing in the Fund.
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VALUATION OF SHARES
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Net asset value per share is calculated by the Fund's custodian, on each day,
Monday through Friday, except that net asset value is not computed on a day in
which no orders to purchase, sell, exchange or redeem Fund shares have been
received, any day on which there is not sufficient trading in the Fund's
portfolio securities that the Fund's net asset values per share might be
materially affected by changes in the value of such portfolio securities or on
days on which the NYSE is not open for trading. The NYSE is currently scheduled
to be closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas, and on the preceding
Friday when one of those holidays falls on a Saturday or on the subsequent
Monday when one of those holidays falls on a Sunday.
Net asset value per share is determined as of the close of regular trading on
the NYSE, and is computed by dividing the value of the Fund's net assets
attributable to that Class by the total number of shares outstanding of that
Class. Generally, the Fund's investments are valued at market value or, in the
absence of a market value, at fair value as determined by or under the direction
of the Trustees.
A security that is primarily traded on a stock exchange is valued at the last
sale price on that exchange or, if no sales occurred during the day, at the
current quoted bid price. Short-term investments that mature in 60 days or less
are valued on the basis of amortized cost (which involves valuing an investment
at its cost and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the effect of fluctuating interest rates on
the market value of the investment) when the Board of Trustees has determined
that amortized cost represents fair value. An option that is written by the Fund
is generally valued at the last sale price or, in the absence of the last sale
price, the last offer price. An option that is purchased by the Fund is
generally valued at the last sale price or, in the absence of the last sale
price, the last bid price. The value of a futures contract is equal to the
unrealized gain or loss on the contract that is determined by marking the
contract to the current settlement price for a like contract on the valuation
date of the futures contract. A settlement price may not be used if the market
makes a limit move with respect to a particular futures contract or if the
securities underlying the futures contract experience significant price
fluctuations after the determination of the settlement price. When a settlement
price cannot be used, futures contracts will be valued at their fair market
value as determined by or under the direction of the Board of Trustees.
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Prospectus Page 15
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PAINEWEBBER TACTICAL ALLOCATION FUND
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MANAGEMENT
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The Trust's board of trustees, as part of its overall management responsibility,
oversees various organizations responsible for the Fund's day-to-day management.
Mitchell Hutchins, the Fund's investment adviser and administrator, supervises
all aspects of the Fund's operations. Mitchell Hutchins receives a monthly fee
for its services, computed daily and payable monthly, at an annual rate of .50%
of the Fund's average daily net assets on assets up to but not including $250
million and .45% thereafter.
The Fund incurs other expenses and, for the fiscal year ended August 31, 1995,
the Fund's total expenses for its Class Y shares, stated as a percentage of
average net assets was 1.23%.
Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New York
10019. It is a wholly owned subsidiary of PaineWebber, which is in turn a wholly
owned subsidiary of Paine Webber Group Inc., a publicly owned financial services
holding company. As of Novemer 30, 1995, Mitchell Hutchins was adviser or sub-
adviser of 38 investment companies with 70 separate portfolios and aggregate
assets of over $29.6 billion.
As the Fund's investment adviser, Mitchell Hutchins manages the Fund's portfolio
in accordance with the investment objective and stated policies of the Fund and
makes investment decisions for the Fund. Mitchell Hutchins also provides the
Fund with investment officers who are authorized by the Trustees to determine
purchases and sales of securities on behalf of the Fund and employs a
professional staff of portfolio managers who draw upon a variety of sources for
research information for the Fund.
T. Kirkham Barneby is responsible for the asset allocation decisions for the
Fund. Mr. Barneby is a Managing Director and Chief Investment
Officer -- Quantitative Investments of Mitchell Hutchins. Mr. Barneby rejoined
Mitchell Hutchins in 1994, after being with Vantage Global Management for one
year. During the eight years that Mr. Barneby was previously with Mitchell
Hutchins, he was Senior Vice President responsible for quantitative management
and asset allocation models. Before joining Mitchell Hutchins, Mr. Barneby
served as Director of Pension Investment Strategy at the Continental Group in
Stamford, Connecticut and has held positions in the Economics Department at both
Citibank, N.A. and Merrill Lynch.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by Mitchell Hutchins, investments of the type the
Fund may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by Mitchell Hutchins are prepared to invest in, or
desire to dispose of, the same security, available investments or opportunities
for sales are allocated in a manner believed by Mitchell Hutchins to be
equitable to each. In some cases, this procedure may adversely affect the price
paid or received by the Fund or the size of the position obtained or disposed of
by the Fund.
Mitchell Hutchins investment personnel 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.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins is the distributor of the Fund's
Class Y shares and has appointed PaineWebber as the exclusive dealer for the
sale of those shares.
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PERFORMANCE INFORMATION
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The Fund performs a standardized computation of annualized total return and may
show this return in advertisements or promotional materials. Standardized return
shows the change in
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Prospectus Page 16
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PAINEWEBBER TACTICAL ALLOCATION FUND
value of an investment in the Fund as a steady compound annual rate of return.
Actual year-by-year returns fluctuate and may be higher or lower than
standardized return. One-, five- and ten-year periods will be shown, unless the
shares have been in existence for a shorter period. Total return calculations
assume reinvestment of dividends and other distributions.
The Fund may use other total return presentations in conjunction with
standardized return. These may cover the same or different periods as those used
for standardized return and may include cumulative returns, average annual
rates, actual year-by-year rates or any combination thereof.
Total return and yield information reflects past performance and does not
necessarily indicate future results. Investment return and principal values will
fluctuate, and proceeds upon redemption may be more or less than a shareholder's
cost.
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GENERAL INFORMATION
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ORGANIZATION OF THE TRUST. The Trust was formed as a business trust pursuant to
a Declaration of Trust, as amended from time to time (the 'Declaration'), under
the laws of The Commonwealth of Massachusetts on March 28, 1991. The Fund
commenced operations on July 22, 1992. The Declaration authorizes the Trust's
Board of Trustees to create separate series, and within each series separate
Classes, of an unlimited number of shares of beneficial interest, par value
$.001 per share. As of the date of this Prospectus, the Trustees have
established several such series, representing interests in the Fund described in
this Prospectus and in several other series.
When issued, Fund shares will be fully paid and non-assessable. Shares are
freely transferable and have no pre-emptive, subscription or conversion rights.
Each Class represents an identical interest in the Fund's investment portfolio.
As a result, the Classes have the same rights, privileges and preferences,
except with respect to: (1) the designation of each Class; (2) the effect of the
respective sales charges, if any, for each Class; (3) the distribution and/or
service fees, if any, borne by each Class; (4) the expenses allocable
exclusively to each Class; (5) voting rights on matters exclusively affecting a
single Class; and (6) the exchange privilege of each Class. The Board of
Trustees does not anticipate that there will be any conflicts among the
interests of the holders of the different Classes. The Trustees, on an ongoing
basis, will consider whether any conflict exists and, if so, take appropriate
action. Certain aspects of the shares may be changed, upon notice to Fund
shareholders, to satisfy certain tax regulatory requirements, if the change is
deemed necessary by the Trustees.
Shareholders of the 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 the aggregate shares of the
Trust may elect all of the Trustees. Generally, shares of the Trust will be
voted on a Trust-wide basis on all matters except those affecting only the
interests of one series, such as the Fund's management and investment advisory
agreement. In turn, shares of the Fund will be voted on a Fund-wide basis on all
matters except those affecting only the interests of one Class, such as the
terms of the Plan as it relates to a Class.
The Trust intends to hold no annual meetings of shareholders for the purpose of
electing Trustees unless, and until such time as, less than a majority of the
Trustees holding office have been elected by shareholders. Shareholders of
record of no less than two-thirds of the outstanding shares of the Trust may
remove a Trustee 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 for the
purpose of voting on the removal of a Trustee at the written request of holders
of 10% of the Trust's outstanding shares. Shareholders of the Fund who satisfy
certain criteria will be assisted by the Trust in communicating with other
shareholders in seeking the holding of the meeting.
To avoid additional operating costs and for investor convenience, the Fund does
not issue share certificates. Ownership of the Fund's shares is
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Prospectus Page 17
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PAINEWEBBER TACTICAL ALLOCATION FUND
recorded on a stock register by the Transfer Agent and shareholders have the
same rights of ownership with respect to such shares as if certificates had been
issued.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One Heritage
Drive, North Quincy, Massachusetts 02171, is the custodian of the Fund's assets.
PFPC Inc., a subsidiary of PNC Bank, National Association, whose principal
business address is 400 Bellevue Parkway, Wilmington, Delaware 19809, is the
Fund's transfer and dividend disbursing agent.
CONFIRMATIONS AND STATEMENTS. Shareholders receive confirmations of purchases
and redemptions of Fund shares. PaineWebber clients receive statements at least
quarterly that report their Fund activity and consolidated year-end statements
that show all Fund transactions for that year. Shareholders who are not
PaineWebber clients receive quarterly statements from the Transfer Agent.
Shareholders also receive audited annual and unaudited semi-annual financial
statements of the Fund.
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Prospectus Page 18
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'c'1996 PaineWebber Incorporated
[Recycled Logo] Printed on recycled paper
PAINEWEBBER
TACTICAL ALLOCATION FUND
CLASS Y SHARES
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
PROSPECTUS
January 1, 1996 (as supplemented
March 13, 1996)
STATEMENT OF DIFFERENCES
The service mark symbol shall be expressed as 'SM'
The dagger symbol shall be expressed as `D'
The copyright symbol shall be expressed as 'c'
