PAINEWEBBER INVESTMENT TRUST, 485APOS, 1996-08-29

PAINEWEBBER INVESTMENT TRUST
485APOS, 1996-08-29

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<PAGE>

As filed with the Securities and Exchange Commission on August 29, 1996

1933 Act Registration No. 33-39659
1940 Act Registration No. 811-6292

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-lA

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 16 [ X ]

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

Amendment No. 17

(Check appropriate box or boxes.)

PAINEWEBBER INVESTMENT TRUST
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)

Registrant's telephone number, including area code: (212) 713-2000

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

Copies to:

ELINOR W. GAMMON, ESQ.
RICHARD C. MILLER, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W. 2nd Floor
Washington, D.C. 20036-1800
Telephone (202) 778-9000

It is proposed that this filing will become effective:

<TABLE>
<S> <C>
Immediately upon filing pursuant to Rule 485(b)
On pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)(i)
X On October 31, 1996 pursuant to Rule 485(a)(i)
75 days after filing pursuant to Rule 485(a)(ii)
On pursuant to Rule 485(a)(ii)
</TABLE>

Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940. The notice required by such rule for the
Registrant's fiscal year ended August 31, 1995 was filed on October 30,
1995.

<PAGE>

PaineWebber Global Equity Fund

Contents of Registration Statement

This registration statement consists of the following papers and
documents:

o Cover Sheet

o Contents of Registration Statement

o Cross Reference Sheets

o PaineWebber Global Equity Fund - Class A, B and C Shares

Part A - Prospectus

Part B - Statement of Additional Information

o PaineWebber Global Equity Fund - Class Y Shares

Part A - Prospectus

Part B - Statement of Additional Information

o Part C - Other Information

o Signature Page

o Exhibits

This filing is made to update the Prospectuses and Statements of
Additional Information of PaineWebber Global Equity Fund. No changes
are hereby made to the Prospectuses or Statements of Additional
Information of PaineWebber Tactical Allocation Fund, the second series
of PaineWebber Investment Trust.

<PAGE>

PaineWebber Global Equity Fund

Class A, B and C Shares

Form N-lA Cross Reference Sheet

Part A Item No.
and Caption Prospectus Caption
--------------- ------------------
<S> <C> <C>
1. Cover Page............................................ Cover Page

2. Synopsis.............................................. Expense Table

3. Condensed Financial Information....................... Financial Highlights;
Performance

4. General Description of The Funds at a Glance;
Registrant............................................ Investment Objective and
Policies; Investment Philosophy
and Process; The Funds'
Investments; General Information

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

6. Capital Stock and Other Cover Page; Flexible Pricing;
Securities............................................ Dividends and Taxes; General
Information

7. Purchase of Securities Being Flexible Pricing; How to Buy
Offered............................................... Shares; Other Services;
Determining the Shares' Net
Asset Value

8. Redemption or Repurchase.............................. How to Sell Shares; Other
Services

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

<CAPTION>
Part B Item No. Statement of Additional
and Caption Information Caption
--------------- -----------------------
<S> <C> <C>
10. Cover Page............................................ Cover Page

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

12. General Information and History....................... Other Information

13. Investment Objectives and Investment Policies and
Policies.............................................. Restrictions; Hedging
Strategies; Portfolio
Transactions

14. Management of the Fund................................ Trustees and Officers;
Compensation Table

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

16. Investment Advisory and Other Investment Advisory and
Services.............................................. Distribution Arrangements; Other
Information
</TABLE>

<PAGE>

<TABLE>
<S> <C> <C>
17. Brokerage Allocation.................................. Portfolio Transactions

18. Capital Stock and Other Conversion of Class B Shares;
Securities............................................ Other Information

19. Purchase, Redemption and Pricing Reduced Sales Charges,
of Securities Being Offered........................... Additional Exchange and
Redemption Information and Other
Services; Valuation of Shares

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

21. Underwriters.......................................... Investment Advisory and
Distribution Arrangements

22. Calculation of Performance Data....................... Performance Information

23. Financial Statements.................................. Financial Statements
</TABLE>

Part C

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

<PAGE>

PaineWebber Global Equity Fund

Class Y Shares

Form N-lA Cross Reference Sheet

<TABLE>
<CAPTION>
Part A Item No.
and Caption Prospectus Caption
--------------- -------------------
<S> <C> <C>
1. Cover Page............................................ Cover Page

2. Synopsis.............................................. Expense Table

3. Condensed Financial Information....................... Financial Highlights;
Performance

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

6. Capital Stock and Other Cover Page; Dividends and Taxes;
Securities............................................ General Information

7. Purchase of Securities Being How to Buy Shares; Determining
Offered............................................... the Shares' Net Asset Value

8. Redemption or Repurchase.............................. How to Sell Shares; Other
Services

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

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

12. General Information and History....................... Other Information

13. Investment Objectives and Investment Policies and
Policies.............................................. Restrictions; Hedging
Strategies; Portfolio
Transactions

14. Management of the Fund................................ Trustees and Officers;
Compensation Table

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

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

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

18. Capital Stock and Other
Securities............................................ Other Information
</TABLE>
<PAGE>

<TABLE>
<S> <C> <C>
19. Purchase, Redemption and Pricing
of Securities Being Offered........................... Valuation of Shares

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

21. Underwriters.......................................... Investment Advisory and
Distribution Arrangements

22. Calculation of Performance Data....................... Performance Information

23. Financial Statements.................................. Financial Statements
</TABLE>

Part C

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

<PAGE>

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

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

1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019
PROSPECTUS -- OCTOBER 31, 1996

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

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

A Statement of Additional Information dated October 31, 1996 has been
filed with the Securities and Exchange Commission and is legally part of
this Prospectus. The Statement of Additional Information can be obtained
without charge, and further inquiries can be made, by contacting an
individual Fund, your investment executive at PaineWebber or one of its
correspondent firms or by calling toll-free 1-800-647-1568.

THE PAINEWEBBER FAMILY OF MUTUAL FUNDS

The PaineWebber Family of Mutual Funds consists of six broad
categories, which are presented here. Generally, investors seeking to
maximize return must assume greater risk. Emerging Markets Equity Fund,
Global Equity Fund and Global Income Fund are all in the GLOBAL category.

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

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

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

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

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. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUNDS OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING BY THE FUNDS OR THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.

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>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

<TABLE>
<CAPTION>
PAGE
----

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

Expense Table........................... 5

Financial Highlights.................... 8

Investment Objectives & Policies........ 14

Investment Philosophy & Process......... 15

Performance............................. 17

The Funds' Investments.................. 20

Flexible Pricing(Service Mark).......... 24

How to Buy Shares....................... 26

How to Sell Shares...................... 28

Other Services.......................... 28

Management.............................. 29

Determining the Shares' Net Asset
Value................................. 30

Dividends & Taxes....................... 31

General Information..................... 32
</TABLE>

--------------------
Prospectus Page 2

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

THE FUNDS AT A GLANCE
- --------------------------------------------------------------------------------

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

EMERGING MARKETS EQUITY FUND

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

INVESTMENT OBJECTIVE: Long-term capital appreciation.

RISKS: Equity securities historically have shown greater growth potential than
other types of securities, but they have also shown greater volatility. Because
the Fund invests primarily in equity securities, its price will rise and fall.
Investors in the Fund should be able to assume the special risks of investing in
foreign securities, which include possible adverse political, social and
economic developments abroad and differing characteristics of foreign economies
and markets. These risks are greater with respect to securities of issuers
located in emerging markets, in which the Fund seeks to invest most of its
assets. Most of the foreign securities held by the Fund are denominated in
foreign currencies, and the value of these investments thus can be adversely
affected by fluctuations in foreign currency values. The Fund may use
derivatives, such as options, futures and forward currency contracts, which may
involve additional risks. Investors may lose money by investing in the Fund; the
investment is not guaranteed.

SIZE: On September 30, 1996, the Fund had over $ million in assets.

GLOBAL EQUITY FUND

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

INVESTMENT OBJECTIVE: Long-term growth of capital.

and markets. Most of the foreign securities held by the Fund are denominated in
foreign currencies, and the value of these investments thus can be adversely
affected by fluctuations in foreign currency values. The Fund may use
derivatives, such as options, futures and forward currency contracts, which may
involve additional risks. Investors may lose money by investing in the Fund; the
investment is not guaranteed.

SIZE: On September 30, 1996, the Fund had over $ million in assets.

GLOBAL INCOME FUND

GOAL: To provide high current income and to increase the value of your
investment by investing principally in high quality foreign and U.S. bonds.

INVESTMENT OBJECTIVE: High current income consistent with prudent investment
risk and, secondarily, capital appreciation.

RISKS: The Fund invests primarily in bonds, which are subject to interest rate
and credit risk. Interest rate risk is the risk that interest rates will rise
and bond prices will fall, lowering the value of the Fund's investments. Credit
risk is the risk that adverse changes in economic conditions will affect an
issuer's ability to pay interest and principal. Investors in the Fund should be
able to assume the special risks of investing in foreign securities, which
include possible adverse political, social and economic developments abroad and
differing characteristics of foreign economies and markets. Most of the foreign
securities held by the Fund are denominated in foreign currencies, and the value
of these investments thus can be adversely affected by fluctuations in foreign
currency values. Certain investment grade bonds in which the Fund may invest
have speculative characteristics. The Fund may also invest in bonds rated below
investment grade, which are subject to greater risks of default or price
fluctuation than investment grade bonds and are considered predominantly
speculative. The Fund may use derivatives, such as options, futures and forward
currency contracts, which may involve additional risks. As a non-diversified
fund, the Fund is subject to greater risk than funds that have a broader range
of investments. Investors may lose money by investing in the Fund; the
investment is not guaranteed.

SIZE: On September 30, 1996, the Fund had over $ million in assets.

--------------------
Prospectus Page 3
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

MANAGEMENT

Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), an asset

management subsidiary of PaineWebber Incorporated ('PaineWebber'), is the
investment adviser and administrator of Emerging Markets Equity Fund, Global
Equity Fund and Global Income Fund (each a 'Fund' and, collectively, the
'Funds'). Mitchell Hutchins has appointed Emerging Markets Management as the
investment sub-adviser for Emerging Markets Equity Fund and GE Investment
Management Incorporated ('GE Investment Management') as the sub-adviser for
Global Equity Fund.

MINIMUM INVESTMENT

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

WHO SHOULD INVEST

EMERGING MARKETS EQUITY FUND is for investors who want long-term capital
appreciation. The Fund seeks to achieve this by investing primarily in equity
securities of companies in newly industrialized countries in Asia, Latin
America, the Middle East, Southern Europe, Eastern Europe and Africa ('emerging
markets'). Over time, foreign stocks have shown greater growth potential than
many other types of securities. However, because their value tends to fluctuate
more than that of U.S. stocks, investors must be willing to tolerate volatility
in the value of the Fund's investments. These risks are greater with respect to
securities of issuers located in emerging markets. Accordingly, Emerging Markets
Equity Fund is designed for investors who are able to bear the risk that comes
with investment in equity securities of emerging market issuers.

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

GLOBAL INCOME FUND is for investors who want high current income consistent with
prudent investment risk and, secondarily, capital appreciation. The Fund seeks
to achieve this by investing primarily in high quality debt securities issued or
guaranteed by foreign governments, by the U.S. government, by their respective
agencies or instrumentalities or by supranational organizations, or issued by
foreign or U.S. companies. Investors in the Fund should be willing to assume the
special risks of investing in foreign securities, which include possible adverse
political, social and economic developments abroad and differing characteristics
of foreign economies and markets. Accordingly, Global Income Fund is designed
for investors who are able to bear the risk that comes with investments in
foreign securities.

HOW TO PURCHASE SHARES OF THE FUNDS

Investors may select among these classes of shares:

CLASS A SHARES

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

CLASS B SHARES

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

CLASS C SHARES

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

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

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

EXPENSE TABLE
- --------------------------------------------------------------------------------

The following tables are intended to assist investors in understanding the
expenses associated with investing in the Class A, B and C shares of the Funds.
Expenses shown below represent those incurred for the most recent fiscal year.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
EMERGING MARKETS EQUITY FUND
Maximum Sales Charge on Purchases of Shares (as a % of
offering price)........................................... 4.50% None None
Sales Charge on Reinvested Dividends (as a % of offering
price).................................................... None None None
Maximum Contingent Deferred Sales Charge (as a % of net
asset value at the time of purchase or sale, whichever is
less)..................................................... None 5% 1%
Exchange Fee................................................ None None None
GLOBAL EQUITY FUND
Maximum Sales Charge on Purchases of Shares (as a % of
offering price)........................................... 4.50% None None
Sales Charge on Reinvested Dividends (as a % of offering
price).................................................... None None None
Maximum Contingent Deferred Sales Charge (as a % of net
asset value at the time of purchase or sale, whichever is
less)..................................................... None 5% 1%
Exchange Fee................................................ None None None
GLOBAL INCOME FUND
Maximum Sales Charge on Purchases of Shares (as a % of
offering price)........................................... 4% None None
Sales Charge on Reinvested Dividends (as a % of offering
price).................................................... None None None
Maximum Contingent Deferred Sales Charge (as a % of net
asset value at the time of purchase or sale, whichever is
less)..................................................... None 5% 0.75%
Exchange Fee................................................ $5.00 $5.00 $5.00

ANNUAL FUND OPERATING EXPENSES (as a % of average net
assets)
EMERGING MARKETS EQUITY FUND
Management Fees............................................. 1.62% 1.62% 1.62%
12b-1 Fees.................................................. 0.25 0.25 0.25
Other Expenses..............................................
------- ------- -------
Total Operating Expenses.................................... % % %

------- ------- -------
------- ------- -------
GLOBAL EQUITY FUND
Management Fees............................................. 0.85% 0.85% 0.85%
12b-1 Fees.................................................. 0.25 1.00 1.00
Other Expenses..............................................
------- ------- -------
Total Operating Expenses.................................... % % %
------- ------- -------
------- ------- -------
GLOBAL INCOME FUND
Management Fees............................................. 0.73% 0.73% 0.73%
12b-1 Fees.................................................. 0.25 1.00 0.75
Other Expenses.............................................. 0.22 0.23 0.23
------- ------- -------
Total Operating Expenses.................................... 1.20% 1.96% 1.71%
------- ------- -------
------- ------- -------
</TABLE>

CLASS A SHARES: Sales charge waivers and a reduced sales charge purchase plan
are available. Purchases of $1 million or more are not subject to a sales
charge. However, if such shares are sold within one year after purchase, a
contingent deferred sales charge of 1% is imposed on the net asset value of the
shares at the time of purchase or sale, whichever is less.
CLASS B SHARES: Sales charge waivers are available. The maximum 5% contingent
deferred sales charge applies to sales of shares during the first year after
purchase. The charge generally declines by 1% annually, reaching zero after six
years.
CLASS C SHARES: If shares are sold within one year after purchase, a contingent
deferred sales charge of 1% (0.75% in the case of Global Income Fund) of the
net asset value of the shares at the time of purchase or sale, whichever is
less, is imposed.

--------------------
Prospectus Page 5
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

The management fees payable to Mitchell Hutchins by Emerging Markets Equity Fund
and Global Equity Fund are greater than those paid by most funds. 12b-1
distribution fees are asset-based sales charges.

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

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<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 for Class C shares of Global Income Fund are 0.50%.

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

EXAMPLES OF EFFECT OF FUND EXPENSES

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

An investor would, pay the following expenses, directly or indirectly, on a
$1,000 investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
Class A............................
Class B (Assuming sale of all
shares at end of period).........
Class B (Assuming no sale of
shares)..........................
Class C (Assuming sale of all
shares at end of period).........
Class C (Assuming no sale of
shares)..........................
GLOBAL EQUITY FUND

<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
Class A............................
Class B (Assuming sale of all
shares at end of period).........
Class B (Assuming no sale of
shares)..........................
Class C (Assuming sale of all
shares at end of period).........
Class C (Assuming no sale of

shares)..........................
GLOBAL INCOME FUND
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
Class A............................
Class B (Assuming sale of all
shares at end of period).........
Class B (Assuming no sale of
shares)..........................
Class C (Assuming sale of all
shares at end of period).........
Class C (Assuming no sale of
shares)..........................
</TABLE>

--------------------
Prospectus Page 6
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

ASSUMPTIONS MADE IN THE EXAMPLES
o ALL CLASSES: Reinvestment of all dividends and distributions; percentage
amounts listed under 'Annual Fund Operating Expenses' remain the same for
years shown.
o CLASS A SHARES: Deduction of the maximum 4.5% (4% in the case of Global
Income Fund) initial sales charge at the time of purchase.
o CLASS B SHARES: Deduction of the maximum applicable contingent deferred
sales charge at the time of sale, which declines over a period of six years.
Ten-year figures assume that Class B shares convert to Class A shares at the
end of the sixth year.
o CLASS C SHARES: Deduction of a 1% (0.75% in the case of Global Income Fund)
contingent deferred sales charge for sales of shares within one year of
purchase.

--------------------
Prospectus Page 7

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

EMERGING MARKETS EQUITY FUND

The following tables provide investors with data and ratios for one Class A,
Class B and Class C share for each of the periods shown. This information is
supplemented by the financial statements and accompanying notes appearing in
Emerging Markets Equity Fund's Annual Report to Shareholders for the fiscal year
ended June 30, 1996 and the report of Ernst & Young LLP, independent auditors,
appearing in the Fund's Annual Report to Shareholders. Both are incorporated by
reference into the Statement of Additional Information. The financial statements
and notes, as well as the financial information in the table below relating to
the fiscal year ended June 30, 1996, have been audited by Ernst & Young LLP.
Further information about the Fund's performance is also included in the Annual
Report to Shareholders, which may be obtained without charge by calling
1-800-647-1568.
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
------------------------------------------------------------
CLASS A
------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Net asset value, beginning of period................................ $ $
-------- --------
Net investment loss.................................................
Net realized and unrealized gains from investment
transactions......................................................
-------- --------
Net increase from investment operations.............................
-------- --------
Distributions from net realized gains...............................
-------- --------
Net asset value, end of period...................................... $ $
-------- --------
-------- --------
Total investment return (1)......................................... % %
-------- --------
-------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)................................. $ $
Expenses to average net assets.................................... % %
Net investment loss to average net assets......................... % %

Portfolio turnover................................................ % %

FOR THE PERIOD
JANUARY 19,
1994+ TO
JUNE 30, 1994
--------------
<S> <C>
Net asset value, beginning of period................................ $
-----------
Net investment loss.................................................
Net realized and unrealized gains from investment
transactions......................................................
-----------
Net increase from investment operations.............................
-----------
Distributions from net realized gains...............................
-----------
Net asset value, end of period...................................... $
-----------
-----------
Total investment return (1)......................................... %
-----------
-----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)................................. $
Expenses to average net assets.................................... %
Net investment loss to average net assets......................... %
Portfolio turnover................................................ %
</TABLE>

- ------------------
* Annualized

+ Commencement of offering of shares.

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

(2) Formerly Class B shares.

--------------------
Prospectus Page 8
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income

Fund

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

<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
----------------------------------------------------------
CLASS C(2)
CLASS B --------------------------------------
--------------
FOR THE PERIOD FOR THE YEARS ENDED FOR THE PERIOD
NOVEMBER 10, JUNE 30, JANUARY 19,
1995+ TO -------------------- 1994+ TO
JUNE 30, 1996 1996 1995 JUNE 30, 1994
-------------- -------- -------- --------------
<S> <C> <C> <C> <C>
$ $ $ $
----------- -------- -------- -----------
----------- -------- -------- -----------
----------- -------- -------- -----------
----------- -------- -------- -----------
$ $ $ $
----------- -------- -------- -----------
----------- -------- -------- -----------
% % % %
----------- -------- -------- -----------
----------- -------- -------- -----------
$ $ $ $
% % % %
% % % %
% % % %
</TABLE>

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

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

GLOBAL EQUITY FUND

Global Equity Fund's Annual Report to Shareholders for the fiscal year ended
August 31, 1996, and the report of Ernst & Young LLP, independent auditors,
appearing in the Fund's Annual Report to Shareholders. Both are incorporated by
reference into the Statement of Additional Information.

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

<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
----------------------------------------------------------------
CLASS A
----------------------------------------------------------------
FOR THE YEARS
ENDED FOR THE
AUGUST 31, PERIOD
-------------------------------------------- NOV. 14, 1991+
1996 1995 1994 1993 TO AUG. 31, 1992
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................
Net investment income................................
Net realized and unrealized gains (losses) from
investment transactions............................
Total increase (decrease) from investment
operations.........................................
Dividends from net investment income.................
Distributions from net realized gains on
investments........................................
Total dividends and distributions to
shareholders.......................................
Net asset value, end of period.......................
Total investment return (1)..........................
Ratios/Supplemental Data:
Net assets, end of period (000's)..................
Expenses to average net assets.....................
Net investment income (loss) to average net
assets..........................................
Portfolio turnover.................................
</TABLE>

- ------------------
* Annualized

+ Commencement of issuance of shares

(1) Total investment return is calculated assuming a $1,000 investment in Fund
shares on the first day of each period reported, reinvestment of all

dividends and other distributions at net asset value on the payable date,
and a sale at net asset value on the last day of each period reported. The
figures do not include sales charges; results would be lower if sales
charges were included. Total investment returns for periods of less than one
year have not been annualized.

(2) Formerly Class E shares.

(3) Formerly Class B shares.

--------------------
Prospectus Page 10
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

GLOBAL EQUITY FUND
-----------------------------------------------------
CLASS B(2)
---------------- CLASS C(3)
FOR THE -----------------------------------
PERIOD FOR THE
FOR THE AUG. PERIOD
YEAR 25, FOR THE YEARS MAY 10,
ENDED 1995+ ENDED 1993+
AUGUST TO AUG. AUGUST 31, TO AUG.
31, 31, -------------------------- 31,
1996 1995 1996 1995 1994 1993
------- ------- -------- ------- ------- -------

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

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

GLOBAL INCOME FUND

<TABLE>
<CAPTION>
GLOBAL INCOME FUND
---------------------------------------------------------------------------
CLASS A
---------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS PERIOD
ENDED JULY 1,
APRIL 30, FOR THE YEARS ENDED OCTOBER 31, 1991+ TO
1996 ------------------------------------------- OCTOBER 31,
(UNAUDITED) 1995 1994 1993 1992 1991
----------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ $ $ $ $ $
--------- ------- ------- ------- ------- ---------
Net investment income..........
Net realized and unrealized
gains (losses) from investment
and foreign currency
activities....................
--------- ------- ------- ------- ------- ---------
Total increase (decrease) from
investment operations.........
--------- ------- ------- ------- ------- ---------
Dividends from net investment
income........................
--------- ------- ------- ------- ------- ---------
Net asset value, end of
period........................ $ $ $ $ $ $
--------- ------- ------- ------- ------- ---------
Total investment return (1).... % % % % % %
--------- ------- ------- ------- ------- ---------
--------- ------- ------- ------- ------- ---------
Ratios/Supplemental Data:
Net assets, end of period

(000's)..................... $ $ $ $ $ $
Expenses to average net
assets...................... % % % % % %
Net investment income to
average net assets.......... % % % % % %
Portfolio turnover............ % % % % % %
</TABLE>

- ------------------
* Annualized.

+ Commencement of operations.

(2) Formerly Class D shares

--------------------
Prospectus Page 12
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL INCOME FUND
------------------------------------------------------------------------------------------------
CLASS B
------------------------------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED
APRIL 30, FOR THE YEARS ENDED OCTOBER 31,
1996 -----------------------------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991 1990 1989 1988
---------------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ $ $ $ $ $ $ $ $
------ ------- ------- ------- ------- ------- ------- ------- -------
------ ------- ------- ------- ------- ------- ------- ------- -------
------ ------- ------- ------- ------- ------- ------- ------- -------
------ ------- ------- ------- ------- ------- ------- ------- -------
$ $ $ $ $ $ $ $ $

------ ------- ------- ------- ------- ------- ------- ------- -------
% % % % % % % % %
------ ------- ------- ------- ------- ------- ------- ------- -------
------ ------- ------- ------- ------- ------- ------- ------- -------
$ $ $ $ $ $ $ $ $
% % % % % % % % %
% % % % % % % % %
% % % % % % % % %

CLASS C(2)
------------------------------------------------------------
FOR THE FOR THE FOR THE
PERIOD SIX MONTHS PERIOD
MARCH 20, ENDED FOR THE YEARS ENDED JULY 2,
1987+ TO APRIL 30, OCTOBER 31, 1992+ TO
OCTOBER 31, 1996 --------------------------- OCTOBER 31,
1987 (UNAUDITED) 1995 1994 1993 1992
----------- ---------------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ $ $ $ $
--------- ------ ------- ------- ------- -----------
--------- ------ ------- ------- ------- -----------
--------- ------ ------- ------- ------- -----------
--------- ------ ------- ------- ------- -----------
$ $ $ $ $
--------- ------ ------- ------- ------- -----------
% % % % % %
--------- ------ ------- ------- ------- -----------
--------- ------ ------- ------- ------- -----------
$ $ $ $ $
% % % % % %
% % % % % %
% % % % % %
</TABLE>

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

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------

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

EMERGING MARKETS EQUITY FUND

Emerging Markets Equity Fund's investment objective is long-term capital
appreciation. The Fund seeks to achieve its objective through investment in a
diversified portfolio consisting primarily of equity securities of issuers in
emerging markets in Asia, Latin America, the Middle East, Southern Europe,
Eastern Europe and Africa. Under normal market conditions, the Fund invests a
minimum of 65% of its total assets in equity securities of issuers in emerging
markets and maintains investments in at least three emerging markets.

Emerging Market Management attempts to spread to the Fund's investments over
geographic as well as economic sectors. Generally, Emerging Markets Management
does not intend to invest more than 65% of the Fund's total assets in any single
region, or more than 35% in any single country. Under no circumstances will more
than 25% of the Fund's total assets be invested in any single industry. Within
each emerging market, the Fund is diversified through investments in a number of
local companies characterized by attractive valuation relative to expected
growth.

There are currently over 60 newly industrialized and developing countries that
have equity markets. A number of these emerging markets are not yet easily
accessible to foreign investors and have unattractive tax barriers or
insufficient liquidity to make significant investments by the Fund feasible or
attractive. However, many of the largest of the emerging markets have, in recent
years, liberalized access, and more are expected to do so over the coming few
years.

GLOBAL EQUITY FUND

PaineWebber Global Equity Fund's investment objective is long-term growth of
capital. The Fund attempts to achieve this goal by investing primarily in equity
securities issued by companies in foreign countries, as well as in the United
States.

The International Equity Team at GE Investment Management selects equity
securities issued by companies located in developed and developing countries
throughout the world. The Fund normally invests in at least three countries, one
of which is typically the United States. The Fund normally invests at least 65%
of its total assets in equity securities of foreign and U.S. companies.

When the International Equity Team believes it is consistent with the Fund's

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

Under normal circumstances, at least 80% of the Fund's total assets are invested
in equity securities or bonds of issuers in countries represented in the Morgan
Stanley Capital International World Index. This is a well-known index that
reflects developed and developing markets throughout the world.

GLOBAL INCOME FUND

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

The Fund's portfolio consists primarily of debt securities rated within one of
the two highest grades assigned by Standard & Poor's, a division of The McGraw
Hill Companies, Inc. ('S&P'), Moody's Investors Service, Inc. ('Moody's') or
another NRSRO or, if unrated, determined by Mitchell Hutchins to be of
comparable quality. Normally, at least 65% of the Fund's total assets are
invested in high quality debt securities, denominated in foreign

--------------------
Prospectus Page 14
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

currencies or U.S. dollars, of issuers located in at least three of the
following countries: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Thailand, the United
Kingdom and the United States. No more than 40% of the Fund's assets normally
are invested in securities of issuers located in any one country.

The Fund may invest up to 35% of its total assets in debt securities rated below
the two highest grades assigned by a NRSRO. Except as noted below, these
securities must be rated at least BBB by S&P, Baa by Moody's or comparably rated
by another NRSRO or, if unrated, determined by Mitchell Hutchins to be of
comparable quality. Within this 35% limitation, the Fund may invest up to 20% of
its total assets in sovereign debt securities rated as low as BB by S&P, Ba by
Moody's or comparably rated by another NRSRO or, in the case of such securities
assigned a commercial paper rating, no lower than B by S&P or comparably rated

by another NRSRO or, if not so rated, determined by Mitchell Hutchins to be of
comparable quality. Mitchell Hutchins will purchase such securities for the Fund
only when it concludes that the anticipated return to the Fund on such
investment warrants exposure to the additional level of risk.

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

EMERGING MARKETS EQUITY FUND

In selecting equity securities for Emerging Markets Equity Fund, Emerging
Markets Management focuses primarily on asset allocation among selected emerging
markets and, as a secondary matter, on issuer selection within those markets. In
addition to considerations relating to a particular market's investment
restrictions and tax barriers, selections are made among emerging markets based
on other relevant factors including the outlook for economic growth, currency
exchange rates, commodity prices, interest rates, political factors and the
stage of the local market cycle in the market.

Based on these and other factors, the Fund's portfolio of securities is
evaluated and, if necessary, adjusted on at least a quarterly basis to ensure
that it conforms to the objective and policies of the Fund. Each of the emerging
markets in which the Fund may invest is also monitored on a continuous basis and
tactical shifts in portfolio allocation are made, when required, based on new
developments.

Within each emerging market, the Fund invests in a variety of companies that are
characterized by attractive valuation. Using a number of data bases and sources
of investment information, Emerging Markets Management screens each market for
companies available for investment. To be considered for investment, companies
must legally permit investment by foreigners, have a market capitalization of
over $15 million, and show sufficient liquidity based on trading volume and
shares outstanding. From among this group, investments are systematically
screened for fundamental value based on a number of standards, including
price-to-earning ratio, price-to-book value ratio, earnings momentum, dividend
yield and debt-to-equity ratio. The resulting selection of investments is
intended to provide a broad group of attractively valued investments available
to foreign investors in each emerging market.

Emerging Markets Management uses a proprietary asset allocation model to assist
in the selection of markets and individual stocks. Making use of long-term
historical data on at least 1,000 of the most actively traded stocks in the
target markets, as well as additional data for recent years and earnings
forecasts, Emerging Markets Management estimates the relationship between the
fair value and price levels of markets based on a variety of fundamental
indicators. The model evaluates markets in historical and prospective terms
taking into consideration interest rates, inflation and currency developments.
While following a disciplined, systematic approach to investment selection,
Emerging Markets Management combines the results from computerized screening
techniques with market, industry, economic and political information.

GLOBAL EQUITY FUND

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

--------------------
Prospectus Page 15
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

investment process employed by the International Equity Team involves several
steps.

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

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

The strength of the Team's conviction about each company is part of what
determines the size of each holding. The stock of a single company will
generally represent no more than 3% of the Fund's total portfolio, but it could
constitute a higher percentage.

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

GLOBAL INCOME FUND

Global Income Fund's investment policies are designed to enable it to capitalize
on unique investment opportunities presented throughout the world and in
international financial markets influenced by the increasing interdependence of
economic cycles and currency exchange rates. Over the past nine years, debt
securities offered by certain foreign governments provided higher investment
returns than U.S. government debt securities. Such returns reflect interest
rates and other market conditions prevailing in those countries and the effect
of gains and losses in the denominated currencies, which have had a substantial
impact on investment in foreign debt securities. As of December 31, 1995, more
than 65.7% of the Salomon Brothers World Government Bond Market Index was

represented by securities denominated in currencies other than the U.S. dollar.

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

--------------------
Prospectus Page 16
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

These charts show the total returns for the Funds; 1995 returns represent the
calendar year ended December 31, 1995. Sales charges have not been deducted from
total returns. Returns would be lower if sales charges were deducted. Past
results are not a guarantee of future results. Total returns both before and
after deducting the maximum sales charges are shown below in the tables that
follow the performance charts.

EMERGING MARKETS EQUITY FUND

[CHART]

As Class A and Class C shares commenced operations on January 19, 1994, the 1994
return represents the period from January 19, 1994 through December 31, 1994.
The inception date of Class B shares is November 10, 1995; thus, the 1995 return
for Class B shares represents the period from November 10, 1995 through December
31, 1995.

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of June 30, 1996
CLASS A CLASS B CLASS C
-------- -------- --------
Inception Date..................... 1/19/94 11/10/95 1/19/94
<S> <C> <C> <C>
ONE YEAR
Before deducting maximum sales
charges....................... % % %
After deducting maximum sales
charges....................... % % %

LIFE
Before deducting maximum sales
charges....................... % % %
After deducting maximum sales
charges....................... % % %
</TABLE>

--------------------
Prospectus Page 17
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

<TABLE>
<S> <C> <C> <C>
GLOBAL EQUITY FUND

[CHART]

</TABLE>

As Class A shares commenced operations on November 14, 1991, the 1991 return
represents the period from November 14, 1991 through December 31, 1991. The
inception date of Class B shares is August 25, 1995; thus, the 1995 return for
Class B shares represents the period from August 25, 1995 through December 31,
1995. The inception date of Class C shares is May 10, 1993; thus, the 1993
return for Class C shares represents the period from May 10, 1993 through
December 31, 1993.

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of August 31, 1996
CLASS A CLASS B CLASS C
-------- -------- --------
Inception Date..................... 11/14/91 8/25/95 5/10/93
<S> <C> <C> <C>
ONE YEAR
Before deducting maximum sales
charges....................... % % %
After deducting maximum sales
charges....................... % % %
LIFE
Before deducting maximum sales
charges....................... % % %
After deducting maximum sales
charges....................... % % %
</TABLE>

--------------------
Prospectus Page 18
<PAGE>

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

GLOBAL INCOME FUND
[CHART]

As Class A shares commenced operations on July 1, 1991, the 1991 return for
Class A shares represents the period from July 1, 1991 through December 31,
1991. The inception date of Class B shares is March 20, 1987; thus, the 1987
return represents the period from March 20, 1987 through December 31, 1987. The
inception date of Class C shares is July 2, 1992; thus, the 1992 return for
Class C shares represents the period from July 2, 1992 through December 31,
1992.

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of October 31, 1995

CLASS A CLASS B CLASS C
-------- -------- --------
Inception Date..................... 7/1/91 3/20/87 7/2/92
<S> <C> <C> <C>
ONE YEAR
Before deducting maximum sales
charges....................... % % %
After deducting maximum sales
charges....................... % % %
FIVE YEAR
Before deducting maximum sales
charges....................... % % %
After deducting maximum sales
charges....................... % % %
LIFE
Before deducting maximum sales
charges....................... % % %
After deducting maximum sales
charges....................... % % %
</TABLE>

PERFORMANCE INFORMATION

The Funds perform a standardized computation of annualized total return and may
show this return in advertisements or promotional materials. Standardized return
shows the change in value of an investment in a Fund as a steady compound annual
rate of return. Actual year-by-year returns fluctuate and may be higher or lower
than standardized return. Standardized return for Class A shares of the Funds
reflects deduction of the Funds' maximum initial sales charge of 4.5% (4% in the
case of Global Income Fund) at the time of purchase, and standardized return for
the Class B and Class C shares of the Funds reflects deduction of the applicable
contingent deferred sales charge imposed on the sale of shares held for the
period. One-, five-and ten-year periods will be shown, unless the Fund or class

has been in existence for a shorter period. If

--------------------
Prospectus Page 19
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

so, returns will be shown for the period since inception. Total return
calculations assume reinvestment of dividends and other distributions.

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

Total return information reflects past performance and does not necessarily
indicate future results. The investment return and principal value of shares of
the Funds will fluctuate. The amount investors receive when selling shares may
be more or less than what they paid. Further information about each Fund's
performance is contained in its Annual Report, which may be obtained without
charge by contacting the Fund, your PaineWebber investment executive or
PaineWebber's correspondent firms or by calling toll-free 1-800-647-1568.

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

EQUITY SECURITIES include common stocks, preferred stocks and securities that
are convertible into them, including convertible debentures and notes and common
stock purchase warrants and rights. Common stocks, the most familiar type,
represent an equity (ownership) interest in a corporation. While past
performance does not guarantee future results, common stocks historically have
provided the greatest long-term growth potential in a company. However, their
prices generally fluctuate more than other securities, and reflect changes in a
company's financial condition and in overall market and economic conditions.

Preferred stock has certain fixed-income features, like a bond, but is actually
equity in a company, like common stock. Convertible securities may include
debentures, notes and preferred equity securities, which are convertible into
common stock.

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

RISKS

Following is a discussion of the risks that are common to each Fund:

EQUITY SECURITIES. Equity securities historically have shown greater growth
potential than other types of securities. Common stocks generally represent the
riskiest investment in a company. It is possible that investors may lose their
entire investment.

BONDS. Bonds are subject to interest rate risk and credit risk. Interest rate
risk is the risk that interest rates will rise and bonds prices will fall,
lowering the value of the Fund's bond investments. Credit risk is the risk that
adverse changes in economic conditions can affect an issuer's ability to pay
principal and interest. In addition, there is a risk that bonds will be
downgraded by rating agencies. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not evaluate the volatility of the
security's value or its liquidity. Rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than the rating indicates.

FOREIGN SECURITIES. Investing in foreign securities involves more risks than
investing in securities of U.S. companies. Their value is subject to economic
and political developments in the countries where the companies operate and to
changes in foreign currency values. Values may also be affected by foreign tax
laws, changes in foreign economic or monetary policies, exchange control
regulations and regulations involving prohibitions on the repatriation of
foreign currencies.

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

--------------------
Prospectus Page 20
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund
brokerage commissions and foreign custody expenses.

INVESTING IN DEVELOPING COUNTRIES. Investing in securities issued by companies
located in developing countries involves additional risks. These countries
typically have economic and political systems that are relatively less mature,
and can be expected to be less stable, than those of developed countries.
Developing countries may have policies that restrict investment by foreigners in
those countries, and there is a risk of government expropriation or
nationalization of private property. The possibility of low or nonexistent
trading volume in the securities of companies in developing countries may also
result in a lack of liquidity and in price volatility.

CURRENCY. Currency risk is the risk that changes in foreign exchange rates may

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

COUNTERPARTIES. The Funds may be exposed to the risk of financial failure or
insolvency of another party. To help lessen those risks, Emerging Markets
Management, GE Investment Management and Mitchell Hutchins, subject to the
supervision of the respective boards of trustees, monitors and evaluates the
creditworthiness of the parties with which each Fund does business.

In addition to these general risks, investments in each Fund are subject to
special risk considerations:

EMERGING MARKETS EQUITY FUND

INVESTING IN COMMUNIST COUNTRIES. Included among the emerging markets in which
Emerging Markets Equity Fund may invest are the formerly communist countries of
Eastern Europe, the Commonwealth of Independent States (formerly the Soviet
Union) and the People's Republic of China (collectively, 'Communist Countries').
Upon the accession to power of Communist regimes approximately 40 to 70 years
ago, the governments of a number of Communist Countries expropriated a large
amount of property. The claims of many property owners against those governments
were never finally settled. There can be no assurance that the Fund's
investments in Communist Countries, if any, would not also be expropriated,
nationalized or otherwise confiscated, in which case the Fund could lose its
entire investment in the Communist Country involved. In addition, any change in
the leadership or policies of Communist Countries may halt the expansion of or
reverse the liberalization of foreign investment policies now occurring.

GLOBAL EQUITY FUND

BONDS. The bonds in which Global Equity Fund may invest must be rated
investment grade. Investment grade quality means that the securities are rated
within the four highest categories by S&P or Moody's. Securities in the fourth
highest category (BBB by S&P or Baa by Moody's) are investment grade but Moody's
considers securities rated Baa to have speculative characteristics. The Fund may
invest in unrated securities if GE Investment Management deems them to be of
comparable quality.

GLOBAL INCOME FUND

invest up to 20% of its total assets in sovereign debt securities rated as low
as BB by S&P, Ba by Moody's or comparable rated by another NRSRO or, in the case
of such securities assigned a commercial paper rating, no lower than B by S&P or
comparably rated by another NRSRO. These securities are deemed by those NRSROs
to be predominately speculative with respect to the issuer's capacity to pay
interest and repay principal and may involve major risk exposure to adverse
conditions. Such securities are commonly referred to as 'junk bonds.' Commercial
paper rated B by S&P is regarded by it as having only an adequate capacity for
timely payment. The Fund is also permitted to purchase debt securities that are
not rated by a NRSRO but Mitchell Hutchins determines to be of comparable
quality to that of rated securities in which the Fund may invest. Such
securities are included in the computation of any percentage limitations
applicable to the comparable rated securities. In the event that, due to a
downgrade of

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund
one or more debt securities, an amount in excess of 20% of the Fund's total
assets is held in securities rated below investment grade and comparable unrated
securities, Mitchell Hutchins will engage in an orderly disposition of such
securities to the extent necessary to ensure that the Fund's holdings of such
securities do not exceed 20% of the Fund's total assets.

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

U.S. AND FOREIGN GOVERNMENT SECURITIES. The U.S. government securities in which
the Fund may invest include direct obligations of the U.S. government (such as
Treasury bills, notes and bonds) and obligations issued or guaranteed by U.S.
government agencies and instrumentalities. The Fund is authorized to invest in
mortgage-backed securities guaranteed by the Government National Mortgage
Association but does not presently expect to invest more than 10% of its total
assets in such securities.

interest to its holder prior to maturity. Accordingly, these securities usually
are issued and traded at a deep discount from their face or par value and are
subject to greater fluctuations of market value in response to changing interest
rates than debt obligations of comparable maturities that make current
distributions of interest. Federal tax law requires that the holder of a zero
coupon security include in gross income each year the original issue discount
that accrues on the security for the year, even though the holder receives no
interest payment on the security during the year. For additional discussion of
the tax treatment of zero coupon Treasury securities, see 'Taxes' in the
Statement of Additional Information.

The foreign government securities in which the Fund may invest generally consist
of obligations supported by national, state or provincial governments or similar
political subdivisions. Investments in foreign government debt securities
involve special risks. The issuer of the debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to pay
interest or repay principal when due in accordance with the terms of such debt,
and the Fund may have limited legal recourse in the event of default. Political
conditions, especially a sovereign entity's willingness to meet the terms of its
debt obligations, are of considerable significance.

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

INVESTMENT TECHNIQUES AND STRATEGIES

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund
may also use these strategies to attempt to enhance income; the use of such

strategies solely to enhance income may be considered a form of speculation.
Global Income Fund also may enter into certain interest rate protection
transactions to preserve a return or spread on a particular investment or
portion of its portfolio or to protect against an increase in the price of
securities the Fund anticipates purchasing at a later date. New financial
products and risk management techniques continue to be developed and may be used
if consistent with the Funds' investment objectives and policies. The Statement
of Additional Information for the Funds contains further information on these
strategies.

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

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

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

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

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

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Fund may purchase securities
on a 'when-issued' or delayed delivery basis. In when-issued or delayed delivery
transactions, delivery of the securities occurs beyond normal settlement
periods, but the Fund would not pay for such securities or start earning
interest on them until they are delivered. However, when the Fund purchases
securities on a when-issued or delayed delivery basis, it immediately assumes
the risks of ownership, including the risk of price fluctuation.

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

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

DEFENSIVE POSITIONS. When Emerging Markets Management, GE Investment Management
or Mitchell Hutchins, as applicable, believes that unusual circumstances warrant

a defensive posture, each Fund may temporarily commit all or any portion of its
assets to cash or money market instruments, including repurchase agreements. In
a typical repurchase agreement, a Fund buys a security and simultaneously agrees
to sell it back at an agreed-upon price and time, usually no more than seven
days after purchase.

ILLIQUID SECURITIES. Global Equity Fund and Global Income Fund each may invest
up to 10% of its net assets, and Emerging Markets Equity Fund up to 15% of its
total assets, in illiquid securities, including certain cover for OTC options
and securities whose disposition is restricted under the federal securities
laws. The Funds do not consider securities that are eligible for resale pursuant
to SEC Rule 144A to be illiquid securities if Emerging Markets Management, GE
Investment Management or Mitchell Hutchins, as applicable, has determined such
securities to be liquid, based upon the trading markets for the securities under
procedures approved by the Fund's boards.

OTHER INFORMATION. Each Fund may borrow money for temporary or emergency
purposes in the following amounts of total assets: Emerging Markets Equity
Fund--33 1/3%; Global Equity Fund--20%; and Global Income Fund--10%. Each Fund
may sell securities short 'against the box' to defer realization of gains or
losses for tax or other purposes. When a security is sold against the box, the
seller owns the security. In addition, Emerging Markets Equity Fund and Global
Equity Fund each may invest up to 10% of its total assets in the securities of
other investment companies. To the extent a Fund invests in other investment
companies, the Fund's shareholders incur duplicative fees and expenses,
including investment advisory fees.

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

FLEXIBLE PRICINGSM
- --------------------------------------------------------------------------------

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

CLASS A SHARES

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

EMERGING MARKETS EQUITY FUND AND GLOBAL EQUITY FUND

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

GLOBAL INCOME FUND

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

- ------------------
(1) A contingent deferred sales charge of 1% of the shares' net asset value at
the time of purchase or sale, whichever is less, is charged on sales of
shares made within one year of the purchase date. Class A shares
representing reinvestment of any dividends or other distributions are not
subject to the 1% charge. Withdrawals under the Systematic Withdrawal Plan
are not subject to this charge. However, investors may not withdraw annually
more than 12% of the value of the Fund account under the Plan in the first
year after purchase. This charge does not apply to Class A shares bought
before November 10, 1995.

(2) Mitchell Hutchins pays 1% to PaineWebber.

SALES CHARGE REDUCTIONS & WAIVERS

Investors who are purchasing Class A shares in more than one PaineWebber mutual

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

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

o their spouses, parents or children under age 21;

o their Individual Retirement Accounts (IRAs);

--------------------
Prospectus Page 24
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

o any company controlled by the investor;

o trusts created by the investor;

o Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts created
by the investor or group of investors for the benefit of the investors'
children; or

o accounts with the same adviser.

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

The sales charge will not apply when the investor:

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

o is the spouse, parent or child of any of the above, or advisory clients of
Mitchell Hutchins;

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

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

o within 90 days of buying Class A shares in a Fund, the investor sells
shares of one or more mutual funds that (a) were principally underwritten
by the competing brokerage firm or its affiliates and (b) the investor

either paid a sales charge to buy those shares, paid a contingent
deferred sales charge when selling them or held those shares until the
contingent deferred sales charge was waived; and

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

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

o is an employer establishing an employee benefit plan qualified under section
401 or 403(b), or a salary reduction plan qualified under section 401(k), of
the Internal Revenue Code. (This waiver is subject to minimum requirements,
with respect to the number of employees and investment amount, established by
Mitchell Hutchins.) Currently, a plan must have 100 or more eligible employees
or the amount invested or to be invested in a Fund or any other PaineWebber
mutual fund must total at least $1 million during the subsequent 13-month
period; or

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

For more information on how to get any reduced sales charge, investors should
contact their investment executive at PaineWebber or one of its correspondent
firms or call 1-800-647-1568.

CLASS B SHARES

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

Depending on how long they own their Fund investment, investors may have to pay
a sales charge when they sell their Fund shares. This sales charge is called a
'contingent deferred sales charge.' The amount of the charge depends on how long
the investor owned the shares. The sales charge is calculated by multiplying the
net asset value of the shares at the time of sale or purchase, whichever is
less, by the percentage shown on the following table. Investors who own shares
for more than six years do not have to pay a sales charge when selling those
shares.

<TABLE>
<CAPTION>
PERCENTAGE BY WHICH
THE SHARES' NET
ASSET
IF THE INVESTOR VALUE IS
SELLS SHARES WITHIN: MULTIPLIED:
- ----------------------------------- -------------------

<S> <C>
1st year since purchase 5%
2nd year since purchase 4
3rd year since purchase 3
4th year since purchase 2
5th year since purchase 2
6th year since purchase 1
7th year since purchase None
</TABLE>

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Prospectus Page 25
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

CONVERSION OF CLASS B SHARES

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

MINIMIZING THE CONTINGENT DEFERRED SALES CHARGE

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

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

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

WAIVERS OF THE CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge will not apply to:

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

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

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

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

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

An investor must provide satisfactory information to PaineWebber or the Fund if
the investor seeks any of these waivers.

CLASS C SHARES

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

A contingent deferred sales charge of 1% (0.75% in the case of Global Income
Fund) of the net asset value of the shares at the time of purchase or sale,
whichever is less, is charged on sales of shares made within one year of the
purchase date. Other PaineWebber mutual funds may impose a different contingent
deferred sales charge on Class C shares sold within one year of the purchase
date. A sale of Class C shares acquired through an exchange and held less than
one year will be subject to the same contingent deferred sales charge that would
have been imposed on the Class C shares of the PaineWebber mutual fund
originally purchased. Class C shares representing reinvestment of any dividends
or capital gain distributions will not be subject to the 1% charge. Withdrawals
under the Systematic Withdrawal Plan also will not be subject to this charge.
However, investors may not withdraw more than 12% of the value of the Fund
account under the Plan in the first year after purchase. This charge does not
apply to Class C shares bought before November 10, 1995.

- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------

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

--------------------
Prospectus Page 26
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

When placing an order to buy shares, investors should specify which class of

shares they want to buy. If investors fail to specify the class, they will
automatically receive Class A shares, which include an initial sales charge.

PAINEWEBBER CLIENTS

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

Investors may pay for their purchases with checks drawn on U.S. banks or with
funds they have in their brokerage accounts at PaineWebber or its correspondent
firms. Payment is due on the third Business Day after PaineWebber's New York
City headquarters office receives the purchase order.

OTHER INVESTORS

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

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

o mail an application with a check; or

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

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

MINIMUM INVESTMENTS

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

A Fund may waive or reduce these minimums for:

o employees of PaineWebber or its affiliates; or

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

HOW TO EXCHANGE SHARES

As shareholders, investors have the privilege of exchanging Fund shares for the
same class of other PaineWebber mutual fund shares. In classes of shares where

no initial sales charge is imposed, a contingent deferred sales charge may apply
if the investor sells the shares acquired through the exchange. Exchanges may be
subject to minimum investment requirements of the fund into which exchanges are
made. A $5 fee is imposed on each exchange.

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

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

o the investor's name and address;

o the Fund's name;

o the Fund account number;

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

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

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

No contingent deferred sales charge is imposed when shares are exchanged for the
corresponding class of shares of other PaineWebber mutual funds. A Fund will use
the purchase date of the initial investment to determine any contingent deferred
sales charge due when the shares are sold. Fund shares may be exchanged only
after the settlement date has passed and payment for the shares has been made.
The exchange privilege is available only in those jurisdictions where the sale
of the Fund shares to be acquired is authorized. This exchange privilege may be
modified or terminated at any time and, when required by SEC rules, upon 60
days' notice. See the back cover of this prospectus for a listing of other
PaineWebber mutual funds.

--------------------
Prospectus Page 27
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

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

Exchange (currently 4:00 p.m., Eastern time).

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

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

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

Because the Funds incur certain fixed costs in maintaining shareholder accounts,
each Fund reserves the right to purchase back all Fund shares in any shareholder
account with a net asset value of less than $500. If the Fund elects to do so,
it will notify the shareholder of the opportunity to increase the amount
invested to $500 or more within 60 days of the notice. The Fund will not
purchase back accounts that fall below $500 solely due to a reduction in net
asset value per share.

REINSTATEMENT PRIVILEGE

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

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

Investors should consult their investment executive at PaineWebber or one of its
correspondent firms to learn more about the following services:

AUTOMATIC INVESTMENT PLAN

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

SYSTEMATIC WITHDRAWAL PLAN

The Systematic Withdrawal Plan allows investors to set up monthly, quarterly
(March, June, September and December) or semi-annual (June and December)
withdrawals from their PaineWebber Mutual Fund accounts. Minimum balances and

withdrawals vary according to the class of shares:

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

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

Withdrawals under the Systematic Withdrawal Plan will not be subject to a
contingent deferred sales charge. Investors may not withdraw annually more than
12% of the value of the Fund account when the investor signed up for the Plan.
Shareholders who elect to receive dividends or other distributions in cash may
not participate in the Plan.

INDIVIDUAL RETIREMENT ACCOUNTS

Self-Directed IRAs are available through PaineWebber in which purchases of
PaineWebber mutual funds and other investments may be made.

--------------------
Prospectus Page 28
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

Investors considering establishing an IRA should review applicable tax laws and
should consult their tax advisers.

TRANSFER OF ACCOUNTS

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

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

EMERGING MARKETS EQUITY FUND

The Fund is governed by a board of trustees, which oversees the Fund's
operations. It has appointed Mitchell Hutchins as investment adviser and
administrator responsible for the Fund's operations (subject to the authority of
the board of trustees). Mitchell Hutchins has appointed the investment
sub-adviser, Emerging Markets Management, to be responsible for day-to-day
management of the Fund's investments.

Antoine W. van Agtmael is responsible for all investment decisions made by

Emerging Markets Management. Mr. van Agtmael serves as the Fund's Chief
Investment Officer and in that capacity is the individual primarily responsible
for the management of the Fund's assets. Mr. van Agtmael has been the President
of Emerging Markets Management for more than five years.

GLOBAL EQUITY FUND

The Fund is governed by a board of trustees, which oversees the Fund's
operations. The board of trustees oversees the Fund's operations and has
appointed Mitchell Hutchins as investment adviser and administrator responsible
for the Fund's operations (subject to the authority of the board of trustees).
Mitchell Hutchins has appointed the investment sub-adviser, GE Investment
Management, to be responsible for day-to-day management of the Fund's
investments.

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

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

Directly assisting Mr. Layman are Pamela J. Thomas, Vice President of Global
Equities at GE Investments, and the rest of the International Equity Team. Ms.
Thomas is a Chartered Financial Analyst and has been with GE Investment
Management for three years. From 1987 to 1992, Ms. Thomas served as assistant
portfolio manager at the Bank of Bermuda. Earlier in her career, she was senior
credit analyst at the Bank of Butterfield. Ms. Thomas has nine years of
investment experience. The International Equity Team is comprised of ten
analysts, eight of whom manage portfolios.

GLOBAL INCOME FUND

Stuart Waugh has been primarily responsible for the day-to-day portfolio
management of the Fund since its inception. Mr. Waugh is a managing director of
global fixed income investments of Mitchell Hutchins. Mr. Waugh has been
employed by Mitchell Hutchins as a portfolio manager for more than the last five
years.

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

* * * *

--------------------
Prospectus Page 29
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

Each board has determined that brokerage transactions for the Fund may be
conducted through PaineWebber or its affiliates in accordance with procedures
adopted by the board.

Mitchell Hutchins, Emerging Markets Management and GE Investment Management
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.

ABOUT THE INVESTMENT ADVISER

Mitchell Hutchins, located at 1285 Avenue of the Americas, New York, New York,
10019, is the asset management subsidiary of PaineWebber Incorporated, which is
wholly owned by Paine Webber Group Inc., a publicly owned financial services
holding company. On September 30, 1996, Mitchell Hutchins was adviser or
sub-adviser of investment companies with separate portfolios and aggregate
assets of approximately $ billion.

ABOUT THE INVESTMENT SUB-ADVISERS

Emerging Markets Management, the investment sub-adviser to Emerging Markets
Equity Fund, is located at 1001 Nineteenth Street North, Arlington, Virginia
22209-1722, and concentrates its investment advisory activities in the area of
emerging markets. The managing partner of Emerging Markets Management is
Emerging Markets Investors Corporation, which provides its investment services
to a variety of clients and had total assets under management of $ billion as
of September 30, 1996.

GE Investment Management, the investment sub-adviser to Global Equity Fund, is
located at 3003 Summer Street, Stamford, CT 06904 and is a subsidiary of General
Electric Company. Together with its affiliate, General Electric Investment
Corporation, GE Investment Management is one of the largest independent
investment managers in the United States. GE Investment Management has been
managing mutual fund assets since 1935 and, as of September 30, 1996, had
approximately $ billion in total assets under management.

MANAGEMENT FEES & OTHER EXPENSES

Each of the Funds pays Mitchell Hutchins a monthly fee for its services. For the
fiscal year ended June 30, 1996, Emerging Markets Equity Fund paid advisory fees
to Mitchell Hutchins at the annual rate of % of its average daily net assets.
For the fiscal year ended August 31, 1996, Global Equity Fund paid advisory fees
to Mitchell Hutchins at the annual rate of % of its average daily net assets.
For the fiscal year ended October 31, 1995, Global Income Fund paid advisory

fees to Mitchell Hutchins at the effective annual rate of 0.73% of its average
daily net assets.

With respect to Emerging Markets Equity Fund, Mitchell Hutchins (not the Fund)
pays Emerging Markets Management a fee for investment sub-advisory services at
the annual rate of 1.12% of the Fund's average daily net assets. With respect to
Global Equity Fund, Mitchell Hutchins (not the Fund) pays Global Equity Fund a
fee for investment sub-advisory services at the annual rate of 0.31% of the
Fund's average daily net assets.

Global Income Fund pays PaineWebber an annual fee of $4.00 per active
shareholder account held at PaineWebber for services not provided by the
Transfer Agent.

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

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

Each Fund values its assets based on their current market value when market
quotations are readily available. If that value is not readily available, assets
are valued at fair value as determined in good faith by or under the direction
of its board. The amortized cost method of valuation generally is used to value
debt obligations with 60 days or less remaining to maturity, unless the board
determines that this does not represent fair value. Investments denominated in
foreign currencies are valued daily in U.S. dollars based on the then-prevailing
exchange rates.
--------------------
Prospectus Page 30
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

DIVIDENDS

Emerging Markets Equity Fund and Global Equity Fund each pays an annual dividend
from its net investment income and net short-term capital gain, if any. Each of
these Funds distributes any net realized gain from foreign currency transactions
with its dividend. Global Income Fund declares monthly dividends from its net
investment income, which may be accompanied by distributions of net realized
short-term capital gains and net realized gains from foreign currency
transactions. Each Fund also distributes annually substantially all of its net

capital gain (the excess of net long-term capital gain over net short-term
capital loss), if any. The Funds may make additional distributions, if
necessary, to avoid a 4% excise tax on certain undistributed income and capital
gain.

Dividends and other distributions paid on each class of shares of each Fund are
calculated at the same time and in the same manner. Dividends on Class B and
Class C shares of the Funds are expected to be lower than those on their Class A
shares because Class B and Class C shares have higher expenses resulting from
their distribution fees. Dividends on each class might be affected differently
by the allocation of other class-specific expenses. See 'General Information.'

The Funds' dividends and other distributions are paid in additional Fund shares
of the same class at net asset value, unless the shareholder has requested cash
payments. Shareholders who wish to receive dividends and other distributions in
cash, either mailed to the shareholder by check or credited to the shareholder's
PaineWebber account, should contact their investment executive at PaineWebber or
one of its correspondent firms or complete the appropriate section of the
account application.

TAXES

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

Dividends from each Fund's investment company taxable income (whether paid in
cash or additional shares) are generally taxable to shareholders as ordinary
income. Distributions of each Fund's net capital gain (whether paid in cash or
additional shares) are taxable to shareholders as a long-term capital gain,
regardless of how long they have held their Fund shares. Shareholders who are
not subject to tax on their income generally will not be required to pay tax on
distributions.

YEAR-END TAX REPORTING

Following the end of each calendar year, each Fund notifies its shareholders of
the dividends and capital gain distributions paid (or deemed paid), their share
of any foreign taxes paid by the Fund that year and any portion of those
dividends that qualify for special treatment.

WITHHOLDING REQUIREMENTS

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

TAXES ON THE SALE OR EXCHANGE OF FUND SHARES

When shareholders sell (redeem) shares, it may result in a taxable gain or loss.
This depends upon whether the shareholders receive more or less than their
adjusted basis for the shares (which normally takes into account any initial
sales charge paid on Class A shares). An exchange of any Fund's shares for
shares of another PaineWebber mutual fund generally will have similar tax
consequences. In addition, if a Fund's shares are bought within 30 days before
or after selling other shares of the Fund (regardless of class) at a loss, all
or a portion of that loss will not be deductible and will increase the basis of
the newly purchased shares.

SPECIAL TAX RULES FOR CLASS A SHAREHOLDERS

Special tax rules apply when a shareholder sells or exchanges Class A shares
within 90 days of

--------------------
Prospectus Page 31
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

* * * *

Because the foregoing only summarizes some of the important tax considerations
affecting the Funds and their shareholders, the Statement of Additional
Information contains more detail. Prospective shareholders are urged to consult
their tax advisers.

- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------

ORGANIZATION

EMERGING MARKETS EQUITY FUND

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

GLOBAL EQUITY FUND

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

GLOBAL INCOME FUND

Global Income Fund is a non-diversified series of PaineWebber Investment Series,
an open-end management investment company which was formed on December 22, 1986,
as a business trust under the laws of the Commonwealth of Massachusetts. The
trustees have authority to issue an unlimited number of shares of beneficial
interest of separate series, with a par value of $0.001 per share.

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

Each share of each Fund is entitled to participate equally in dividends, other
distributions and the proceeds of any liquidation of that Fund. However, due to
the differing expenses of the classes, dividends on Class B and Class C shares
are likely to be lower than for Class A shares and are likely to be lower for
Class Y shares than for any other class of shares.

Class Y shares, which are offered only to limited groups of investors, are
subject to neither an initial or contingent deferred sales charge nor ongoing
service or distribution fees. More information concerning Class Y shares may be
obtained from an investment executive at PaineWebber or one of its correspondent
firms or by calling toll-free 1-800-647-1568.

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

--------------------
Prospectus Page 32
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

VOTING RIGHTS

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

SHAREHOLDER MEETINGS

The Funds do not intend to hold annual meetings.

Shareholders of record of no less than two-thirds of the outstanding shares of
the Trust or Fund, as applicable, may remove a board member through a
declaration in writing or by vote cast in person or by proxy at a meeting called
for that purpose. A meeting will be called to vote on the removal of a board
member at the written request of holders of 10% of the outstanding shares of the
Trust or Fund, as applicable.

REPORTS TO SHAREHOLDERS

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

CUSTODIAN & RECORDKEEPING AGENT; TRANSFER & DIVIDEND AGENT

State Street Bank and Trust Company, located at One Heritage Drive, North
Quincy, Massachusetts 02171, serves as custodian and recordkeeping agent for
Emerging Markets Equity Fund and Global Equity Fund and employs foreign
sub-custodians to provide custody of the Funds' foreign assets. Brown Brothers
Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, serves as
custodian for Global Income Fund and employs foreign sub-custodians to provide
custody of the Fund's foreign assets. PFPC Inc., a subsidiary of PNC Bank, N.A.,
serves as each Fund's transfer and dividend disbursing agent. It is located at
400 Bellevue Parkway, Wilmington, DE 19809.

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

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

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

PROSPECTUS -- OCTOBER 31, 1996

<TABLE>
<S> <C>
/ / PAINEWEBBER BOND FUNDS / / PAINEWEBBER STOCK FUNDS
High Income Fund Capital Appreciation Fund
Investment Grade Income Fund Financial Services Growth Fund
Low Duration U.S. Government Growth Fund
Income Fund Growth and Income Fund
Strategic Income Fund Small Cap Fund
U.S. Government Income Fund Utility Income Fund
/ / PAINEWEBBER TAX-FREE BOND FUNDS / / PAINEWEBBER GLOBAL FUNDS
California Tax-Free Income Fund Emerging Markets Equity Fund
Municipal High Income Fund Global Equity Fund
National Tax-Free Income Fund Global Income Fund
New York Tax-Free Income Fund / / PAINEWEBBER MONEY MARKET FUND
/ / PAINEWEBBER ASSET
ALLOCATION FUNDS
Balanced Fund
Tactical Allocation Fund
</TABLE>

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

(Copyright) 1996 PaineWebber Incorporated

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

<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019

STATEMENT OF ADDITIONAL INFORMATION

The three funds named above (each a 'Fund' and, collectively, 'Funds') are
series of open-end management investment companies. PaineWebber Emerging Markets
Equity Fund ('Emerging Markets Equity Fund') is a diversified series of
PaineWebber Investment Trust II ('Investment Trust II'), a professionally
managed, open-end management investment company organized as a Massachusetts
business trust. Emerging Markets Equity Fund seeks long-term growth of capital
by investing primarily in equity securities of companies in newly industrialized
countries. PaineWebber Global Equity Fund ('Global Equity Fund') is a
diversified series of PaineWebber Investment Trust ('Investment Trust'), a
professionally managed, open-end management investment company organized as a
Massachusetts business trust. Global Equity Fund seeks long-term capital
appreciation by investing primarily in equity securities of U.S. and foreign
issuers. PaineWebber Global Income Fund ('Global Income Fund') is a
non-diversified series of PaineWebber Investment Series ('Investment Series'), a
professionally managed, open-end management investment company organized as a
Massachusetts business trust. Global Income Fund seeks high current income
consistent with prudent investment risk, with capital appreciation as a
secondary objective, and invests primarily in high quality U.S. and foreign debt
securities.

The investment adviser, administrator and distributor for each Fund is
Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), a wholly owned
subsidiary of PaineWebber Incorporated ('PaineWebber'). As distributor for the
Funds, Mitchell Hutchins has appointed PaineWebber to serve as the exclusive
dealer for the sale of Fund shares. Emerging Markets Management and GE
Investment Management Incorporated ('GE Investment Management') (each a
'Sub-Adviser') serve as investment sub-advisers, respectively, for Emerging
Markets Equity Fund and Global Equity Fund.

This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Funds' current Prospectus, dated October 31,
1996. A copy of the Prospectus may be obtained by calling any PaineWebber
investment executive or correspondent firm or by calling toll-free
1-800-647-1568. This Statement of Additional Information is dated October 31,
1996.

INVESTMENT POLICIES AND RESTRICTIONS

The following supplements the information contained in the Prospectus
concerning the Funds' investment policies and limitations.

YIELD FACTORS AND RATINGS. Moody's Investors Service, Inc. ('Moody's'),
Standard & Poor's, a division of The McGraw Hill Companies, Inc. ('S&P') and
other nationally recognized statistical rating organizations ('NRSROs') are

private services that provide ratings of the credit quality of debt obligations.
A description of the ratings assigned to corporate debt obligations by Moody's
and S&P is included in the Appendix to this Statement of Additional Information.
The Funds may use these ratings in determining whether to purchase, sell or hold
a security. It should be emphasized, however, that ratings are general and are
not absolute standards of quality. Consequently, securities with the same
maturity, interest rate and rating may have different market prices.

Global Income Fund is authorized to invest up to 20% of its net assets in
non-investment grade debt securities--that is, debt securities that are not
rated at the time of purchase within one of the four highest grades assigned by
S&P or Moody's, comparably rated by another NRSRO or determined by Mitchell
Hutchins to be of comparable quality. Lower rated debt securities generally
offer a higher current yield than that available for investment grade issues;
however, they involve higher risks in that they are especially subject to
adverse changes in general economic conditions and in the industries in which
the issuers are engaged, to changes in the financial condition of the issuers
and to price fluctuations in response to changes in interest
<PAGE>
rates. During periods of economic downturn or rising interest rates, highly
leveraged issuers may experience financial stress which could adversely affect
their ability to make payments of interest and principal and increase the
possibility of default. In addition, such issuers may not have more traditional
methods of financing available to them and may be unable to repay debt at
maturity by refinancing. The risk of loss due to default by such issuers is
significantly greater because such securities frequently are unsecured and
subordinated to the prior payment of senior indebtedness.

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

RISK CONSIDERATIONS RELATING TO FOREIGN SECURITIES. To the extent that the
Funds hold securities of foreign issuers, these securities may not be registered
with the Securities and Exchange Commission ('SEC'), nor may the issuers thereof
be subject to its reporting requirements. Accordingly, there may be less
publicly available information concerning foreign issuers of securities held by
the Funds than is available concerning U.S. companies. Foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory requirements comparable to those applicable to
U.S. companies.

The Funds may invest in foreign securities by purchasing American
Depository Receipts ('ADRs') and also may purchase securities of foreign issuers
in foreign markets and purchase European Depository Receipts ('EDRs') or other
securities convertible into securities of issuers based in foreign countries.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Generally, ADRs, in registered
form, are denominated in U.S. dollars and are designed for use in the U.S.
securities markets, while EDRs, in bearer form, may be denominated in other
currencies and are designed for use in European securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs are European receipts evidencing a similar
arrangement. For purposes of each Fund's investment policies, ADRs and EDRs are
deemed to have the same classification as the underlying securities they
represent. Thus, an ADR or EDR representing ownership of common stock will be
treated as common stock.

The Funds anticipate that their brokerage transactions involving foreign
securities of companies headquartered in countries other than the United States
will be conducted primarily on the principal exchanges of such countries.
Transactions on foreign exchanges are usually subject to fixed commissions that
are generally higher than negotiated commissions on U.S. transactions, although
each Fund will endeavor to achieve the best net results in effecting its
portfolio transactions. There is generally less government supervision and
regulation of exchanges and brokers in foreign countries than in the United
States.

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

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

2
<PAGE>
Sovereign Debt differs from debt obligations issued by private entities in
that, generally, remedies for defaults must be pursued in the courts of the
defaulting party. Legal recourse is therefore somewhat diminished. Political
conditions, especially a sovereign entity's willingness to meet the terms of its
debt obligations, are of considerable significance. Also, there can be no
assurance that the holders of commercial bank debt issued by the same sovereign
entity may not contest payments to the holders of Sovereign Debt in the event of
default under commercial bank loan agreements.

A sovereign debtor's willingness or ability to repay principal and interest
due in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient

foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which a
sovereign debtor may be subject. Increased protectionism on the part of a
country's trading partners, or political changes in those countries, could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any, or the credit standing of a particular local government
or agency.

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

U.S. GOVERNMENT SECURITIES. The Funds may invest in various direct
obligations of the United States Treasury and obligations issued or guaranteed
by the United States government or one of it agencies or instrumentalities
(collectively, 'U.S. Government Securities'). Among the U.S. Government
Securities that may be held by the Funds are instruments that are supported by
the full faith and credit of the United States; instruments that are supported
by the right of the issuer to borrow from the United States Treasury; and
instruments that are supported solely by the credit of the instrumentality.

The U.S. Government Securities in which Global Income Fund may invest
include mortgage-backed securities issued or guaranteed by the Government
National Mortgage Association, the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation, which represent undivided ownership
interests in pools of mortgages. The mortgages backing these securities include
both fixed and adjustable rate mortgages. The U.S. government or the issuing
agency guarantees the payment of the interest on and principal of these
securities. The guarantees do not extend to the securities' market value,
however, which is likely to vary inversely with fluctuations in interst rates,
and the guarantees do not extend to the yield or value of the Fund's shares.
These securities are 'pass-through' instruments through which the holders
receive a share of the interest and principal payments from the mortgages
underlying the securities, net of certain fees. The principal amounts of such
underlying mortgages generally may be prepaid in whole or in part by the
mortgagees at any time without penalty, and the prepayment characteristics of
the underlying mortgages may vary. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed securities can be expected to
accelerate. The Fund will reinvest prepaid amounts in other income producing
securities, the yields of which will reflect interest rates prevailing at the
time. Accelerated prepayments adversely affect yields for mortgage-backed
securities purchased by the Fund at a premium and may involve additional risk of
loss of principal because the premium may not have been fully amortized at the
time the obligation is prepaid. The opposite is true for mortgage-backed
securities purchased by the Fund at a discount.

FOREIGN CURRENCY TRANSACTIONS. Although the Funds value their assets daily
in U.S. dollars, they do not intend to convert their holdings of foreign

currencies to U.S. dollars on a daily basis. The Funds' foreign currencies
generally will be held as 'foreign currency call accounts' at foreign branches
of foreign or domestic banks. These accounts bear interest at negotiated rates
and are payable upon relatively short demand periods. If a bank became
insolvent, the Funds could suffer a loss of some or all of the amounts
deposited. The Funds may convert foreign currency to U.S. dollars from time to
time. Although foreign exchange dealers generally

3
<PAGE>
do not charge a stated commission or fee for conversion, the prices posted
generally include a 'spread,' which is the difference between the prices at
which the dealers are buying and selling foreign currencies.

ILLIQUID SECURITIES. Global Equity Fund and Global Income Fund each may
invest up to 10% of its net assets, and Emerging Markets Equity Fund up to 15%
of its net assets, in illiquid securities. The term 'illiquid securities' for
this purpose means securities that cannot be disposed of within seven days in
the ordinary course of business at approximately the amount at which a Fund has
valued the securities and includes, among other things, purchased
over-the-counter ('OTC') options, repurchase agreements maturing in more than
seven days and restricted securities other than those Mitchell Hutchins or a
Sub-Adviser, as applicable, have determined are liquid pursuant to guidelines
established by each Fund's board of trustees (each sometimes referred to as a
'board'). The assets used as cover for OTC options written by the Funds will be
considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Funds may repurchase any OTC option it writes at a maximum price
to be calculated by a formula set forth in the option agreement. The cover for
an OTC option written subject to this procedure would be considered illiquid
only to the extent that the maximum repurchase price under the formula exceeds
the intrinsic value of the option.

Illiquid restricted securities may be sold only in privately negotiated
transactions or in public offerings with respect to which a registration
statement is in effect under the Securities Act of 1933 ('1933 Act'). However,
to the extent that securities are freely tradeable in the country in which they
are principally traded, they are not considered illiquid securities for purposes
of the Funds' respective 10% net asset or 15% total asset limitation, even if
they are not freely tradeable in the United States. Where registration is
required, a Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision
to sell and the time a Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, a Fund might obtain a less favorable price than
prevailed when it decided to sell.

Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the 1933 Act, including private placements, repurchase
agreements, commercial paper, foreign securities and corporate bonds and notes.
These instruments are often restricted securities because the securities are
sold in transactions not requiring registration. Institutional investors
generally will not seek to sell these instruments to the general public, but
instead will often depend either on an efficient institutional market in which

such unregistered securities can be readily resold or on an issuer's ability to
honor a demand for repayment. Therefore, the fact that there are contractual or
legal restrictions on resale to the general public or certain institutions is
not dispositive of the liquidity of such investments.

Rule 144A under the 1933 Act establishes a 'safe harbor' from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
have developed as a result of Rule 144A, providing both readily ascertainable
values for restricted securities and the ability to liquidate an investment to
satisfy share redemption orders. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at favorable prices.

Each board has delegated the function of making day-to-day determinations
of liquidity to Mitchell Hutchins or a Sub-Adviser, as applicable, pursuant to
guidelines approved by the board. Mitchell Hutchins or the Sub-Adviser takes
into account a number of factors in reaching liquidity decisions, including (1)
the frequency of trades for the security, (2) the number of dealers that make
quotes for the security, (3) the number of dealers that have undertaken to make
a market in the security, (4) the number of other potential purchasers and (5)
the nature of the security and how trading is effected (e.g., the time needed to
sell the security, how offers are solicited and the mechanics of transfer).
Mitchell Hutchins or a Sub-Adviser monitors the liquidity of restricted
securities in each Fund's portfolio and reports periodically on such decisions
to the applicable board.

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REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a
Fund purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer at an
agreed-upon date or upon demand and at a price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased securities.
The Fund maintains custody of the underlying securities prior to their
repurchase; thus, the obligation of the bank or dealer to pay the repurchase
price on the date agreed to is, in effect, secured by such securities. If the
value of these securities is less than the repurchase price, plus any
agreed-upon additional amount, the other party to the agreement must provide
additional collateral so that at all times the collateral is at least equal to
the repurchase price, plus any agreed-upon additional amount. The difference
between the total amount to be received upon repurchase of the securities and
the price that was paid by a Fund upon acquisition is accrued as interest and
included in its net investment income. Repurchase agreements carry certain risks
not associated with direct investments in securities, including possible
declines in the market value of the underlying securities and delays and costs
to a Fund if the other party to a repurchase agreement becomes insolvent.

The Funds intend to enter into repurchase agreements only with banks and

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

REVERSE REPURCHASE AGREEMENTS. Global Income Fund may enter into reverse
repurchase agreements with banks and securities dealers up to an aggregate value
of not more than 10% of the Fund's total assets. Such agreements involve the
sale of securities held by the Fund subject to the Fund's agreement to
repurchase the securities at an agreed-upon date and price reflecting a market
rate of interest. Such agreements are considered to be borrowings and may be
entered into only for temporary or emergency purposes. While a reverse
repurchase agreement is outstanding, the Fund's custodian segregates assets to
cover the Fund's obligations under the reverse repurchase agreement. See
'Investment Policies and Restrictions-Segregated Accounts.'

LENDING OF PORTFOLIO SECURITIES. Each Fund is authorized to lend portfolio
securities up to 33 1/3% of its total assets taken at market value to
broker-dealers or institutional investors that Mitchell Hutchins deems
qualified, but only when the borrower maintains with that Fund's custodian bank
acceptable collateral, marked to market daily, in an amount at least equal to
the market value of the securities loaned, plus accrued interest and dividends.
Acceptable collateral is limited to cash, U.S. government securities and
irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. In determining whether to lend securities to a particular
broker-dealer or institutional investor, Mitchell Hutchins will consider, and
during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. Each Fund will
retain authority to terminate any loans at any time. Each Fund may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or money market
instruments held as collateral to the borrower or placing broker. Each Fund will
receive reasonable interest on the loan or a flat fee from the borrower and
amounts equivalent to any dividends, interest or other distributions on the
securities loaned. Each Fund will regain record ownership of loaned securities
to exercise beneficial rights, such as voting and subscription rights and rights
to dividends, interest or other distributions, when regaining such rights is
considered to be in the Fund's interest.

SHORT SALES 'AGAINST THE BOX'. Each Fund may engage in short sales of
securities it owns or has the right to acquire at no added cost through
conversion or exchange of other securities it owns (short sales 'against the
box') to defer realization of gains or losses for tax or other purposes. To make
delivery to the purchaser in a short sale, the executing broker borrows the
securities being sold short on behalf of a Fund, and that Fund is obligated to
replace the securities borrowed at a date in the future. When a Fund sells
short, it will establish a margin account with the broker effecting the short
sale, and will deposit collateral with the broker. In addition, the Fund will
maintain with its custodian, in a segregated account, the securities that could
be used to cover the short sale. Each Fund incurs transaction costs, including
interest expense, in connection with opening, maintaining and closing short
sales against the box. No Fund currently expects to have obligations under short
sales at any time during the coming year that exceed 5% of its net assets.

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The Funds might make a short sale 'against the box' in order to hedge
against market risks when Mitchell Hutchins or a Sub-Adviser believes that the
price of a security may decline, thereby causing a decline in the value of a
security owned by a Fund or a security convertible into or exchangeable for a
security owned by the Fund, or when Mitchell Hutchins or a Sub-Adviser wants to
sell a security that a Fund owns at a current price, but also wishes to defer
recognition of gain or loss for federal income tax purposes. In such case, any
loss in the Fund's long position after the short sale should be reduced by a
gain in the short position. Conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which gains or losses in
the long position are reduced will depend upon the amount of the securities sold
short relative to the amount of the securities a Fund owns, either directly or
indirectly, and in the case where the Fund owns convertible securities, changes
in the investment values or conversion premiums of such securities.

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

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As stated in the Prospectus,
each Fund may purchase securities on a 'when-issued' or delayed delivery basis.
A security purchased on a when-issued or delayed delivery basis is recorded as
an asset on the commitment date and is subject to changes in market value,
generally based upon changes in the level of interest rates. Thus, fluctuation
in the value of the security from the time of the commitment date will affect a
Fund's net asset value. When the Fund agrees to purchase securities on a
when-issued or delayed delivery basis, its custodian segregates assets to cover
the amount of the commitment. See 'Investment Policies and
Restrictions-Segregated Accounts.' The Fund purchases when-issued securities
only with the intention of taking delivery, but may sell the right to acquire
the security prior to delivery if Mitchell Hutchins or a Sub-Adviser deems it
advantageous to do so, which may result in a gain or loss to the Fund.

INVESTMENT LIMITATIONS OF THE FUNDS

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

Each Fund will not:

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

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

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

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

(5) purchase or sell real estate, except that investments in securities of
issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by interests
in real estate are not subject to this limitation, and except that the Fund may
exercise rights under agreements relating to such securities, including the
right to enforce security interests and to hold real estate acquired by reason
of such enforcement until that real estate can be liquidated in an orderly
manner.

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

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

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

The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not be

considered to have been issued by the same issuer by reason of the securities
having the same sponsor, and mortgage- and asset-backed securities issued by a
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company.

NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions, which
apply to each Fund, are non-fundamental and may be changed by the vote of the
Fund's board without shareholder approval.

Each Fund will not:

(1) purchase or retain the securities of any issuer if the officers and
trustees of the Trust and the officers and directors of Mitchell Hutchins (and,
for Emerging Markets Equity Fund and Global Equity Fund, the applicable
Sub-Adviser) each owning beneficially more than 0.5% of the outstanding
securities of the issuer own in the aggregate more than 5% of the securities of
the issuer.

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

(3) purchase any security if as a result the Fund would have more than 5%
of its total assets invested in securities of companies that together with any
predecessors have been in continuous operation for less than three years.

(4) make an investment in warrants, valued at the lower of cost or market,
that exceeds 5% of the value of its net assets, which amount may include
warrants that are not listed on the New York Stock Exchange Inc. ('NYSE') or the
American Stock Exchange, Inc., provided that such warrants, valued at the lower
of cost or market, do not exceed 2% of the Fund's net assets, and further
provided that this restriction does not apply to warrants attached to, or sold
as a unit with, other securities. For purposes of this restriction, the term
'warrants' does not include options on debt securities, bond indices, foreign
currencies or futures contracts.

(5) change its investment policies to permit the Fund to invest more than
35% of its total assets in debt securities rated Ba or lower by Moody's or BB or
lower by S&P, comparably rated by another NRSRO or determined by Mitchell
Hutchins (or the Sub-Adviser) to be of comparable quality, without giving at
least 30 days' advance notice to shareholders.

(6) invest in real estate limited partnerships.

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

(8) purchase securities on margin, except for short-term credit necessary

for clearance of portfolio transactions and except that the Fund may make margin
deposits in connection with its use of financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts or
derivative instruments.

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

(10) invest in oil, gas or mineral exploration or development programs or
leases, except that investments in securities of issuers that invest in such
programs or leases and investments in asset-backed securities supported by
receivables generated from such programs or leases are not subject to this
prohibition.

(11) purchase securities of other investment companies, except to the
extent permitted by the 1940 Act and except that this limitation does not apply
to securities received or acquired as dividends, through offers of exchange, or
as a result of reorganization, consolidation, or merger.

In addition, Global Equity Fund will not:

(12) invest in companies for the purpose of exercising control or
management.

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HEDGING STRATEGIES

HEDGING INSTRUMENTS. Mitchell Hutchins and the Sub-Advisers may use a
variety of financial instruments ('Hedging Instruments'), including certain
options, futures contracts (sometimes referred to as 'futures') and options on
futures contracts, to attempt to hedge each Fund's portfolio. In particular,
each Fund may use the hedging instruments described below. Global Income Fund
may use these strategies to attempt to enhance income and also may enter into
certain interest rate protection transactions.

OPTIONS ON SECURITIES AND FOREIGN CURRENCIES--A call option is a short-term
contract pursuant to which the purchaser of the option, in return for a premium,
has the right to buy the security or currency underlying the option at a
specified price at any time during the term of the option. The writer of the
call option, who receives the premium, has the obligation, upon exercise of the
option during the option term, to deliver the underlying security or currency
against payment of the exercise price. A put option is a similar contract that
gives its purchaser, in return for a premium, the right to sell the underlying
security or currency at a specified price during the option term. The writer of
the put option, who receives the premium, has the obligation, upon exercise of
the option during the option term, to buy the underlying security or currency at
the exercise price.

OPTIONS ON SECURITIES INDEXES--A securities index assigns relative values
to the securities included in the index and fluctuates with changes in the

market values of those securities. A securities index option operates in the
same way as a more traditional securities option, except that exercise of a
securities index option is effected with cash payment and does not involve
delivery of securities. Thus, upon exercise of a securities index option, the
purchaser will realize, and the writer will pay, an amount based on the
difference between the exercise price and the closing price of the securities
index.

SECURITIES INDEX FUTURES CONTRACTS--A securities index futures contract is
a bilateral agreement pursuant to which one party agrees to accept, and the
other party agrees to make, delivery of an amount of cash equal to a specified
dollar amount times the difference between the securities index value at the
close of trading of the contract and the price at which the futures contract is
originally struck. No physical delivery of the securities comprising the index
is made. Generally, contracts are closed out prior to the expiration date of the
contract.

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

OPTIONS ON FUTURES CONTRACTS--Options on futures contracts are similar to
options on securities or currency, except that an option on a futures contract
gives the purchaser the right, in return for the premium, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put), rather than to purchase or sell a security or
currency, at a specified price at any time during the option term. Upon exercise
of the option, the delivery of the futures position to the holder of the option
will be accompanied by delivery of the accumulated balance that represents the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the future. The writer of an option, upon exercise, will assume a short
position in the case of a call and a long position in the case of a put.

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

GENERAL DESCRIPTION OF HEDGING STRATEGIES. Hedging strategies can be
broadly categorized as 'short hedges' and 'long hedges.' A short hedge is a
purchase or sale of a Hedging Instrument intended to partially or fully offset
potential declines in the value of one or more investments held in a Fund's
portfolio. Thus, in a short hedge a Fund takes a position in a Hedging
Instrument whose price is expected to move in the opposite direction of the
price of the investment being hedged. For example, a Fund might purchase a put

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option on a security to hedge against a potential decline in the value of that
security. If the price of the security declined below the exercise price of the
put, a Fund could exercise the put and thus limit its loss below the exercise
price to the premium paid plus transactions costs. In the alternative, because
the value of the put option can be expected to increase as the value of the
underlying security declines, a Fund might be able to close out the put option
and realize a gain to offset the decline in the value of the security.

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

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

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

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

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

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

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

The effectiveness of hedges using Hedging Instruments on indices will
depend on the degree of correlation between price movements in the index and
price movements in the securities being hedged.

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

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

COVER FOR HEDGING STRATEGIES. Transactions using Hedging Instruments,
other than purchased options, expose the Funds to an obligation to another

party. A Fund will not enter into any such transactions unless it owns either
(1) an offsetting ('covered') position in securities, other options or futures
contracts or (2) cash and liquid securities, with a value sufficient at all
times to cover its potential obligations to the extent not covered as provided
in (1) above. Each Fund will comply with SEC guidelines regarding cover for
hedging transactions and will, if the guidelines so require, set aside cash or
liquid securities in a segregated account with its custodian in the prescribed
amount.

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

OPTIONS. The Funds may purchase put and call options, and write (sell)
covered put or call options, in the case of Emerging Markets Equity Fund and
Global Equity Fund, on equity and debt securities and stock indices and on
foreign currencies, and in the case of Global Income Fund, on debt securities in
which it is authorized to invest and on foreign currencies. The purchase of call
options serves as a long hedge, and the purchase of put options serves as a
short hedge. Writing covered call options serves as a limited short hedge,
because declines in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the security
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the affected Fund will be
obligated to sell the security at less than its market value. Writing covered
put options serves as a limited long hedge because increases in the value of the
hedged investment would be offset to the extent of the premium received for
writing the option. However, if the security depreciates to a price lower than
the exercise price of the put option, it can be expected that the put option
will be exercised and the Fund will be obligated to purchase the security at
more than its market value. The securities or other assets used as cover for OTC
options written by a Fund would be considered illiquid to the extent described
under 'Investment Policies and Restrictions--Illiquid Securities.'

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

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

The Funds may purchase and write both exchange-traded and OTC options.
Exchange markets for options on debt securities and foreign currencies exist but
are relatively new, and these instruments are primarily traded on the OTC
market. Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed which,
in effect, guarantees completion of every exchange-traded option transaction. In
contrast, OTC options are contracts between a Fund and its contra party (usually
a securities dealer or a bank) with no clearing organization guarantee. Thus,
when a Fund purchases or writes an OTC option, it relies on the contra party to
make or take delivery of the underlying investment upon exercise of the option.
Failure by the contra party to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Funds will enter into OTC option transactions only with contra parties that
have a net worth of at least $20 million.

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

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

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

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

(1) Global Equity Fund--

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

(b) The aggregate value of underlying securities on which covered
calls are written will not exceed 5% of the Fund's total assets.

(c) To the extent cash or cash equivalents, including U.S. government
securities, are maintained in a segregated account to collateralize options
written on currencies, securities or stock indexes, the Fund will limit
collateralization to 50% of its net assets.

(2) Global Income Fund--

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

12
<PAGE>
(b) The aggregate value of securities underlying put options written
by the Fund determined as of the date the put options are written will not
exceed 50% of a Fund's net assets.

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

FUTURES. The Funds may purchase and sell securities index futures
contracts, interest rate futures contracts and foreign currency futures
contracts. A Fund may also purchase put and call options, and write covered put
and call options, on futures in which it is allowed to invest. The purchase of
futures or call options thereon can serve as a long hedge, and the sale of
futures or the purchase of put options thereon can serve as a short hedge.
Writing covered call options on futures contracts can serve as a limited short
hedge, and writing covered put options on futures contracts can serve as a
limited long hedge, using a strategy similar to that used for writing covered
options on securities or indices.

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

Subsequent 'variation margin' payments are made to and from the futures

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

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

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

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

Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or related options might not
correlate perfectly with movements in the prices of the

13
<PAGE>
investments being hedged. For example, all participants in the futures and
related options markets are subject to daily variation margin calls and might be
compelled to liquidate futures or related options positions whose prices are
moving unfavorably to avoid being subject to further calls. These liquidations
could increase price volatility of the instruments and distort the normal price
relationship between the futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the futures and securities markets involving

arbitrage, 'program trading' and other investment strategies might result in
temporary price distortions.

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

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

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

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

FOREIGN CURRENCY HEDGING STRATEGIES--SPECIAL CONSIDERATIONS. Each Fund may
use options and futures on foreign currencies, as described above, and forward
currency forward contracts, as described below, to hedge against movements in
the values of the foreign currencies in which the Funds' securities are
denominated. Such currency hedges can protect against price movements in a
security a Fund owns or intends to acquire that are attributable to changes in
the value of the currency in which it is denominated. Such hedges do not,
however, protect against price movements in the securities that are attributable
to other causes.

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

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

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the

interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Hedging Instruments until they reopen.

Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
the Funds might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance

14
<PAGE>
of foreign banking arrangements by U.S. residents and might be required to pay
any fees, taxes and charges associated with such delivery assessed in the
issuing country.

FORWARD CURRENCY CONTRACTS. Each Fund may enter into forward currency
contracts to purchase or sell foreign currencies for a fixed amount of U.S.
dollars or another foreign currency. Such transactions may serve as long
hedges--for example, a Fund may purchase a forward currency contract to lock in
the U.S. dollar price of a security denominated in a foreign currency that the
Fund intends to acquire. Forward currency contract transactions may also serve
as short hedges--for example, a Fund may sell a forward currency contract to
lock in the U.S. dollar equivalent of the proceeds from the anticipated sale of
a security denominated in a foreign currency.

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

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

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

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

LIMITATIONS ON THE USE OF FORWARD CURRENCY CONTRACTS. Each Fund may enter
into forward currency contracts or maintain a net exposure to such contracts
only if (1) the consummation of the contracts would not obligate the Fund to
deliver an amount of foreign currency in excess of the value of the position
being hedged by such contracts or (2) the Fund segregates with its custodian
cash, U.S. government securities or other liquid, high-grade debt securities in
an amount not less than the value of its total assets committed to the
consummation of the contract and not covered as provided in (1) above, as marked
to market daily.

15
<PAGE>
INTEREST RATE PROTECTION TRANSACTIONS. Global Income Fund may enter into
interest rate protection transactions, including interest rate swaps and
interest rate caps, collars and floors. Interest rate swap transactions involve
an agreement between two parties to exchange payments that are based, for
example, on variable and fixed rates of interest and that are calculated on the
basis of a specified amount of principal (the 'notional principal amount') for a
specified period of time. Interest rate cap and floor transactions involve an
agreement between two parties in which the first party agrees to make payments
to the counterparty when a designated market interest rate goes above (in the
case of a cap) or below (in the case of a floor) a designated level on
predetermined dates or during a specified time period. Interest rate collar
transactions involve an agreement between two parties in which payments are made
when a designated market interest rate either goes above a designated ceiling
level or goes below a designated floor level on predetermined dates or during a
specified time period.

The Fund expects to enter into interest rate protection transactions to
preserve a return or spread on a particular investment or portion of its

portfolio or to protect against any increase in the price of securities it
anticipates purchasing at a later date. The Fund intends to use these
transactions as a hedge and not as a speculative investment. Interest rate
protection transactions are subject to risks comparable to those described above
with respect to other hedging strategies.

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

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

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

16
<PAGE>
TRUSTEES AND OFFICERS

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

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
Margo N. Alexander**; 49 Trustee and President Mrs. Alexander is president, chief executive

officer and a director of Mitchell Hutch-
ins (since January 1995) and also an ex-
ecutive vice president and a director of
PaineWebber. Mrs. Alexander is president
and a director or trustee of 30 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.

Richard Q. Armstrong; 61 Trustee Mr. Armstrong is chairman and principal of
78 West Brother Drive RQA Enterprises (management consulting
Greenwich, CT 06830 firm) (since April 1991 and principal
occupation since March 1995). Mr. Arm-
strong is also a director of Hi Lo Auto-
motive, Inc. He was chairman of the board,
chief executive officer and co-owner of
Adirondack Beverages (producer and
distributor of soft drinks and spar-
kling/still waters) (October 1993-March
1995). He was a partner of the New England
Consulting Group (management consulting
firm) (December 1992-September 1993). He
was managing director of LMVH U.S.
Corporation (U.S. subsidiary of the French
luxury goods conglomerate, Luis Vuitton
Moet Hennessey Corporation) (1987-1991) and
chairman of its wine and spirits
subsidiary, Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong is a director or
trustee of 29 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.

E. Garrett Bewkes, Jr.**; 69 Trustee and Chairman of the Mr. Bewkes is a director of Paine Webber
Board of Trustees Group Inc. ('PW Group') (holding company of
PaineWebber and Mitchell Hutchins). Prior
to December 1995, he was a consultant to PW
Group. Prior to 1988, he was chairman of
the board, president and chief executive
officer of American Bakeries Company. Mr.
Bewkes is also a director of Interstate
Bakeries Corporation and NaPro BioTherapeu-
tics, Inc. and is a director or trustee of
30 investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
</TABLE>

17
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------

<S> <C> <C>
Richard R. Burt; 49 Trustee Mr. Burt is chairman of International Equity
1101 Connecticut Avenue, N.W. Partners (international investments and
Washington, D.C. 20036 consulting firm) (since March 1994) and a
partner of McKinsey & Company (management
consulting firm) (since 1991). He is also a
director of American Publishing Company. He
was the chief negotiator in the Strategic
Arms Reduction Talks with the former Soviet
Union (1989-1991) and the U.S. Ambassador
to the Federal Republic of Germany
(1985-1989). Mr. Burt is a director or
trustee of 29 investment companies for
which serves as investment adviser.

Mary C. Farrell**; 46 Trustee Ms. Farrell is a managing director, senior
investment strategist and member of the
Investment Policy Committee of PaineWebber.
Ms. Farrell joined PaineWebber in 1982. She
is a member of the Financial Women's
Association and Women's Economic Roundtable
and is employed as a regular panelist on
Wall Street Week with Louis Rukeyser. She
also serves on the Board of Overseers of
New York University's Stern School of
Business. Ms. Farrell is a director or
trustee of 29 investment companies for
which Mitchell Hutchins or PaineWebber
serves as an investment adviser.

Meyer Feldberg; 54 Trustee Mr. Feldberg is Dean and Professor of
Columbia University Management of the Graduate School of
101 Uris Hall Business, Columbia University. Prior to
New York, New York 10027 1989, he was president of the Illinois In-
stitute of Technology. Dean Feldberg is
also a director of AMSCO International
Inc., Federated Department Stores, Inc. and
New World Communications Group Incorporated
and is a director or trustee of 29
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

George W. Gowen; 66 Trustee Mr. Gowen is a partner in the law firm of
666 Third Avenue Dunnington, Bartholow & Miller. Prior to
New York, New York 10017 May 1994, he was a partner in the law firm
of Fryer, Ross & Gowen. Mr. Gowen is also a
director of Columbia Real Estate
Investments, Inc. Mr. Gowen is a director
or trustee of 29 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>

18
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
Frederic V. Malek; 59 Trustee Mr. Malek is chairman of Thayer Capital
901 15th Street, N.W. Partners (investment bank) and a co-
Suite 300 chairman and director of CB Commercial
Washington, D.C. 20005 Group Inc. (real estate). From January 1992
to November 1992, he was campaign manager
of Bush-Quayle '92. From 1990 to 1992, he
was vice chairman and, from 1989 to 1990,
he was president of Northwest Airlines
Inc., NWA Inc. (holding company of North-
west Airlines Inc.) and Wings Holdings Inc.
(holding company of NWA Inc.). Prior to
1989, he was employed by the Marriott
Corporation (hotels, restaurants, airline
catering and contract feeding), where he
most recently was an executive vice
president and president of Marriott Hotels
and Resorts. Mr. Malek is also a director
of American Management Systems, Inc.
Automatic Data Processing, Inc., Avis,
Inc., FPL Group, Inc., ICF International,
Manor Care, Inc. and National Education
Corporation. Mr. Malek is a director or
trustee of 29 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.

Carl W. Schafer; 60 Trustee Mr. Schafer is president of the Atlantic
P.O. Box 1164 Foundation (charitable foundation sup-
Princeton, NJ 08542 porting mainly oceanographic exploration
and research). He also is a director of
Roadway Express, Inc. (trucking), The
Guardian Group of Mutual Funds, Evans
Systems, Inc. (a motor fuels, convenience
store and diversified company), Hidden Lake
Gold Mines Ltd., (gold mining), Electronic
Clearing House, Inc., (financial
transactions processing), Wainoco Oil
Corporation and Nutraceutix, Inc.
(biotechnology). Prior to January 1993, he
was chairman of the Investment Advisory
Committee of the Howard Hughes Medical
Institute. Mr. Schafer is a director or
trustee of 29 investment companies for
which Mitchell Hutchins or PaineWebber
serves as an investment adviser.
</TABLE>

19
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
John R. Torrell, III; 58 Trustee Mr. Torell is chairman of Torell Management,
767 Fifth Avenue Inc. (financial advisory firm), chairman of
Suite 4605 Telesphere Corporation (electronic provider
New York, NY 10153 of financial information) and a partner of
Zilkha & Company (merchant bank and private
investment company). He is the former
chairman and chief executive officer of
Fortune Bancorp (1990-1991 and 1990-1994,
respectively), the former chairman, presi-
dent and chief executive officer of CalFed,
Inc. (savings association) (1988 to 1989)
and the former president of Manufacturers
Hanover Corp. (bank) (prior to 1988). Mr.
Torell is also a director of American Home
Products Corp., New Colt Inc. (armament
manufacturer) and Volt Information Sciences
Inc. Mr. Torell is a director or trustee of
29 investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

T. Kirkham Barneby; 49 Vice President Mr. Barneby is a managing director and chief
(Investment Trust only) investment officer--quantitative
investments of Mitchell Hutchins. Prior to
September 1994, he was a senior vice
president at Vantage Global Management.
Prior to June 1993, he was a senior vice
president at Mitchell Hutchins. Mr. Barneby
is a vice president of four investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.

Teresa M. Boyle; 37 Vice President Ms. Boyle is a first vice president and man-
ager--advisory administration of Mitchell
Hutchins. Prior to November 1993, she was
compliance manager of Hyperion Capital
Management, Inc., an investment advisory
firm. Prior to April 1993, Ms. Boyle was a
vice president and manager--legal
administration of Mitchell Hutchins. Ms.
Boyle is a vice president of 30 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>

20
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
C. William Maher; 34 Vice President and Mr. Maher is a first vice president and a se-
Assistant Treasurer nior manager of the mutual fund finance
division of Mitchell Hutchins. Mr. Maher is
a vice president and assistant treasurer of
30 investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

Dennis McCauley; 49 Vice President (Investment Mr. McCauley is a managing director and chief
Series only) investment officer--fixed income of
Mitchell Hutchins. Prior to December 1994,
he was director of fixed income
investments of IBM Corporation. Mr.
McCauley is a vice president of 19
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

Ann E. Moran; 38 Vice President and Ms. Moran is a vice president of Mitchell
Assistant Treasurer Hutchins. Ms. Moran is a vice president and
assistant treasurer of 30 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.

Dianne E. O'Donnell; 44 Vice President and Ms. O'Donnell is a senior vice president and
Secretary deputy general counsel of Mitchell
Hutchins. Ms. O'Donnell is a vice presi-
dent and secretary of 29 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.

Victoria E. Schonfeld; 45 Vice President Ms. Schonfeld is a managing director and
general counsel of Mitchell Hutchins. Prior
to May 1994, she was a partner in the law
firm of Arnold & Porter. Ms. Schonfeld is a
vice president of 30 investment companies
for which Mitchell Hutchins or PaineWebber
serves as investment adviser.

Paul H. Schubert; 33 Vice President and Mr. Schubert is a first vice president and a
Assistant Treasurer senior manager of the mutual fund finance
division of Mitchell Hutchins. From August
1992 to August 1994, he was a vice
president at Black-Rock Financial
Management, L.P. Prior to August 1992, he
was an audit manager with Ernst & Young

LLP. Mr. Schubert is a vice president and
assistant treasurer of 30 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>

21
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
Julian F. Sluyters; 35 Vice President and Mr. Sluyters is a senior vice president and
Treasurer the director of the mutual fund finance
division of Mitchell Hutchins. Prior to
1991, he was an audit senior manager with
Ernst & Young LLP. Mr. Sluyters is a vice
president and treasurer of 30 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.

Mark A. Tincher; 40 Vice President Mr. Tincher is a managing director and chief
(Investment Trust and investment officer--U.S. equity invest-
Investment Trust II only) ments of Mitchell Hutchins. Prior to March
1995, he was a vice president and directed
the U.S. funds management and equity
research areas of Chase Manhattan Private
Bank. Mr. Tincher is a vice president of 14
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

Stuart Waugh; 40 Vice President (Investment Mr. Waugh is a managing director and a
Series only) portfolio manager of Mitchell Hutchins
responsible for global fixed income in-
vestments and currency trading. Mr. Waugh
is also a vice president of four other
investment companies for which Mitchell
Hutchins serves as investment adviser.

Keith A. Weller; 34 Vice President and Mr. Weller is a first vice president and as-
Assistant Secretary sociate general counsel of Mitchell
(Investment Series only) Hutchins. Prior to May 1995, he was an
attorney in private practice. Mr. Weller is
a vice president and assistant secretary of
29 investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
</TABLE>

- ------------------
* Unless otherwise indicated, the business address of each listed person is

1285 Avenue of the Americas, New York, New York 10019.

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

Each Trust pays trustees who are not 'interested persons' of the Trust
$1,000 annually for each series and $150 for each board meeting and each
separate meeting of a board committee. Investment Trust II and Investment Series
presently each has one series and thus pay each such trustee $1,000 annually,
plus any additional amounts due for board or committee meetings. Investment
Trust has two series and thus pays each such trustee $2,000 annually, plus any
additional amounts due for board or committee meetings. Certain committee chairs
receive additional compensation aggregating $15,000 annually from all the funds
within the PaineWebber fund complex. All trustees are reimbursed for any
expenses incurred in attending meetings. Trustees own in the aggregate less than
1% of the outstanding shares of each Fund. Because PaineWebber and Mitchell
Hutchins perform substantially all the services necessary for the operation of
the Trusts and each Fund, the Trusts require no employees. No officer, director
or employee of Mitchell Hutchins or PaineWebber presently receives any
compensation from the Trusts for acting as a trustee or officer.

22
<PAGE>
The table below includes certain information relating to the compensation
of the current trustees who held office with the Trusts or with other
PaineWebber funds during the fiscal years indicated.

COMPENSATION TABLE

<TABLE>
<CAPTION>
TOTAL
AGGREGATE AGGREGATE AGGREGATE COMPENSATION
COMPENSATION COMPENSATION COMPENSATION FROM THE
FROM FROM PW FROM TRUST AND
INVESTMENT INVESTMENT INVESTMENT THE FUND
NAME OF PERSON, POSITION TRUST II* TRUST** SERIES*** COMPLEX****
- -------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Richard Q. Armstrong,
Trustee.........................................
Richard R. Burt,
Trustee.........................................
Meyer Feldberg,
Trustee.........................................
George W. Gowen,
Trustee.........................................
Frederic V. Malek,
Trustee.........................................
Carl W. Schafer,
Trustee.........................................
John R. Torell, III,
Trustee.........................................

</TABLE>

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

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

* Represents fees paid to each trustee during the fiscal year ended June 30,
1996.

** Represents fees paid to each trustee during the fiscal year ended August
31, 1996.

*** Represents fees paid to each trustee during the fiscal year ended October
31, 1995.

**** Represents total compensation paid to each trustee during the calendar year
ended December 31, 1995.

INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS

INVESTMENT ADVISORY ARRANGEMENTS. Mitchell Hutchins acts as the investment
adviser and administrator to each Fund pursuant to separate contracts (each an
'Advisory Contract') with each Trust. Under the Advisory Contracts, each Fund
pays Mitchell Hutchins a fee, computed daily and paid monthly, at the annual
rate specified in the Prospectus. Furthermore, under a service agreement
('Service Agreement') with Global Income Fund that is reviewed by its board
annually, PaineWebber provides certain services to Global Income Fund not
otherwise provided by the Fund's transfer agent.

Under the terms of the Advisory Contracts, each Fund bears all expenses
incurred in its operation that are not specifically assumed by Mitchell
Hutchins. Expenses borne by each Fund include the following: (1) the cost
(including brokerage commissions) of securities purchased or sold by the Fund
and any losses incurred in connection therewith; (2) fees payable to and
expenses incurred on behalf of the Fund by Mitchell Hutchins; (3) organizational
expenses; (4) filing fees and expenses relating to the registration and
qualification of the Fund's shares under federal and state securities laws and
maintenance of such registrations and qualifications; (5) fees and salaries
payable to trustees and officers who are not interested persons (as defined in
the 1940 Act) of the Trust or Mitchell Hutchins; (6) all expenses incurred in
connection with the trustees' services, including travel expenses; (7) taxes
(including any income or franchise taxes) and governmental fees; (8) costs of
any liability, uncollectible items of deposit and other insurance or fidelity
bonds; (9) any costs, expenses or losses arising out of a liability of or claim
for damages or other relief asserted against the Trust or Fund for violation of
any law; (10) legal, accounting and auditing expenses, including legal fees of
special

23
<PAGE>
counsel for the independent trustees; (11) charges of custodians, transfer
agents and other agents; (12) costs of preparing share certificates; (13)

expenses of setting in type and printing prospectuses, statements of additional
information and supplements thereto, reports and proxy materials for existing
shareholders, and costs of mailing such materials to shareholders; (14) any
extraordinary expenses (including fees and disbursements of counsel) incurred by
the Fund; (15) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; (16) costs of
mailing and tabulating proxies and costs of meetings of shareholders, the board
and any committees thereof; (17) the cost of investment company literature and
other publications provided to trustees and officers; and (18) costs of mailing,
stationery and communications equipment.

So long as required by state regulation, Mitchell Hutchins will reimburse a
Fund if and to the extent the aggregate operating expenses of the Fund in any
fiscal year exceed applicable limits. Currently, the most restrictive such limit
applicable to the Fund is 2.5% of the first $30 million of the Fund's average
daily net assets, 2.0% of the next $70 million of its average daily net assets
and 1.5% of its average daily net assets in excess of $100 million. Certain
expenses, such as brokerage commissions, taxes, interest, distribution fees,
certain expenses attributable to investing outside the United States and
extraordinary items, are excluded from this limitation. For the last three
fiscal years, no reimbursements were made pursuant to such limitation to any
Fund, except that for the fiscal years ended June 30, 1995 and June 30, 1996,
Mitchell Hutchins voluntarily waived part of its management fees and reimbursed
Emerging Markets Equity Fund in the amounts of $81,217 and $ ,
respectively.

Under each Advisory Contract, Mitchell Hutchins will not be liable for any
error of judgment or mistake of law or for any loss suffered by a Fund in
connection with the performance of the Advisory Contract, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Mitchell Hutchins in the performance of its duties or from reckless disregard of
its duties and obligations thereunder. Each Advisory Contract terminates
automatically upon assignment and is terminable at any time without penalty by
the Fund's board of trustees or by vote of the holders of a majority of the
Fund's outstanding voting securities on 60 days' written notice to Mitchell
Hutchins, or by Mitchell Hutchins on 60 days' written notice to the Fund.

EMERGING MARKETS EQUITY FUND. Mitchell Hutchins acts as the investment
adviser and administrator of Emerging Markets Equity Fund pursuant to an
Advisory Contract with the Trust dated . Under the Advisory
Contract the Fund pays Mitchell Hutchins an annual fee, computed daily and paid
monthly, at the annual rate of 1.62% of the Fund's average daily net assets. For
the fiscal years ended June 30, 1996 and June 30, 1995 and for the period
January 19, 1994 (commencement of operations) to June 30, 1994, the Fund paid
(or accrued) to Mitchell Hutchins and a preceding investment adviser advisory
and administrative fees of $ , $1,261,493 and $658,437, respectively.

the Fund's average daily net assets. Emerging Markets Management bears all
expenses incurred by it in connection with its services under the Sub-Advisory
Contract. Under the Sub-Advisory Contract for the fiscal years ended June 30,
1996, June 30, 1995 and for the period January 19, 1994 (commencement of
operations) through June 30, 1994, Mitchell Hutchins paid (or accrued) fees of
$ , $872,143 and $455,243, respectively, to Emerging Markets Management.

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

GLOBAL EQUITY FUND. Mitchell Hutchins acts as the investment adviser and
administrator of Global Equity Fund pursuant to an Advisory Contract dated
August 25, 1995 with the Trust. Under the Advisory

24
<PAGE>
Contract, the Fund pays Mitchell Hutchins a fee, computed daily and paid
monthly, at the annual rate of 0.85% of the value of the Fund's average daily
net assets up to and including $500 million, 0.83% of amounts over $500 million
and up to and including $1 billion, and 0.805% of amounts over $1 billion. For
the fiscal years ended August 31, 1996 and August 31, 1995, the Fund paid (or
accrued) to Mitchell Hutchins and a preceding investment adviser investment
advisory and administration fees of and $2,109,091, respectively. For
the fiscal year August 31, 1994, the Fund paid $2,339,156 to Kidder Peabody
Asset Management, Inc. ('KPAM'), the Fund's investment manager during that
period.

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

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

faith, gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under the Sub-Advisory
Contract.

The Sub-Advisory Contract terminates automatically upon its assignment or
the termination of the Advisory Contract and is terminable at any time without
penalty by the board of trustees or by vote of the holders of a majority of
Global Equity Fund's outstanding voting securities on 60 days' notice to GE
Investment Management, or by Global Equity on 60 days' written notice to
Mitchell Hutchins.

GLOBAL INCOME FUND. Mitchell Hutchins acts as the investment adviser and
administrator of Global Income Fund pursuant to an Advisory Contract with the
Trust dated April 21, 1988. Under the Advisory Contract the Fund pays Mitchell
Hutchins an annual fee, computed daily and paid monthly, at the annual rate of
0.75% of the value of its average daily net assets up to and including $500
million, 0.725% of amounts in excess of $500 million and up to $1 billion, 0.70%
of amounts in excess of $1 billion and up to $1.5 billion, 0.675% of amounts in
excess of $1.5 billion and up to $2.0 billion, and 0.65% of amounts over $2
billion. For the fiscal years ended October 31, 1995, October 31, 1994 and
October 31, 1993, the Fund paid (or accrued) to Mitchell Hutchins advisory and
administrative fees of $9,229,318, $12,723,592 and $11,643,580, respectively.

Pursuant to the Service Agreement, for the fiscal years ended October 31,
1995, October 31, 1994 and October 31, 1993, Global Income Fund paid (or
accrued) to PaineWebber $376,299, $487,859 and $467,885, respectively.

25
<PAGE>
NET ASSETS. The following table shows the approximate net assets as of
September 30, 1996, sorted by category of investment objective, of the
investment companies as to which Mitchell Hutchins serves as adviser or
sub-adviser. An investment company may fall into more than one of the categories
below.

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

PERSONNEL TRADING POLICIES. Mitchell Hutchins personnel may invest in
securities for their own accounts pursuant to codes of ethics that describes the
fiduciary duty owed to shareholders of PaineWebber mutual funds and other
Mitchell Hutchins advisory accounts by all Mitchell Hutchins' directors,

officers and employees, establishes procedures for personal investing and
restricts certain transactions. For example, employee accounts generally must be
maintained at PaineWebber, personal trades in most securities require
pre-clearance and short-term trading and participation in initial public
offerings generally are prohibited. In addition, the code of ethics puts
restrictions on the timing of personal investing in relation to trades by
PaineWebber Funds and other Mitchell Hutchins advisory clients. Personnel of
Emerging Markets Management and GE Investment Management may also invest in
securities for their own accounts pursuant to comparable codes of ethics.

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

Under separate plans of distribution pertaining to the Class A, Class B and
Class C shares adopted by each Trust in the manner prescribed under Rule 12b-1
under the 1940 Act ('Class A Plan,' 'Class B Plan' and 'Class C Plan,'
collectively, 'Plans'), each Fund pays Mitchell Hutchins a service fee, accrued
daily and payable monthly, at the annual rate of 0.25% of the average daily net
assets of each Class of shares for each respective Fund. Under the Class B Plan,
each Fund pays Mitchell Hutchins a distribution fee, accrued daily and payable
monthly, at the annual rate of 0.75% (in the case of Global Equity Fund and
Global Income Fund) and 1.00% (in the case of Emerging Markets Equity Fund) of
the average daily net assets of the Class B shares. Under the Class C Plan, each
Fund pays Mitchell Hutchins a distribution fee, accrued daily and payable
monthly, at the annual rate of 1.00% (in the case of Emerging Markets Equity
Fund), 0.75% (in the case of Global Equity Fund) and 0.50% (in the case of
Global Income Fund) of the average daily net assets of the Class C shares.

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

26
<PAGE>
persons' of the Funds shall be committed to the discretion of the trustees or
directors who are not 'interested persons' of their respective Funds.

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

For the fiscal year ended June 30, 1996 (for Emerging Markets Equity Fund),
August 31, 1996 (for Global Equity Fund) and October 31, 1995 (for Global Income
Fund), the Funds paid (or accrued) the following respective fees to Mitchell
Hutchins under the Plans:

<TABLE>
<CAPTION>
EMERGING
MARKETS GLOBAL GLOBAL
EQUITY EQUITY INCOME
FUND FUND FUND
---------- -------- --------
<S> <C> <C> <C>
Class A.......................................................... $ $ $
Class B.......................................................... $ $ $
Class C.......................................................... $ $ $
</TABLE>

Mitchell Hutchins estimates that it and its parent corporation,
PaineWebber, incurred the following shareholder service-related and
distribution-related expenses with respect to each Fund during the fiscal year
ended June 30, 1996 (for Emerging Markets Equity Fund), August 31, 1996 (for
Global Equity Fund) and October 31, 1995 (for Global Income Fund):

<TABLE>
<CAPTION>
EMERGING
MARKETS GLOBAL GLOBAL
EQUITY EQUITY INCOME
FUND FUND FUND
-------- -------- --------
<S> <C> <C> <C>
CLASS A
Marketing and advertising.......................................... $ $ $
Printing of prospectuses and statement of additional information... $ $ $
Branch network costs allocated and interest expense................ $ $ $
Service fees paid to PaineWebber Investment Executives............. $ $ $

CLASS B
Marketing and advertising.......................................... $ $ $
Amortization of commissions........................................ $ $ $
Printing of prospectuses and statement of additional information... $ $ $
Branch network costs allocated and interest expense................ $ $ $
Service fees paid to PaineWebber investment executives............. $ $ $

CLASS C

Marketing and advertising.......................................... $ $ $
Amortization of commissions........................................ $ $ $
Printing of prospectuses and statement of additional information... $ $ $
Branch network costs allocated and interest expense................ $ $ $
Service fees paid to PaineWebber investment executives............. $ $ $
</TABLE>

27
<PAGE>
'Marketing and advertising' includes various internal costs allocated by
Mitchell Hutchins to its efforts at distributing the Funds' shares. These
internal costs encompass office rent, salaries and other overhead expenses of
various departments and areas of operations of Mitchell Hutchins. 'Branch
network costs allocated and interest expense' consist of an allocated portion of
the expenses of various PaineWebber departments involved in the distribution of
the Funds' shares, including the PaineWebber retail branch system.

In approving the Funds' overall Flexible Pricing(Service Mark) system of
distribution, each Trust's board considered several factors, including that
implementation of Flexible Pricing would (1) enable investors to choose the
purchasing option best suited to their individual situation, thereby encouraging
current shareholders to make additional investments in each respective Fund and
attracting new investors and assets to the Fund to the benefit of the Fund and
its shareholders, (2) facilitate distribution of the Funds' shares and (3)
maintain the competitive position of the Funds in relation to other funds that
have implemented or are seeking to implement similar distribution arrangements.

In approving the Class A Plan, the trustees of each Fund considered all the
features of the distribution system, including (1) the conditions under which
initial sales charges would be imposed and the amount of such charges, (2)
Mitchell Hutchins' belief that the initial sales charge combined with a service
fee would be attractive to PaineWebber investment executives and correspondent
firms, resulting in greater growth of the Fund than might otherwise be the case,
(3) the advantages to the shareholders of economies of scale resulting from
growth in the Fund's assets and potential continued growth, (4) the services
provided to the Fund and its shareholders by Mitchell Hutchins, (5) the services
provided by PaineWebber pursuant to its Exclusive Dealer Agreement with Mitchell
Hutchins and (6) Mitchell Hutchins' shareholder service-related expenses and
costs.

In approving the Class B Plan, the trustees of each Fund considered all the
features of the distribution system, including (1) the conditions under which
contingent deferred sales charges would be imposed and the amount of such
charges, (2) the advantage to investors in having no initial sales charges
deducted from Fund purchase payments and instead having the entire amount of
their purchase payments immediately invested in Fund shares, (3) Mitchell
Hutchins' belief that the ability of PaineWebber investment executives and
correspondent firms to receive sales commissions when Class B shares are sold
and continuing service fees thereafter while their customers invest their entire
purchase payments immediately in Class B shares would prove attractive to the
investment executives and correspondent firms, resulting in greater growth of
the Fund than might otherwise be the case, (4) the advantages to the
shareholders of economies of scale resulting from growth in the Fund's assets
and potential continued growth, (5) the services provided to the Fund and its

shareholders by Mitchell Hutchins, (6) the services provided by PaineWebber
pursuant to its Exclusive Dealer Agreement with Mitchell Hutchins and (7)
Mitchell Hutchins' shareholder service and distribution-related expenses and
costs. The trustees also recognized that Mitchell Hutchins' willingness to
compensate PaineWebber and its investment executives, without the concomitant
receipt by Mitchell Hutchins of initial sales charges, was conditioned upon its
expectation of being compensated under the Class B Plan.

In approving the Class C Plan, the trustees of each Fund considered all the
features of the distribution system, including (1) the advantage to investors in
having no initial sales charges deducted from the Fund purchase payments and
instead having the entire amount of their purchase payments immediately invested
in Fund shares, (2) the advantage to investors in being free from contingent
deferred sales charges upon redemption for shares held more than one year and
paying for distribution on an ongoing basis, (3) Mitchell Hutchins' belief that
the ability of PaineWebber investment executives and correspondent firms to
receive sales compensation for their sales of Class C shares on an ongoing
basis, along with continuing service fees, while their customers invest their
entire purchase payments immediately in Class C shares and generally do not face
contingent deferred sales charges, would prove attractive to the investment
executives and correspondent firms, resulting in greater growth to the Fund than
might otherwise be the case, (4) the advantages to the shareholders of economies
of scale resulting from growth in the Fund's assets and potential continued
growth, (5) the services provided to the Fund and its shareholders by Mitchell
Hutchins, (6) the services provided by PaineWebber pursuant to its Exclusive
Dealer Agreement with Mitchell Hutchins and (7) Mitchell Hutchins' shareholder
service- and distribution-related expenses and costs. The trustees also
recognized that Mitchell Hutchins' willingness to compensate PaineWebber and its
investment executives

28
<PAGE>
without the concomitant receipt by Mitchell Hutchins of initial sales charges or
contingent deferred sales charges upon redemption, was conditioned upon its
expectation of being compensated under the Class C Plan.

With respect to each Plan, the trustees considered all compensation that
Mitchell Hutchins would receive under the Plan and the Distribution Contract,
including service fees and, as applicable, initial sales charges, distribution
fees and contingent deferred sales charges. The trustees also considered the
benefits that would accrue to Mitchell Hutchins under each Plan in that Mitchell
Hutchins would receive service, distribution and advisory fees which are
calculated based upon a percentage of the average net assets of each Fund, which
would increase if the Plan were successful and the Fund attained and maintained
significant asset levels.

Under the Distribution Contracts, for the Class A shares and similar prior
distribution contracts, for the fiscal years set forth below, Mitchell Hutchins
earned the following approximate amounts of sales charges and retained the
following approximate amounts, net of concessions to PaineWebber as exclusive
dealer.

FISCAL YEAR END
--------------------------------------------
1996 1995 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
EMERGING MARKETS EQUITY FUND
Earned........................................................... $ $ $ $
Retained......................................................... $ $ $ $

GLOBAL EQUITY FUND
Earned........................................................... $ $ $ $
Retained......................................................... $ $ $ $

GLOBAL INCOME FUND
Earned........................................................... $ $ $ $
Retained......................................................... $ $ $ $
</TABLE>

For the fiscal year ended June 30, 1996 (for Emerging Markets Equity Fund),
August 31, 1996 (for Global Equity Fund), and October 31, 1995 (for Global
Income Fund), Mitchell Hutchins earned and retained $ , $ , and
$2,395,994, respectively, in contingent deferred sales charges paid upon certain
redemptions of shares.

29
<PAGE>
PORTFOLIO TRANSACTIONS

Subject to policies established by each Fund's board, Mitchell Hutchins or
a Sub-Adviser, as applicable, is responsible for the execution of each Fund's
portfolio transactions and the allocation of brokerage transactions. In
executing portfolio transactions, Mitchell Hutchins or the Sub-Adviser seeks to
obtain the best net results for a Fund, taking into account such factors as the
price (including the applicable brokerage commission or dealer spread), size of
order, difficulty of execution and operational facilities of the firm involved.
While Mitchell Hutchins and the Sub-Adviser generally seek reasonably
competitive commission rates, payment of the lowest commission is not
necessarily consistent with obtaining the best net results. Prices paid to
dealers in principal transactions, through which most debt securities and some
equity securities are traded, generally include a 'spread,' which is the
difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. The Funds may invest in securities traded
in the OTC market and will engage primarily in transactions directly with the
dealers who make markets in such securities, unless a better price or execution
could be obtained by using a broker. For the fiscal years ended June 30, 1996,
June 30, 1995 and the period January 19, 1994 (commencement of operations) to
June 30, 1994, Emerging Markets Equity Fund paid $ , $531,901 and
$363,528, respectively, in brokerage commissions. For the fiscal years ended
August 31, 1996, August 31, 1995 and August 31, 1994, Global Equity Fund paid
$ , $850,531 and $780,022, respectively, in brokerage commissions. For
the fiscal years ended October 31, 1995, October 31, 1994 and October 31, 1993,
Global Income Fund did not pay any brokerage commissions.

The Funds have no obligation to deal with any broker or group of brokers in

the execution of portfolio transactions. The Funds contemplate that, consistent
with the policy of obtaining the best net results, brokerage transactions may be
conducted through PaineWebber. Each Fund's board of trustees has adopted
procedures in conformity with Rule 17e-1 under the 1940 Act to ensure that all
brokerage commissions paid to PaineWebber are reasonable and fair. Specific
provisions in the Advisory Contracts authorize PaineWebber to effect portfolio
transactions for the Funds on such exchange and to retain compensation in
connection with such transactions. Any such transactions will be effected and
related compensation paid only in accordance with applicable SEC regulations.
For the fiscal years ended June 30, 1996, June 30, 1995 and the period January
19, 1994 (commencement of operations) to June 30, 1994, Emerging Markets Equity
Fund paid $ , $0, and $ , respectively, in brokerage commissions to
PaineWebber. For the fiscal years ended August 31, 1996, August 31, 1995 and
August 31, 1994, Global Equity Fund paid $ , $0 and $0, respectively, in
brokerage commissions to PaineWebber. For the fiscal years ended October 31,
1995, October 31, 1994 and October 31, 1993, Global Income Fund did not pay any
brokerage commissions to PaineWebber.

Transactions in futures contracts are executed through futures commission
merchants ('FCMs'), who receive brokerage commissions for their services. The
Funds' procedures in selecting FCMs to execute their transactions in futures
contracts, including procedures permitting the use of PaineWebber are similar to
those in effect with respect to brokerage transactions in securities.

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

For purchases or sales with broker-dealer firms which act as principal,
Mitchell Hutchins or one of the Sub-Advisers seeks best execution. Although
Mitchell Hutchins and the Sub-Advisers may receive certain research or execution
services in connection with these transactions, Mitchell Hutchins and the
Sub-Advisers will not purchase securities at a higher price or sell securities
at a lower price than would otherwise be paid if no weight was attributed to the
services provided by the executing dealer. Moreover, Mitchell Hutchins and the
Sub-Advisers will not enter into any explicit soft dollar arrangements relating
to principal transactions and

30
<PAGE>
will not receive in principal transactions the types of services which could be
purchased for hard dollars. Mitchell Hutchins or a Sub-Adviser may engage in
agency transactions in OTC equity and debt securities in return for research and
execution services. These transactions are entered into only in compliance with
procedures ensuring that the transaction (including commissions) is at least as
favorable as it would have been if effected directly with a market-maker that

did not provide research or execution services. These procedures include
Mitchell Hutchins or the Sub-Adviser receiving multiple quotes from dealers
before executing the transactions on an agency basis.

Information and research services furnished by brokers or dealers through
which or with which the Funds effect securities transactions may be used by
Mitchell Hutchins or a Sub-Adviser in advising other funds or accounts and,
conversely, research services furnished to Mitchell Hutchins or the Sub-Adviser
by brokers or dealers in connection with other funds or accounts that either of
them advises may be used in advising the Funds. Information and research
received from brokers or dealers will be in addition to, and not in lieu of, the
services required to be performed by Mitchell Hutchins under the Advisory
Contract or the Sub-Advisers under the Sub-Advisory Contracts.

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

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

PORTFOLIO TURNOVER. The Funds' annual portfolio turnover rates may vary
greatly from year to year, but they will not be a limiting factor when
management deems portfolio changes appropriate. The portfolio turnover rate is
calculated by dividing the lesser of each Fund's annual sales or purchases of
portfolio securities (exclusive of purchases or sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the portfolio during the year.

The Funds' respective portfolio turnover rates for the preceding two fiscal
years were:

GLOBAL EQUITY FUND
Fiscal Year ended August 31, 1996........................................................................... %
Fiscal Year ended August 31, 1995........................................................................... 40%

GLOBAL INCOME FUND
Fiscal Year ended October 31, 1995.......................................................................... 113%
Fiscal Year ended October 31, 1994.......................................................................... 108%
</TABLE>

31
<PAGE>
REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND REDEMPTION
INFORMATION AND OTHER SERVICES

COMBINED PURCHASE PRIVILEGE-CLASS A SHARES. Investors and eligible groups
of related Fund investors may combine purchases of Class A shares of the Funds
with concurrent purchases of Class A shares of any other PaineWebber mutual fund
and thus take advantage of the reduced sales charges indicated in the table of
sales charges for Class A shares in the Prospectus. The sales charge payable on
the purchase of Class A shares of the Funds and Class A shares of such other
funds will be at the rates applicable to the total amount of the combined
concurrent purchases.

An 'eligible group of related Fund investors' can consist of any
combination of the following:

(a) an individual, that individual's spouse, parents and children;

(b) an individual and his or her Individual Retirement Account
('IRA');

(c) an individual (or eligible group of individuals) and any company
controlled by the individual(s) (a person, entity or group that holds 25%
or more of the outstanding voting securities of a corporation will be
deemed to control the corporation, and a partnership will be deemed to be
controlled by each of its general partners);

(d) an individual (or eligible group of individuals) and one or more
employee benefit plans of a company controlled by individual(s);

(e) an individual (or eligible group of individuals) and a trust
created by the individual(s), the beneficiaries of which are the individual
and/or the individual's spouse, parents or children;

(f) an individual and a Uniform Gifts to Minors Act/Uniform Transfers
to Minors Act account created by the individual or the individual's spouse;

(g) an employer (or group of related employers) and one or more
qualified retirement plans of such employer or employers (an employer
controlling, controlled by or under common control with another employer is
deemed related to that other employer); or

(h) individual accounts related together under one registered
investment adviser having full discretion and control over the accounts.

The registered investment adviser must communicate at least quarterly
through a newsletter or investment update establishing a relationship with
all of the accounts.

RIGHTS OF ACCUMULATIONS-CLASS A SHARES. Reduced sales charges are
available through a right of accumulation, under which investors and eligible
groups of related Fund investors (as defined above) are permitted to purchase
Class A shares of the Funds among related accounts at the offering price
applicable to the total of (1) the dollar amount then being purchased plus (2)
an amount equal to the then-current net asset value of the purchaser's combined
holdings of Class A Fund shares and Class A shares of any other PaineWebber
mutual fund. The purchaser must provide sufficient information to permit
confirmation of his or her holdings, and the acceptance of the purchase order is
subject to such confirmation. The right of accumulation may be amended or
terminated at any time.

WAIVERS OF SALES CHARGES-CLASS B SHARES. Among other circumstances, the
contingent deferred sales charge on Class B shares is waived where a total or
partial redemption is made within one year following the death of the
shareholder. The contingent deferred sales charge waiver is available where the
decedent is either the individual 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.

Certain PaineWebber mutual funds offered shares subject to contingent
deferred sales charges before the implementation of the Flexible Pricing System
on July 1, 1991 ('CDSC Funds'). The contingent deferred sales charge is waived
with respect to redemptions of Class B shares of CDSC Funds purchased prior to
July 1, 1991 by officers, directors (trustees) or employees of the CDSC Funds,
Mitchell Hutchins or their affiliates (or their spouses and children under age
21). In addition, the contingent deferred sales charge will be reduced by 50%
with respect to redemptions of Class B shares of CDSC Funds purchased prior to
July 1, 1991 with a net asset value at the time of purchase of at least $1
million. If Class B shares of a CDSC Fund purchased

32
<PAGE>
prior to July 1, 1991 are exchanged for Class B shares of the Funds, any waiver
or reduction of the contingent deferred sales charge that applied to the Class B
Shares of the CDSC Fund will apply to the Class B shares of the Funds acquired
through the exchange.

ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION. As discussed in the
Prospectus, eligible shares of the Funds may be exchanged for shares of the
corresponding Class of most other PaineWebber mutual funds. This exchange
privilege is available only in those jurisdictions where the sale of PaineWebber
fund shares to be acquired through such exchange may be legally made.
Shareholders will receive at least 60 days' notice of any termination or
material modification of the exchange offer, except no notice need be given of
an amendment whose only material effect is to reduce the exchange fee and no
notice need be given if, under extraordinary circumstances, either redemptions
are suspended under the circumstances described below or a Fund temporarily
delays or ceases the sales of its shares because it is unable to invest amounts
effectively in accordance with the Fund's investment objective, policies and

restrictions.

If conditions exist that make cash payments undesirable, the Funds reserve
the right to honor any request for redemption by making payment in whole or in
part in securities chosen by the Funds and valued in the same way as they would
be valued for purposes of computing the Funds' net asset value. If payment is
made in securities, a shareholder may incur brokerage expenses in converting
these securities into cash. Each Fund has elected, however, to be governed by
Rule 18f-1 under the 1940 Act, under which the Funds are obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net asset value
of the Funds during any 90-day period for one shareholder. This election is
irrevocable unless the SEC permits its withdrawal.

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

SYSTEMATIC WITHDRAWAL PLAN. On or about the 15th of each month for monthly
plans and on or about the 15th of the months selected for quarterly or
semi-annual plans, PaineWebber will arrange for redemption by the Funds of
sufficient Fund shares to provide the withdrawal payment specified by
participants in the Funds' systematic withdrawal plan. The payment generally is
mailed approximately five business days after the redemption date. Withdrawal
payments should not be considered dividends, but redemption proceeds, with the
tax consequences described under 'Dividends and Taxes' in the Prospectus. If
periodic withdrawals continually exceed reinvested dividends, a shareholder's
investment may be correspondingly reduced. A shareholder may change the amount
of the systematic withdrawal or terminate participation in the systematic
withdrawal plan at any time without charge or penalty by written instructions
with signatures guaranteed to PaineWebber or PFPC Inc. ('Transfer Agent').
Instructions to participate in the plan, change the withdrawal amount or
terminate participation in the plan will not be effective until five days after
written instructions with signatures guaranteed are received by the Transfer
Agent. Shareholders may request the forms needed to establish a systematic
withdrawal plan from their PaineWebber investment executives, correspondent
firms or the Transfer Agent at 1-800-647-1568.

REINSTATEMENT PRIVILEGE-CLASS A SHARES. As described in the Prospectus,
shareholders who have redeemed their Class A shares may reinstate their account
in the Funds without a sales charge. Shareholders may exercise the reinstatement
privilege by notifying the Transfer Agent of such desire and forwarding a check
for the amount to be purchased within 365 days after the date of redemption. The
reinstatement will be made at the net asset value per share next computed after
the notice of reinstatement and check are received. The amount of a purchase
under this reinstatement privilege cannot exceed the amount of the redemption
proceeds. Gain on a redemption is taxable regardless of whether the
reinstatement privilege is exercised; however, a loss arising out of a
redemption will not be deductible to the extent the reinstatement privilege is
exercised within 30 days after redemption, and an adjustment will be made to the

shareholder's tax basis for shares acquired pursuant to the reinstatement
privilege. Gain or loss on a redemption also will be adjusted for federal income
tax purposes by the amount of any sales charge paid on Class A shares, under the
circumstances and to the extent described in 'Dividends and Taxes' in the
Prospectus.

33
<PAGE>
PAINEWEBBER RMA RESOURCE ACCUMULATION PLAN(SERVICE MARK)
PAINEWEBBER RESOURCE MANAGEMENT ACCOUNT(REGISTERED) (RMA)(REGISTERED)

Shares of PaineWebber mutual funds (each a 'PW Fund' and, collectively, the
'PW Funds') are available for purchase through the RMA Resource Accumulation
Plan ('Plan') by customers of PaineWebber and its correspondent firms who
maintain Resource Management Accounts ('RMA accountholders'). The Plan allows an
RMA accountholder to continually invest in one or more of the PW Funds at
regular intervals, with payment for shares purchased automatically deducted from
the client's RMA account. The client may elect to invest at monthly or quarterly
intervals and may elect either to invest a fixed dollar amount (minimum $100 per
period) or to purchase a fixed number of shares. A client can elect to have Plan
purchases executed on the first or fifteenth day of the month. Settlement occurs
three Business Days (defined under 'Valuation of Shares') after the trade date,
and the purchase price of the shares is withdrawn from the investor's RMA
account on the settlement date from the following sources and in the following
order: uninvested cash balances, balances in RMA money market funds, or margin
borrowing power, if applicable to the account.

To participate in the Plan, an investor must be an RMA accountholder, must
have made an initial purchase of the shares of each PW Fund selected for
investment under the Plan (meeting applicable minimum investment requirements)
and must complete and submit the RMA Resource Accumulation Plan Client Agreement
and Instruction Form available from PaineWebber. The investor must have received
a current prospectus for each PW Fund selected prior to enrolling in the Plan.
Information about mutual fund positions and outstanding instructions under the
Plan are noted on the RMA accountholder's account statement. Instructions under
the Plan may be changed at any time, but may take up to two weeks to become
effective.

The terms of the Plan, or an RMA accountholder's participation in the Plan,
may be modified or terminated at any time. It is anticipated that, in the
future, shares of other PW Funds and/or mutual funds other than the PW Funds may
be offered through the Plan.

PERIODIC INVESTING AND DOLLAR COST AVERAGING.

Periodic investing in the PW Funds or other mutual funds, whether through
the Plan or otherwise, helps investors establish and maintain a disciplined
approach to accumulating assets over time, de-emphasizing the importance of
timing the market's highs and lows. Periodic investing also permits an investor
to take advantage of 'dollar cost averaging.' By investing a fixed amount in
mutual fund shares at established intervals, an investor purchases more shares
when the price is lower and fewer shares when the price is higher, thereby
increasing his or her earning potential. Of course, dollar cost averaging does
not guarantee a profit or protect against a loss in a declining market, and an

investor should consider his or her financial ability to continue investing
through periods of low share prices. However, over time, dollar cost averaging
generally results in a lower average original investment cost than if an
investor invested a larger dollar amount in a mutual fund at one time.

PAINEWEBBER'S RESOURCE MANAGEMENT ACCOUNT.

In order to enroll in the Plan, an investor must have opened an RMA account
with PaineWebber or one of its correspondent firms. The RMA account is
PaineWebber's comprehensive asset management account and offers investors a
number of features, including the following:

o monthly Premier account statements that itemize all account activity,
including investment transactions, checking activity and Gold MasterCard
(R) transactions during the period, and provide unrealized and realized
gain and loss estimates for most securities held in the account;

o comprehensive preliminary 9-month and year-end summary statements that
provide information on account activity for use in tax planning and tax
return preparation;

o automatic 'sweep' of uninvested cash into the RMA accountholder's choice
of one of the seven RMA money market funds-RMA Money Market Portfolio,
RMA U.S. Government Portfolio, RMA Tax-Free Fund, RMA California
Municipal Money Fund, RMA Connecticut Municipal Money Fund, RMA New
Jersey Municipal Money Fund and RMA New York Municipal Money Fund. Each
money market

34
<PAGE>
fund attempts to maintain a stable price per share of $1.00, although
there can be no assurance that it will be able to do so. Investments in
the money market funds are not insured or guaranteed by the U.S.
government;

o check writing, with no per-check usage charge, no minimum amount on
checks and no maximum number of checks that can be written. RMA
accountholders can code their checks to classify expenditures. All
canceled checks are returned each month;

o Gold MasterCard, with or without a line of credit, which provides RMA
accountholders with direct access to their accounts and can be used with
automatic teller machines worldwide. Purchases on the Gold MasterCard are
debited to the RMA account once monthly, permitting accountholders to
remain invested for a longer period of time;

o 24-hour access to account information through toll-free numbers, and more
detailed personal assistance during business hours from the RMA Service
Center;

o expanded account protection to $25 million in the event of the
liquidation of PaineWebber. This protection does not apply to shares of
the RMA money market funds or the PW Funds because those shares are held
at the transfer agent and not through PaineWebber; and

o automatic direct deposit of checks into your RMA account and automatic
withdrawals from the account.

The annual account fee for an RMA account is $85, which includes the Gold
MasterCard, with an additional fee of $40 if the investor selects an optional
line of credit with the Gold MasterCard.

CONVERSION OF CLASS B SHARES

Class B shares of the Funds will automatically convert to Class A shares,
based on the relative net asset values per share of the two Classes, as of the
close of business on the first Business Day (as defined under 'Valuation of
Shares') of the month in which the sixth anniversary of the initial issuance of
such Class B shares of each Fund occurs. For the purpose of calculating the
holding period required for conversion of Class B shares, the date of initial
issuance shall mean (i) the date on which such Class B shares were issued, or
(ii) for Class B shares obtained through an exchange, or a series of exchanges,
the date on which the original Class B shares were issued. If the shareholder
acquired Class B shares of each Fund through an exchange of Class B shares of a
CDSC Fund that were acquired prior to July 1, 1991, the shareholder's holding
period for purposes of conversion will be determined based on the date the CDSC
Fund shares were initially issued. For purposes of conversion into Class A,
Class B shares purchased through the reinvestment of dividends and other
distributions paid in respect of Class B shares will be held in a separate
sub-account. Each time any Class B shares in the shareholder's regular account
(other than those in the sub-account) convert to Class A, a pro rata portion of
the Class B shares in the sub-account will also convert to Class A. The portion
will be determined by the ratio that the shareholder's Class B shares converting
to Class A bears to the shareholder's total Class B shares not acquired through
dividends and other distributions.

The availability of the conversion feature is subject to (1) the continuing
applicability of a ruling of the Internal Revenue Service that the dividends and
other distributions paid on Class A and Class B shares will not result in
'preferential dividends' under the Internal Revenue Code and (2) the continuing
availability of an opinion of counsel to the effect that the conversion of
shares does not constitute a taxable event. If the conversion feature ceased to
be available, the Class B shares of the Funds would not be converted and would
continue to be subject to the higher ongoing expenses of the Class B shares
beyond six years from the date of purchase. Mitchell Hutchins has no reason to
believe that these conditions for the availability of the conversion feature
will not continue to be met.

35
<PAGE>
VALUATION OF SHARES

The Funds determine their net asset values per share separately for each
Class of shares as of the close of regular trading (currently 4:00 p.m., Eastern
time) on the NYSE on each Business Day, which is defined as each Monday through
Friday when the NYSE is open. Currently the NYSE is closed on the observance of
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Securities that are listed on U.S. and foreign stock exchanges are valued
at the last sale price on the day the securities are valued or, lacking any
sales on such day, at the last available bid price. In cases where securities
are traded on more than one exchange, the securities are generally valued on the
exchange considered by Mitchell Hutchins or the Sub-Adviser as the primary
market. Securities traded in the OTC market and listed on The Nasdaq Stock
Exchange ('Nasdaq') are valued at the last trade price on Nasdaq at 4:00 p.m.,
Eastern time; other OTC securities are valued at the last bid price available
prior to valuation. Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of each Fund's board of trustees or board of directors. In
valuing lower rated corporate debt securities it should be recognized that
judgment often plays a greater role than is the case with respect to securities
for which a broader range of dealer quotations and last-sale information is
available. All investments quoted in foreign currency will be valued daily in
U.S. dollars on the basis of the foreign currency exchange rate prevailing at
the time such valuation is determined by the Funds' custodian. Investments in
U.S. Government Securities and other securities traded over-the-counter (other
than short-term investments that mature in 60 days or less) are valued at the
average of the quoted bid and asked prices in the over-the-counter market. The
amortized cost method of valuation generally is used to value debt obligations
with 60 days or less remaining until maturity, unless the board of trustees of a
Fund determines that this does not represent fair value.

Foreign currency exchange rates are generally determined prior to the close
of trading on the NYSE. Occasionally events affecting the value of foreign
investments and such exchange rates occur between the time at which they are
determined and the close of trading on the NYSE, which events would not be
reflected in a computation of the Funds' net asset value on that day. If events
materially affecting the value of such investments or currency exchange rates
occur during such time period, the investments will be valued at their fair
value as determined in good faith by or under the direction of each Fund's board
of trustees. The foreign currency exchange transactions of the Funds conducted
on a spot (that is, cash) basis are valued at the spot rate for purchasing or
selling currency prevailing on the foreign exchange market. This rate under
normal market conditions differs from the prevailing exchange rate in an amount
generally less than one-tenth of one percent due to the costs of converting from
one currency to another.

PERFORMANCE INFORMATION

The Funds' performance data quoted in advertising and other promotional
materials ('Performance Advertisements') represents past performance and is not
intended to indicate future performance. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.

TOTAL RETURN CALCULATIONS. Average annual total return quotes
('Standardized Return') used in each Fund's Performance Advertisements are
calculated according to the following formula:

<TABLE>
<S> <C>
n

P(1 + T) = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares of a specified Class
T = average annual total return of shares of that Class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at the beginning of that period.
</TABLE>

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or 'T' in the formula above, is computed by finding
the average

36
<PAGE>
annual change in the value of an initial $1,000 investment over the period. In
calculating the ending redeemable value, for Class A shares, the maximum 4.5%
sales charge is deducted from the initial $1,000 payment and, for Class B and
Class C shares, the applicable contingent deferred sales charge imposed on a
redemption of Class B or Class C shares held for the period is deducted. All
dividends and other distributions are assumed to have been reinvested at net
asset value.

The Funds also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ('Non-Standardized Return'). The Funds calculate Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in Fund shares
and assuming the reinvestment of all dividends and other distributions. The rate
of return is determined by subtracting the initial value of the investment from
the ending value and by dividing the remainder by the initial value. Neither
initial nor contingent deferred sales charges are taken into account in
calculating Non-Standardized Return; the inclusion of those charges would reduce
the return.

Both Standardized Return and Non-Standardized Return for Class B shares for
periods of over six years reflect conversion of the Class B shares to Class A
shares at the end of the sixth year.

The following table shows performance information for the Class A, Class B
and Class C shares of the Funds for the periods indicated. All returns for
periods of more than one year are expressed as an average return.

EMERGING MARKETS EQUITY FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Fiscal year ended June 30, 1996:
Standardized Return*............................................................
Non-Standardized Return.........................................................
Inception** to June 30, 1996:
Standardized Return*............................................................

Non-Standardized Return.........................................................
</TABLE>

- ------------------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5%. All Standardized Return figures for
Class B and Class C shares reflect deduction of the applicable contingent
deferred sales charges imposed on a redemption of shares held for the period.
** The inception date for each Class of shares is as follows: Class A--January
19, 1994, Class B--November 10, 1995, and Class C--January 19, 1994.

GLOBAL EQUITY FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Fiscal year ended August 31, 1996:
Standardized Return*............................................................
Non-Standardized Return.........................................................
Inception** to August 31, 1996:
Standardized Return*............................................................
Non-Standardized Return.........................................................
</TABLE>

- ------------------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5%. All Standardized Return figures for
Class B and Class C shares reflect deduction of the applicable contingent
deferred sales charges imposed on a redemption of shares held for the period.
** The inception date for each Class of shares is as follows: Class A--November
14, 1991, Class B--August 25, 1995, and Class C--May 10, 1993.

37
<PAGE>
GLOBAL INCOME FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Fiscal year ended October 31, 1995:
Standardized Return*............................................................
Non-Standardized Return.........................................................
Five years ended October 31, 1995:
Standardized Return*............................................................
Non-Standardized Return.........................................................
Inception** to October 31, 1995:
Standardized Return*............................................................
Non-Standardized Return.........................................................
</TABLE>

- ------------------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4%. All Standardized Return figures for Class
B and Class C shares reflect deduction of the applicable contingent deferred
sales charges imposed on a redemption of shares held for the period.
** The inception date for each Classes of shares is follows: Class A--July 1,
1991, Class B--March 20, 1987, and Class C--July 2, 1992.

YIELD. Yields used in Global Income Fund's Performance Advertisements are
calculated by dividing the Fund's interest income attributable to a Class of
shares for a 30-day period ('Period'), net of expenses attributable to such
Class, by the average number of shares of such Class entitled to receive
dividends during the Period and expressing the result as an annualized
percentage (assuming semi-annual compounding) of the maximum offering price per
share (in the case of Class A shares) or the net asset value per share (in the
case of Class B and Class C shares) at the end of the Period. Yield quotations
are calculated according to the following formula:

a-b 6
YIELD = 2[(--- +1) -1]
cd

<TABLE>
<S> <C>
where: a = interest earned during the Period attributable to a Class of shares
b = expenses accrued for the Period attributable to a Class of shares (net of
reimbursements)
c = the average daily number of shares of a Class outstanding during the Period that were
entitled to receive dividends
d = the maximum offering price per share (in the case of Class A shares) or the net asset
value per share (in the case of Class B and Class C shares) on the last day of the
Period.
</TABLE>

Except as noted below, in determining interest income earned during the
Period (variable 'a' in the above formula), Global Income Fund calculates
interest earned on each debt obligation held by it during the Period by (1)
computing the obligation's yield to maturity, based on the market value of the
obligation (including actual accrued interest) on the last business day of the
Period or, if the obligation was purchased during the Period, the purchase price
plus accrued interest and (2) dividing the yield to maturity by 360, and
multiplying the resulting quotient by the market value of the obligation
(including actual accrued interest) to determine the interest income on the
obligation for each day of the period that the obligation is in the portfolio.
Once interest earned is calculated in this fashion for each debt obligation held
by the Fund, interest earned during the Period is then determined by totalling
the interest earned on all debt obligations. For purposes of these calculations,
the maturity of an obligation with one or more call provisions is assumed to be
the next date on which the obligation reasonably can be expected to be called
or, if none, the maturity date. With respect to Class A shares, in calculating
the maximum offering price per share at the end of the Period (variable 'd' in

the above formula) the Fund's current maximum 4% initial sales charge on Class A
shares is included. For the 30-day period ended September 30, 1996, the yields
for its Class A shares, Class B shares and Class C shares were %,
% and %, respectively.

OTHER INFORMATION. In Performance Advertisements, the Funds may compare
their Standardized Return and/or their Non-Standardized Return with data
published by Lipper Analytical Services, Inc.

38
<PAGE>
('Lipper'), CDA Investment Technologies, Inc. ('CDA'), Wiesenberger Investment
Companies Service ('Wiesenberger'), Investment Company Data, Inc. ('ICD') or
Morningstar Mutual Funds ('Morningstar'), with the performance of recognized
stock and other indices, including (but not limited to) the Standard & Poor's
500 Composite Stock Price Index ('S&P 500'), the Dow Jones Industrial Average,
the Nasdaq Composite Index, the Russell 2000 Index, the Wilshire 5000 Index, the
Lehman Bond Index, 30-year and 10-year U.S. Treasury bonds, the Morgan Stanley
Capital International World Index and changes in the Consumer Price Index as
published by the U.S. Department of Commerce. The Funds also may refer in such
materials to mutual fund performance rankings and other data, such as
comparative asset, expense and fee levels, published by Lipper, CDA,
Wiesenberger, ICD or Morningstar. Performance Advertisements also may refer to
discussions of the Funds and comparative mutual fund data and ratings reported
in independent periodicals, including (but not limited to) THE WALL STREET
JOURNAL, MONEY MAGAZINE, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S,
FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST AND THE
KIPLINGER LETTERS. Comparisons in Performance Advertisements may be in graphic
form.

The Funds may include discussions or illustrations of the effects of
compounding in Performance Advertisements. 'Compounding' refers to the fact
that, if dividends or other distributions on a Fund investment are reinvested in
additional Fund shares, any future income or capital appreciation of a Fund
would increase the value, not only of the original Fund investment, but also of
the additional Fund shares received through reinvestment. As a result, the value
of a Fund investment would increase more quickly than if dividends or other
distributions had been paid in cash.

The Funds may also compare their performance with the performance of bank
certificates of deposit (CDs) as measured by the CDA Certificate of Deposit
Index, the Bank Rate Monitor National Index and the averages of yields of CDs of
major banks published by Banxquote(R) Money Markets. In comparing the Funds'
performance to CD performance, investors should keep in mind that bank CDs are
insured in whole or in part by an agency of the U.S. government and offer fixed
principal and fixed or variable rates of interest, and that bank CD yields may
vary depending on the financial institution offering the CD and prevailing
interest rates. Shares of the Funds are not insured or guaranteed by the U.S.
government and returns and net asset value will fluctuate. The securities held
by the Funds generally have longer maturities than most CDs and may reflect
interest rate fluctuations for longer term securities. An investment in any of
the Funds involves greater risks than an investment in either a money market
fund or a CD.

39
<PAGE>
Each Fund may also compare its performance to general trends in the stock
and bond markets, as illustrated by the following graph prepared by Ibbotson
Associates, Chicago.

[CHART]

The chart is shown for illustrative purposes only and does not represent any
Fund's performance. These returns consist of income, capital appreciation (or
depreciation), and should not be considered an indication or guarantee of future
investments results. Year-to-year fluctuations in certain markets have been
significant and negative returns have been experienced in certain markets from
time to time. Stocks are measured by the S&P 500 Index, an unmanaged weighted
index comprising 500 widely held common stock and varying in composition. Unlike
investors in bonds and Treasury bills, common stock investors do not receive
fixed income payments and are not entitled to repayment of principal. These
differences contribute to investment risk. Returns shown for long-term
government bonds are based on Treasury bonds with 20-year maturities. Inflation
is measured by the Consumer Price Index. The indexes are unmanaged and are not
available for investment.
- ------------------
Source: Stocks, Bonds, Bills and Inflation 1996 Yearbook(Trademark) Ibbotson
Assoc., Chi., (annual updates work by Roger G. Ibbotson & Rex A. Sinquefield).

40
<PAGE>
Over time, stocks have outperformed all other investments by a wide margin,
offering a solid hedge against inflation. From 1926 to 1995, stocks beat all
other traditional asset classes. A $10 investment in the S&P 500 grew to
$10,507, significantly more than any other investment.

TAXES

In order to continue to qualify for treatment as a regulated investment
company ('RIC') under the Internal Revenue Code, each Fund must distribute to
its shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income net short-term
capital gain and net gains from certain foreign currency transactions)
('Distribution Requirement') and must meet several additional requirements.
Among these requirements are the following: (1) the Fund must derive at least
90% of its gross income each taxable year from dividends, interest, payments
with respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures or forward contracts) derived with respect to its business of investing
in securities or those currencies ('Income Requirement'); (2) the Fund must
derive less than 30% of its gross income each taxable year from the sale or
other disposition of securities, or any of the following, that were held for
less than three months--options, futures or forward contracts (other than those
on foreign currencies), or foreign currencies (or options, futures or forward
contracts thereon) that are not directly related to the Fund's principal
business of investing in securities (or options and futures with respect to
securities) ('Short-Short Limitation'); (3) at the close of each quarter of the
Fund's taxable year, at least 50% of the value of its total assets must be

represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities, with these other securities limited, in respect
of any one issuer, to an amount that does not exceed 5% of the value of that
Fund's total assets and that does not represent more than 10% of the issuer's
outstanding voting securities; and (4) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets may be
invested in securities (other than U.S. government securities or the securities
of other RICs) of any one issuer.

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

A portion of the dividends from each Fund's investment company taxable
income (whether paid in cash or reinvested in additional Fund shares) may be
eligible for the dividends-received deduction allowed to corporations. The
eligible portion may not exceed the aggregate dividends received by each Fund
from U.S. corporations. However, dividends received by a corporate shareholder
and deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.

If shares of a Fund are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.

Investors also should be aware that if shares are purchased shortly before
the record date for any dividend or capital gain distribution, the shareholder
will pay full price for the shares and receive some portion of the price back as
a taxable distribution.

Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of a
Fund's total assets at the close of its taxable year consists of securities of
foreign corporations, it will be eligible to, and may, file an election with the
Internal Revenue Service that will enable its shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions income taxes paid by it. Pursuant to the election, the Fund
would treat those taxes as dividends paid to its shareholders and each
shareholder would be required to (1) include in gross income, and treat as paid
by him or her, his or her proportionate share of those taxes; (2) treat his or
her share of those

41
<PAGE>
taxes and of any dividend paid by the Fund that represents income from foreign
or U.S. possessions sources as his or her own income from those sources; and (3)
either deduct the taxes deemed paid by him or her in computing his or her

taxable income or, alternatively, use the foregoing information in calculating
the foreign tax credit against his or her federal income tax. A Fund will report
to its shareholders shortly after each taxable year their respective shares of
the income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.

Each Fund will be subject to a nondeductible 4% excise tax ('Excise Tax')
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.

Each Fund may invest in the stock of 'passive foreign investment companies'
('PFICs') if such stock is a permissible investment. A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under certain
circumstances, a Fund will be subject to federal income tax on a portion of any
'excess distribution' received on the stock of a PFIC or of any gain from
disposition of such stock (collectively 'PFIC income'), plus interest thereon,
even if the Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders. If a Fund invests in
a PFIC and elects to treat the PFIC as a 'qualified electing fund,' then in lieu
of the foregoing tax and interest obligation, the Fund will be required to
include in income each year its pro rata share of the qualified electing fund's
annual ordinary earnings and net capital gain (the excess of net long-term
capital gain over net short-term capital loss)--which would have to be
distributed to satisfy the Distribution Requirement and avoid imposition of the
Excise Tax--even if those earnings and gain are not distributed to the Fund. In
most instances it will be very difficult, if not impossible, to make this
election because of certain requirements thereof.

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

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

directly related to a Fund's principal business of investing in securities (or
options and futures with respect to securities) also will be subject to the
Short-Short Limitation if they are held for less than three months.

If a Fund satisfies certain requirements, any increase in value of a
position that is part of a 'designated hedge' will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. Each
Fund will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent a Fund does not qualify for this treatment,
it may be forced to defer the closing out of certain options, futures and
forward currency contracts beyond the time when it otherwise would be
advantageous to do so, in order for the Fund to continue to qualify as a RIC.

Global Income Fund may acquire zero coupon Treasury securities issued with
original issue discount. As a holder of such securities, the Fund must include
in its gross income the original issue discount that accrues

42
<PAGE>
on the securities during the taxable year, even if the Fund receives no
corresponding payment on them during the year. Because the Fund annually must
distribute substantially all of its investment company taxable income, including
any accrued original issue discount, to satisfy the Distribution Requirement and
avoid imposition of the Excise Tax, it may be required in a particular year to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives. Those distributions will be made from the Fund's cash
assets or from the proceeds of sales of portfolio securities, if necessary. The
Fund may realize capital gains or losses from those sales, which would increase
or decrease its investment company taxable income and/or net capital gain. In
addition, any such gains may be realized on the disposition of securities held
for less than three months. Because of the Short-Short Limitation, any such
gains would reduce the Fund's ability to sell other securities, or certain
options, futures, forward currency contracts or foreign currency position, held
for less than three months that it might wish to sell in the ordinary course of
its portfolio management.

OTHER INFORMATION

obligations, a possibility that Mitchell Hutchins believes it remote and not
material. Upon payment of any liability incurred by a shareholder solely by
reason of being or having been a shareholder, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the Fund.
The trustees intend to conduct the Fund's operations in such a way as to avoid,
as far as possible, ultimate liability of the shareholders for liabilities of
the Fund.

Prior to November 1, 1995, the name of Emerging Markets Equity Fund was
'Mitchell Hutchins/Kidder Peabody Emerging Markets Equity Fund.' Prior to
February 13, 1995, the name of the Fund was 'Kidder, Peabody Emerging Markets
Equity Fund.' Prior to November 10, 1995, the Fund's Class C shares were called
'Class B' shares. New Class B shares were not offered prior to November 10,
1995.

Prior to August 25, 1995, the name of Global Equity Fund was 'Mitchell
Hutchins/Kidder, Peabody Global Equity Fund.' Prior to November 10, 1995, the
Fund's Class B shares were known as 'Class E' shares and its Class C shares were
known as 'Class B' shares.

Prior to July 1, 1991, the name of Global Income Fund was 'PaineWebber
Master Global Income Fund.' Prior to November 10, 1995, the Fund's Class C
shares were known as 'Class D' shares.

CLASS-SPECIFIC EXPENSES. Each Fund may determine to allocate certain of
its expenses (in addition to distribution fees) to the specific Classes of the
Fund's shares to which those expenses are attributable. For example, Class B
shares bear higher transfer agency fees per shareholder account than those borne
by Class A or Class C shares. The higher fee is imposed due to the higher costs
incurred by the transfer agent in tracking shares subject to a contingent
deferred sales charge because, upon redemption, the duration of the
shareholder's investment must be determined in order to determine the applicable
charge. Moreover, the tracking and calculations required by the automatic
conversion feature of the Class B shares will cause the transfer agent to incur
additional costs. Although the transfer agency fee will differ on a per account
basis as stated above, the specific extent to which the transfer agency fees
will differ between the Classes as a percentage of net assets is not certain,
because the fee as a percentage of net assets will be affected by the number of
shareholder accounts in each Class and the relative amounts of net assets in
each Class.

COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the Funds.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.

43
<PAGE>
AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for Emerging Markets Equity Fund and Global
Equity Fund. Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New
York 10036, serves as independent accountants for Global Income Fund.

FINANCIAL STATEMENTS

Each Fund's Annual Report to Shareholders for the last fiscal year is a
separate document supplied with this Statement of Additional Information and the
financial statements, accompanying notes and reports of independent auditors
appearing therein are incorporated herein by this reference. The Semi-Annual
Report to Shareholders for Global Income Fund is a separate document supplied
with this Statement of Additional Information and the financial statements and
accompanying notes appearing therein are incorporated herein by reference.

44
<PAGE>
APPENDIX

DESCRIPTION OF MOODY'S INVESTORS SERVICES, INC. ('MOODY'S') CORPORATE BOND
RATINGS

Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as a
'gilt edge.' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues; Aa. Bonds which are rated Aa
are judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities; A. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future; Baa. Bonds which are rated Baa are considered
as medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well; Ba. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B. Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small; Caa. Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest; Ca. Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings; C. Bonds which are rated C
are the lowest rated class of bonds and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.

Note: Moody's apply numerical modifiers, 1, 2 and 3 in each generic rating
classification from AA through B in its corporate bond rating system. The

modifier 1 indicates that the security ranks in the higher end of its generic
rating category, the modifier 2 indicates a mid-range ranking, and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

DECRIPTION OF STANDARD & POOR'S ('S&P') CORPORATE DEBT RATINGS

AAA Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong; AA. Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the higher
rated issues only in small degree; A. Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories; BBB. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories; BB,
B, CCC, CC, C. Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions;
C1. The rating C1 is reserved for income bonds on which no interest is being
paid; D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

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

<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THE PROSPECTUS OR IN THIS STATEMENT OF
ADDITIONAL INFORMATION IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS OR THEIR DISTRIBUTOR. THE PROSPECTUS
AND THIS STATEMENT OF ADDITIONAL INFORMATION DO NOT CONSTITUTE AN OFFERING BY
THE FUNDS OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Restrictions........... 1
Hedging Strategies............................. 9
Trustees and Officers.......................... 17
Investment Advisory and Distribution
Arrangements................................. 23
Portfolio Transactions......................... 30
Reduced Sales Charges, Additional Exchange and
Redemption Information and Other Services.... 32
Conversion of Class B Shares................... 35
Valuation of Shares............................ 36
Performance Information........................ 36
Taxes.......................................... 41
Other Information.............................. 43
Financial Statements........................... 44
Appendix....................................... 45
</TABLE>

(Copyright)1996 PaineWebber Incorporated

PaineWebber
Emerging Markets
Equity Fund
PaineWebber
Global Equity Fund
PaineWebber
Global Income Fund
-----------------------------------
Statement of Additional Information
October 31, 1996

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

PAINEWEBBER

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

PAINEWEBBER
EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
CLASS Y SHARES

1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019
PROSPECTUS -- OCTOBER 31, 1996

THE PAINEWEBBER FAMILY OF MUTUAL FUNDS

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

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

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 'How to Buy Shares.'

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

<TABLE>
<CAPTION>
PAGE
----

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

Expense Table........................... 5

Financial Highlights.................... 6

Investment Objectives & Policies........ 9

Investment Philosophy & Process......... 10

Performance............................. 12

The Funds' Investments.................. 15

How to Buy Shares....................... 19

How to Sell Shares...................... 20

Management.............................. 21

Determining the Shares' Net Asset
Value................................. 22

Dividends & Taxes....................... 23

General Information..................... 24
</TABLE>

--------------------
Prospectus Page 2
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

THE FUNDS AT A GLANCE
- --------------------------------------------------------------------------------

EMERGING MARKETS EQUITY FUND

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

INVESTMENT OBJECTIVE: Long-term growth of capital.

SIZE: On September 30, 1996, the Fund had over $ million in assets.

GLOBAL EQUITY FUND

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

INVESTMENT OBJECTIVE: Long-term growth of capital.

RISKS: Equity securities historically have shown greater growth potential than
other types of securities, but they have also shown greater volatility. Because
the Fund invests primarily in equity securities, its price will rise and fall.
Investors in the Fund should be able to assume the special risks of investing in
foreign securities, which include possible adverse political, social and
economic developments abroad and differing characteristics of foreign economies
and markets. Most of the foreign securities held by the Fund are denominated in
foreign currencies, and the value of these investments thus can be adversely
affected by fluctuations in foreign currency values. The Fund may use
derivatives, such as options, futures and forward currency contracts, which may
involve additional risks. Investors may lose money by investing in the Fund; the
investment is not guaranteed.

SIZE: On September 30, 1996, the Fund had over $ million in assets.

GLOBAL INCOME FUND

GOAL: To provide high current income and to increase the value of your
investment by investing principally in high quality foreign and U.S. bonds.

INVESTMENT OBJECTIVE: High current income consistent with prudent investment
risk and, secondarily, capital appreciation.

--------------------
Prospectus Page 3
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

THE FUNDS AT A GLANCE
- --------------------------------------------------------------------------------

Fund may use derivatives, such as options, futures and forward currency
contracts, which may involve additional risks. As a non-diversified fund, the
Fund is subject to greater risk than funds that have a broader range of
investments. Investors may lose money by investing in the Fund; the investment
is not guaranteed.

SIZE: On September 30, 1996, the Fund had over $ million in assets.
MANAGEMENT

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

WHO SHOULD INVEST

HOW TO PURCHASE CLASS Y SHARES

Eligible investors may purchase Class Y shares of the Funds as follows:

The price is the net asset value next calculated after PaineWebber's New York
City headquarters or the Transfer Agent receives the purchase order.

Investors do not pay an initial sales charge when they buy Class Y shares. 100%
of their purchase is immediately invested. Investors also do not pay a
redemption fee or contingent deferred sales charge when they sell Class Y
shares.

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

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

EXPENSE TABLE
- --------------------------------------------------------------------------------

The following tables are intended to assist investors in understanding the
expenses associated with investing in Class Y shares of the Funds. Expenses
shown below represent those incurred for the most recent fiscal year.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS Y
-------
<S> <C>
Maximum Sales Charge on Purchases of Shares (as a % of
offering price)........................................... None
Sales Charge on Reinvested Dividends (as a % of offering
price).................................................... None
Maximum Contingent Deferred Sales Charge (as a % of net
asset value at the time of purchase or sale, whichever is
less)..................................................... None
Exchange Fee................................................ None
</TABLE>

<TABLE>
<S> <C>
Maximum Annual Investment Advisory Fee Payable by
Shareholders through INSIGHT (as a % of average daily
value of shares held) (1)................................. 1.50%
ANNUAL FUND OPERATING EXPENSES (as a % of average net
assets) (2)
EMERGING MARKETS EQUITY FUND
Management Fees............................................. 1.62%
12b-1 Fees.................................................. 0.00
Other Expenses..............................................
-------
Total Operating Expenses.................................... %
-------
-------
GLOBAL EQUITY FUND
Management Fees............................................. 0.85%
12b-1 Fees.................................................. 0.00
Other Expenses..............................................
-------
Total Operating Expenses.................................... %
-------
-------
GLOBAL INCOME FUND
Management Fees............................................. 0.73%
12b-1 Fees.................................................. 0.00

Other Expenses.............................................. 0.18
-------
Total Operating Expenses.................................... 0.91%
-------
-------
</TABLE>

- ------------------
(1) Participation in INSIGHT is subject to an advisory fee at the maximum annual
rate of 1.50% of assets held through INSIGHT (generally charged quarterly in
advance, which may be charged to the INSIGHT participant's PaineWebber
account).

(2) See 'Management' for additional information. The management fees payable to
Mitchell Hutchins by Emerging Markets Equity Fund and Global Equity Fund are
greater than those paid by most funds.

EXAMPLES OF EFFECT OF FUND EXPENSES

<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
Class Y............................
GLOBAL INCOME FUND
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
Class Y............................
</TABLE>

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

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

EMERGING MARKETS EQUITY FUND

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

<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
------------------------------------------------------------
CLASS Y
------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Net asset value, beginning of period................................ $ $
-------- --------
Net investment loss.................................................
Net realized and unrealized gains from investment
transactions......................................................
-------- --------
Net increase from investment operations.............................
-------- --------
Distributions from net realized gains...............................
-------- --------
Net asset value, end of period...................................... $ $
-------- --------
-------- --------
Total investment return (1)......................................... % %
-------- --------
-------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)................................. $ $
Expenses to average net assets.................................... % %

Net investment loss to average net assets......................... % %
Portfolio turnover................................................ % %

- ------------------
* Annualized

+ Commencement of offering of shares.

--------------------
Prospectus Page 6

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income

Fund

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

GLOBAL EQUITY FUND

<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
------------------------------------------------------
CLASS Y (2)
------------------------------------------------------
FOR THE YEARS
ENDED FOR THE
AUGUST 31, PERIOD
-------------------------------- MAY 10, 1993+
1996 1995 1994 TO AUGUST 31, 1993
-------- -------- -------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period...........................
Net investment income..........................................
Net realized and unrealized gains (losses) from investment
transactions.................................................
Total increase (decrease) from investment operations...........
Dividends from net investment income...........................
Distributions from net realized gains on investments...........
Total dividends and distributions to
shareholders.................................................
Net asset value, end of period.................................
Total investment return (1)....................................
Ratios/Supplemental Data:
Net assets, end of period (000's)............................
Expenses to average net assets...............................
Net investment income (loss) to average net assets...........
Portfolio turnover...........................................
</TABLE>

- ------------------
* Annualized
+ Commencement of issuance of shares

(2) Formerly Class C shares.

--------------------
Prospectus Page 7

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

GLOBAL INCOME FUND

The following tables provide investors with data and ratios for one Class Y
share for each of the periods shown. This information is supplemented by the
financial statements and accompanying notes appearing in Global Income Fund's
Annual Report to Shareholders for the fiscal year ended October 31, 1995 and the
report of Price Waterhouse LLP, independent accountants, appearing in the Fund's
Annual Report to Shareholders. Both are incorporated by reference into the
Statement of Additional Information. The financial statements and notes, as well
as the financial information in the table below, have been audited by Price
Waterhouse LLP. Further information about the Fund's performance is also
included in the Annual Report to Shareholders, which may be obtained without
charge by calling 1-800-647-1568. The financial statements and notes and the
financial information in the table below, as they relate to the six months ended
April 30, 1996, have been taken from the records of the Fund without examination
by the independent accountants, who do not express an opinion thereon.

<TABLE>
<CAPTION>
GLOBAL INCOME FUND
---------------------------------------------------------------------------
CLASS Y
---------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS PERIOD
ENDED AUGUST 26,

APRIL 30, FOR THE YEARS ENDED OCTOBER 31, 1991+ TO
1996 ------------------------------------------- OCTOBER 31,
(UNAUDITED) 1995 1994 1993 1992 1991
----------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ $ $ $ $ $
--------- ------- ------- ------- ------- ---------
Net investment income..........
Net realized and unrealized
gains (losses) from investment
and foreign currency
activities....................
--------- ------- ------- ------- ------- ---------
Total increase (decrease) from
investment operations.........
--------- ------- ------- ------- ------- ---------
Dividends from net investment
income........................
--------- ------- ------- ------- ------- ---------
Net asset value, end of
period........................ $ $ $ $ $ $
--------- ------- ------- ------- ------- ---------
Total investment return (1).... % % % % % %
--------- ------- ------- ------- ------- ---------
--------- ------- ------- ------- ------- ---------
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $ $ $ $ $ $
Expenses to average net
assets...................... % % % % % %
Net investment income to
average net assets.......... % % % % % %
Portfolio turnover............ % % % % % %
</TABLE>

- ------------------
* Annualized.

+ Commencement of operations.

--------------------
Prospectus Page 8

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

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------

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

EMERGING MARKETS EQUITY FUND

GLOBAL EQUITY FUND

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

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

GLOBAL INCOME FUND

--------------------
Prospectus Page 9
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund
currencies or U.S. dollars, of issuers located in at least three of the
following countries: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Thailand, the United
Kingdom and the United States. No more than 40% of the Fund's assets normally
are invested in securities of issuers located in any one country.

only when it concludes that the anticipated return to the Fund on such
investment warrants exposure to the additional level of risk.

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

EMERGING MARKETS EQUITY FUND

GLOBAL EQUITY FUND

In selecting equity securities for Global Equity Fund, the International Equity
Team at GE Investment Management searches for growth companies selling at

reasonable prices, with an emphasis on undervalued medium- to large-size growth
companies with a global presence. The

--------------------
Prospectus Page 10
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

investment process employed by the International Equity Team involves several
steps.

GLOBAL INCOME FUND

--------------------
Prospectus Page 11
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

These charts show the total returns for Class Y shares of the Funds; 1995
returns represent the calendar year ended December 31, 1995. Past results are
not a guarantee of future results.

EMERGING MARKETS EQUITY FUND

[CHART]

As Class Y shares commenced operations on January 19, 1994, the 1994 return
represents the period from January 19, 1994 through December 31, 1994.

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of June 30, 1996
CLASS Y
--------
Inception Date..................... 1/19/94
<S> <C>
One Year........................... %
Life............................... %
</TABLE>

--------------------
Prospectus Page 12
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

GLOBAL EQUITY FUND

[CHART]

As Class Y shares commenced operations on May 10, 1993, the 1993 return
represents the period from May 10, 1993 through December 31, 1993.

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of August 31, 1996

CLASS Y
--------
Inception Date..................... 5/10/93
<S> <C>
One Year........................... %
Life............................... %
</TABLE>

--------------------
Prospectus Page 13
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

GLOBAL INCOME FUND
[CHART]

As Class Y shares commenced operations on August 26, 1991, the 1991 return for
Class Y shares represents the period from August 26, 1991 through December 31,
1991.

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of October 31, 1995

CLASS Y
--------
Inception Date..................... 8/26/91
<S> <C>
One Year........................... %
Life............................... %
</TABLE>

PERFORMANCE INFORMATION

the Fund or class has been in existence for a shorter period. If so, returns
will be shown for the period since inception. Total return calculations assume
reinvestment of dividends and other distributions.

--------------------
Prospectus Page 14
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

RISKS

Following is a discussion of the risks that are common to each Fund:

entire investment.

BONDS. Bonds are subject to interest rate risk and credit risk. Interest rate
risk is the risk that interest rates will rise and bond prices will fall,
lowering the value of the Fund's bond investments. Credit risk is the risk that
adverse changes in economic conditions can affect an issuer's ability to pay
principal and interest. In addition, there is a risk that bonds will be
downgraded by rating agencies. Credit ratings attempt to evaluate the safety or
principal and interest payments and do not evaluate the volatility of the
security's value or its liquidity. Rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than the rating indicates.

CURRENCY. Currency risk is the risk that changes in foreign exchange rates may
reduce the U.S. dollar value of each Fund's foreign investments. Each Fund's
share value may change significantly when investments are denominated in foreign
currencies. Generally, currency exchange rates are determined by supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries. Currency exchange rates can also be affected by the
intervention of the U.S. and foreign governments or central banks, the
imposition

--------------------
Prospectus Page 15
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income

Fund

of currency controls or other political developments inside and outside the
United States.

In addition to these general risks, investments in each Fund are subject to
special risk considerations:

EMERGING MARKETS EQUITY FUND

GLOBAL EQUITY FUND

GLOBAL INCOME FUND

BONDS; LOWER-RATED BONDS. Global Income Fund is permitted to invest up to 35%
of its total assets in securities rated below the two highest grades assigned by
a NRSRO. Except as noted below, these securities must be rated at least BBB by
S&P or Baa by Moody's. These securities are investment grade but Moody's
considers securities rated Baa to have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity for such securities to make principal and interest payments than is the
case for higher-rated securities. Within this 35% limitation, the Fund may
invest up to 20% of its total assets in sovereign debt securities rated as low
as BB by S&P, Ba by Moody's or comparable rated by another NRSRO or, in the case
of such securities assigned a commercial paper rating, no lower than B by S&P or
comparably rated by another NRSRO. These securities are deemed by those NRSROs

to be predominately speculative with respect to the issuer's capacity to pay
interest and repay principal and may involve major risk exposure to adverse
conditions. Such securities are commonly referred to as 'junk bonds.' Commercial
paper rated B by S&P is regarded by it as having only an adequate capacity for
timely payment. The Fund is also permitted to purchase debt securities that are
not rated by a NRSRO but Mitchell Hutchins determines to be of comparable
quality to that of rated securities in which the Fund may invest. Such
securities are included in the computation of any percentage limitations
applicable to the comparable rated securities. In the event that, due to a
downgrade of one or more debt securities, an amount in excess of 20% of the
Fund's total assets is held in securities rated below investment grade and
comparable unrated securities, Mitchell Hutchins will engage in an orderly
disposition of such securities to the extent necessary to ensure that the Fund's
holdings of such securities do not exceed 20% of the Fund's total assets.

--------------------
Prospectus Page 16
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

significantly greater because such securities frequently are unsecured and
subordinated to the prior payment of senior indebtedness.

The Fund may invest in 'zero coupon' Treasury securities, which are U.S.
Treasury bills, notes and bonds that have been stripped of their unmatured
interest coupons, and receipts or certificates representing interest in such
stripped debt obligations and coupons. A zero coupon security pays no cash
interest to its holder prior to maturity. Accordingly, these securities usually
are issued and traded at a deep discount from their face or par value and are
subject to greater fluctuations of market value in response to changing interest

rates than debt obligations of comparable maturities that make current
distributions of interest. Federal tax law requires that the holder of a zero
coupon security include in gross income each year the original issue discount
that accrues on the security for the year, even though the holder receives no
interest payment on the security during the year. For additional discussion of
the tax treatment of zero coupon Treasury securities, see 'Taxes' in the
Statement of Additional Information.

INVESTMENT TECHNIQUES AND STRATEGIES

HEDGING STRATEGIES. Each Fund may use certain strategies designed to adjust the
overall risk of its investment portfolio. These 'hedging' strategies involve
derivative contracts, including options (on securities, foreign currencies,
futures and stock indexes) and futures contracts (on foreign currencies, stock
indexes and interest rates), and forward currency contracts. Global Income Fund
may also use these strategies to attempt to enhance income; the use of such
strategies solely to enhance income may be considered a form of speculation.
Global Income Fund also may enter into certain interest rate protection
transactions to preserve a return or spread on a particular investment or
portion of its portfolio or to protect against an increase in the price of
securities the Fund anticipates purchasing at a later date. New financial
products and risk management techniques continue to be developed and may be used
if consistent with the Funds' investment objectives and policies. The Statement
of Additional Information for the Funds contains further information on these
strategies.

The Funds might not use any hedging strategies, and there can be no assurance

that any strategy used will succeed. If Emerging Markets Management, GE
Investment Management or Mitchell Hutchins, as applicable, is incorrect in its
judgment on market values, interest rates or other economic factors in using a
hedging strategy, a Fund may have lower net income and a net loss on the

--------------------
Prospectus Page 17
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

investment. Each of these strategies involves certain risks, which include:

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

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

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

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

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

DEFENSIVE POSITIONS. When Emerging Markets Management, GE Investment Management
or Mitchell Hutchins, as applicable, believes that unusual circumstances warrant
a defensive posture, each Fund may temporarily commit all or any portion of its
assets to cash or money market instruments, including repurchase agreements. In

a typical repurchase agreement, a Fund buys a security and simultaneously agrees
to sell it back at an agreed-upon price and time, usually no more than seven
days after purchase.

--------------------
Prospectus Page 18
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

HOW TO BUY SHARES
- --------------------------------------------------------------------------------

Class Y shares are sold to eligible investors at the net asset value next
determined after the purchase order is received at PaineWebber's New York City
headquarters or by PFPC Inc., the Funds' Transfer Agent ('Transfer Agent'). No
initial or contingent deferred sales charge is imposed, nor are Class Y shares
subject to rule 12b-1 distribution or service fees. The Funds and Mitchell
Hutchins reserve the right to reject any purchase order and to suspend the
offering of Class Y shares for a period of time. Mitchell Hutchins, the
distributor for each Fund's Class Y shares, has appointed PaineWebber to serve
as the exclusive dealer for each Fund's Class Y shares.

INSIGHT

An investor who purchases $50,000 or more of shares of the mutual funds that are
available to INSIGHT participants (which include the PaineWebber mutual funds in
the Flexible Pricing(Service Mark) System and certain other specified mutual
funds) may take part in INSIGHT, a total portfolio asset allocation program
sponsored by PaineWebber, and thus become eligible to purchase Class Y shares.
INSIGHT offers comprehensive investment services, including a personalized asset

allocation investment strategy using an appropriate combination of funds,
monitoring of investment performance and comprehensive quarterly reports that
cover market trends, portfolio summaries and personalized account information.

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

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

ACQUISITION OF CLASS Y SHARES BY OTHERS

Present holders of Class Y shares of a former Mitchell Hutchins/Kidder, Peabody
('MH/KP') mutual fund who are not current INSIGHT participants may acquire Class
Y shares of a Fund only when those shares are issued in connection with the
reorganization of the MH/KP mutual fund into that Fund. This category includes
former employees of Kidder, Peabody & Co., Incorporated ('Kidder, Peabody'),
their associated accounts, present and former directors and trustees of the
MH/KP mutual funds.

Dividends and other distributions on Class Y shares of a Fund issued in
connection with the reorganization will be paid in additional Class Y shares at
net asset value, unless the shareholder has requested cash payments. These
holders may not otherwise purchase additional Class Y shares.

Each Fund is authorized to offer Class Y shares to 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 this category.

--------------------
Prospectus Page 19
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

Class Y shares may be sold (redeemed) at their net asset value and proceeds from
the sales of shares will be paid after receipt of a request to sell shares, as
described below.

SALES THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS

INSIGHT participants who are Class Y shareholders may submit requests to sell
shares to their investment executives or correspondent firms in person or by
telephone, mail or wire. As agent for the Funds, PaineWebber may honor a request
to sell shares by repurchasing Class Y shares from a selling shareholder at the
shares' net asset value next determined after receipt of the request by
PaineWebber's New York City headquarters. Within three Business Days after
receipt of the request, repurchase proceeds 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 requests to sell shares to PaineWebber's New York City
headquarters. A 'Business Day' is any day, Monday through Friday, on which the
New York Stock Exchange is open for business.

PaineWebber reserves the right not to honor any request to sell shares, in which
case PaineWebber promptly will forward the request to the Transfer Agent for
treatment as described below.

SALES THROUGH THE TRANSFER AGENT

Shareholders also may sell Fund shares through the Transfer Agent. Shareholders
should mail requests to sell shares directly to the Transfer Agent: PFPC Inc.,
Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington, Delaware 19899. A
request to sell shares will be executed at the net asset value next computed
after it is received in 'good order,' and proceeds from the sale 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 sold (or that all shares credited to the Fund account
be sold), 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 to sell shares is received in 'good order.'

ADDITIONAL INFORMATION ON SALES

A shareholder may have proceeds from the sale of shares 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 sale
requirements generally, should be referred to the shareholder's investment
executive at PaineWebber or one of its correspondent firms. If a shareholder
wants to sell shares which were purchased recently, a 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.

invested to $500 or more within 60 days of the notice. The Fund will not
purchase back accounts that fall below $500 solely due to a reduction in net
asset value per share.

--------------------
Prospectus Page 20
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

EMERGING MARKETS EQUITY FUND

Antoine W. van Agtmael is responsible for all investment decisions made by
Emerging Markets Management. Mr. van Agtmael serves as the Fund's Chief
Investment Officer and in that capacity is the individual primarily responsible
for the management of the Fund's assets. Mr. van Agtmael has been the President
of Emerging Markets Management for more than five years.

GLOBAL EQUITY FUND

Directly assisting Mr. Layman are Pamela J. Thomas, Vice President of Global

Equities at GE Investments, and the rest of the International Equity Team. Ms.
Thomas is a Chartered Financial Analyst and has been with GE Investment
Management for three years. From 1987 to 1992, Ms. Thomas served as assistant
portfolio manager at the Bank of Bermuda. Earlier in her career, she was senior
credit analyst at the Bank of Butterfield. Ms. Thomas has nine years of
investment experience. The International Equity Team is comprised of ten
analysts, eight of whom manage portfolios.

GLOBAL INCOME FUND

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

* * * *

Each board has determined that brokerage transactions for the Fund may be
conducted through PaineWebber or its affiliates in accordance with procedures
adopted by the board.

ABOUT THE INVESTMENT ADVISER

--------------------
Prospectus Page 21
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

services holding company. On September 30, 1996, Mitchell Hutchins was adviser
or sub-adviser of investment companies with separate portfolios and
aggregate assets of approximately $ billion.

ABOUT THE INVESTMENT SUB-ADVISERS

MANAGEMENT FEES & OTHER EXPENSES

With respect to Emerging Markets Equity Fund, Mitchell Hutchins (not the Fund)
pays Emerging Markets Management a fee for sub-investment advisory services at
the annual rate of 1.12% of the Fund's average daily net assets. With respect to
Global Equity Fund, Mitchell Hutchins (not the Fund) pays Global Equity Fund a
fee for sub-investment advisory services at the annual rate of 0.31% of the
Fund's average daily net assets.

Global Income Fund pays PaineWebber an annual fee of $4.00 per active
shareholder account held at PaineWebber for services not provided by the
Transfer Agent.

Each Fund values its assets based on their current market value when market
quotations are readily available. If that value is not readily available, assets

are valued at fair value as determined in good faith by or under the direction
of its board. The amortized cost method of valuation generally is used to value
debt obligations with 60 days or less remaining to maturity, unless the board
determines that this does not represent fair value. Investments denominated in
foreign currencies are valued daily in U.S. dollars based on the then-prevailing
exchange rates.

--------------------
Prospectus Page 22
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

DIVIDENDS

Dividends and other distributions paid on Class Y shares of each Fund are
calculated at the same time and in the same manner as dividends and
distributions on other classes of shares.

TAXES

YEAR-END TAX REPORTING

WITHHOLDING REQUIREMENTS

TAXES ON THE SALE OR EXCHANGE OF FUND SHARES

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

--------------------
Prospectus Page 23
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

* * * *

Because the foregoing only summarizes some of the important tax considerations
affecting the Funds and their shareholders, the Statement of Additional

Information contains more detail. Prospective shareholders are urged to consult
their tax advisers.

- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------

ORGANIZATION

EMERGING MARKETS EQUITY FUND

GLOBAL EQUITY FUND

GLOBAL INCOME FUND

More information concerning Class A, Class B and Class C shares may be obtained
from an investment executive at PaineWebber or one of its correspondent firms or

by calling toll-free 1-800-647-1568.

VOTING RIGHTS

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

SHAREHOLDER MEETINGS

The Funds do not intend to hold annual meetings.

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

--------------------
Prospectus Page 24
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund Global Income
Fund

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

REPORTS TO SHAREHOLDERS

CUSTODIAN & RECORDKEEPING AGENT; TRANSFER & DIVIDEND AGENT

custody of the Fund's foreign assets. PFPC Inc., a subsidiary of PNC Bank, N.A.,
serves as each Fund's transfer and dividend disbursing agent. It is located at
400 Bellevue Parkway, Wilmington, DE 19809.

--------------------
Prospectus Page 25

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

PAINEWEBBER
EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
CLASS Y SHARES

PROSPECTUS -- OCTOBER 31, 1996

<TABLE>
<S> <C>
/ / PAINEWEBBER BOND FUNDS / / PAINEWEBBER STOCK FUNDS

High Income Fund Capital Appreciation Fund
Investment Grade Income Fund Financial Services Growth Fund
Low Duration U.S. Government Growth Fund
Income Fund Growth and Income Fund
Strategic Income Fund Small Cap Fund
U.S. Government Income Fund Utility Income Fund

/ / PAINEWEBBER TAX-FREE BOND FUNDS / / PAINEWEBBER GLOBAL FUNDS

California Tax-Free Income Fund Emerging Markets Equity Fund
Municipal High Income Fund Global Equity Fund
National Tax-Free Income Fund Global Income Fund
New York Tax-Free Income Fund
/ / PAINEWEBBER MONEY MARKET FUND

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

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

<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
CLASS Y SHARES
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019

STATEMENT OF ADDITIONAL INFORMATION

The three funds named above (each a 'Fund' and, collectively, 'Funds') are
series of open-end management investment companies. PaineWebber Emerging Markets
Equity Fund ('Emerging Markets Equity Fund') is a diversified series of
PaineWebber Investment Trust II ('Investment Trust II'), a professionally
managed, open-end management investment company organized as a Massachusetts
business trust. Emerging Markets Equity Fund seeks long-term capital
appreciation by investing primarily in equity securities of companies in newly
industrialized countries. PaineWebber Global Equity Fund ('Global Equity Fund')
is a diversified series of PaineWebber Investment Trust ('Investment Trust'), a
professionally managed, open-end management investment company organized as a
Massachusetts business trust. Global Equity Fund seeks long-term growth of
capital by investing primarily in equity securities of U.S. and foreign issuers.
PaineWebber Global Income Fund ('Global Income Fund') is a non-diversified
series of PaineWebber Investment Series ('Investment Series'), a professionally
managed, open-end management investment company organized as a Massachusetts
business trust. Global Income Fund seeks high current income consistent with
prudent investment risk, with capital appreciation as a secondary objective, and
invests primarily in high quality U.S. and foreign debt securities.

INVESTMENT POLICIES AND RESTRICTIONS

The following supplements the information contained in the Prospectus
concerning the Funds' investment policies and limitations.

A description of the ratings assigned to corporate debt obligations by Moody's
and S&P is included in the Appendix to this Statement of Additional Information.
The Funds may use these ratings in determining whether to purchase, sell or hold
a security. It should be emphasized, however, that ratings are general and are
not absolute standards of quality. Consequently, securities with the same
maturity, interest rate and rating may have different market prices.

Global Income Fund is authorized to invest up to 20% of its net assets in
non-investment grade debt securities--that is, debt securities that are not
rated at the time of purchase within one of the four highest grades assigned by
S&P or Moody's, comparably rated by another NRSRO or determined by Mitchell
Hutchins to be of comparable quality. Lower rated debt securities generally
offer a higher current yield than that available for investment grade issues;
however, they involve higher risks in that they are especially subject to
adverse changes in general economic conditions and in the industries in which
the issuers are engaged, to
<PAGE>
changes in the financial condition of the issuers and to price fluctuations in
response to changes in interest rates. During periods of economic downturn or
rising interest rates, highly leveraged issuers may experience financial stress
which could adversely affect their ability to make payments of interest and
principal and increase the possibility of default. In addition, such issuers may
not have more traditional methods of financing available to them and may be
unable to repay debt at maturity by refinancing. The risk of loss due to default
by such issuers is significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior indebtedness.

service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which a
sovereign debtor may be subject. Increased protectionism on the part of a
country's trading partners, or political changes in those countries, could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any, or the credit standing of a particular local government
or agency.

FOREIGN CURRENCY TRANSACTIONS. Although the Funds value their assets daily
in U.S. dollars, they do not intend to convert their holdings of foreign
currencies to U.S. dollars on a daily basis. The Funds' foreign currencies

generally will be held as 'foreign currency call accounts' at foreign branches
of foreign or domestic banks. These accounts bear interest at negotiated rates
and are payable upon relatively short demand periods. If a bank became
insolvent, the Funds could suffer a loss of some or all of the amounts
deposited. The Funds may convert foreign currency to U.S. dollars from time to
time. Although foreign exchange dealers generally

honor a demand for repayment. Therefore, the fact that there are contractual or
legal restrictions on resale to the general public or certain institutions is
not dispositive of the liquidity of such investments.

The Funds intend to enter into repurchase agreements only with banks and
dealers in transactions believed by Mitchell Hutchins or a Sub-Adviser to

present minimal credit risks in accordance with guidelines established by each
board. Mitchell Hutchins or the Sub-Adviser reviews and monitors the
creditworthiness of those institutions under each board's general supervision.

<PAGE>
The Funds might make a short sale 'against the box' in order to hedge
against market risks when Mitchell Hutchins or a Sub-Adviser believes that the
price of a security may decline, thereby causing a decline in the value of a
security owned by a Fund or a security convertible into or exchangeable for a
security owned by the Fund, or when Mitchell Hutchins or a Sub-Adviser wants to
sell a security that a Fund owns at a current price, but also wishes to defer
recognition of gain or loss for federal income tax purposes. In such case, any
loss in the Fund's long position after the short sale should be reduced by a
gain in the short position. Conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which gains or losses in
the long position are reduced will depend upon the amount of the securities sold
short relative to the amount of the securities a Fund owns, either directly or
indirectly, and in the case where the Fund owns convertible securities, changes
in the investment values or conversion premiums of such securities.

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

INVESTMENT LIMITATIONS OF THE FUNDS

Each Fund will not:

(1) purchase any security if, as a result of that purchase, 25% or more of

the Fund's total assets would be invested in securities of issuers having their
principal business activities in the same industry, except that this limitation
does not apply to securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities or to municipal securities.

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

The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the securities

having the same sponsor, and mortgage- and asset-backed securities issued by a
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company.

NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions, which
apply to each Fund, are non-fundamental and may be changed by the vote of the
Fund's board without shareholder approval.

Each Fund will not:

(6) invest in real estate limited partnerships.

7
<PAGE>
(7) purchase portfolio securities while borrowings in excess of 5% of its
total assets are outstanding.

(8) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may make margin

deposits in connection with its use of financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts or
derivative instruments.

In addition, Global Equity Fund will not:

(12) invest in companies for the purpose of exercising control or
management.

<PAGE>
HEDGING STRATEGIES

OPTIONS ON SECURITIES INDEXES--A securities index assigns relative values
to the securities included in the index and fluctuates with changes in the

9
<PAGE>

The effectiveness of hedges using Hedging Instruments on indices will
depend on the degree of correlation between price movements in the index and
price movements in the securities being hedged.

COVER FOR HEDGING STRATEGIES. Transactions using Hedging Instruments,
other than purchased options, expose the Funds to an obligation to another

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

(1) Global Equity Fund--

(b) The aggregate value of underlying securities on which covered
calls are written will not exceed 5% of the Fund's total assets.

(2) Global Income Fund--

12
<PAGE>
(b) The aggregate value of securities underlying put options written
by the Fund determined as of the date the put options are written will not
exceed 50% of a Fund's net assets.

Subsequent 'variation margin' payments are made to and from the futures

arbitrage, 'program trading' and other investment strategies might result in
temporary price distortions.

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

14
<PAGE>
of foreign banking arrangements by U.S. residents and might be required to pay
any fees, taxes and charges associated with such delivery assessed in the
issuing country.

The Fund expects to enter into interest rate protection transactions to
preserve a return or spread on a particular investment or portion of its

16
<PAGE>
TRUSTEES AND OFFICERS

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

20
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
C. William Maher; 34 Vice President and Mr. Maher is a first vice president and a
Assistant Treasurer senior manager of the mutual fund finance
division of Mitchell Hutchins. Mr. Maher is
a vice president and assistant treasurer of
30 investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.

Paul H. Schubert; 33 Vice President and Mr. Schubert is a first vice president and
Assistant Treasurer a senior manager of the mutual fund fi-
nance division of Mitchell Hutchins. From
August 1992 to August 1994, he was a vice

president at Black-Rock Financial
Management, L.P. Prior to August 1992, he
was an audit manager with Ernst & Young
LLP. Mr. Schubert is a vice president and
assistant treasurer of 30 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>

Mark A. Tincher; 40 Vice President Mr. Tincher is a managing director and chief
investment officer--U.S. equity in-
vestments of Mitchell Hutchins. Prior to
March 1995, he was a vice president and
directed the U.S. funds management and
equity research areas of Chase Manhat-
tanPrivate Bank. Mr. Tincher is a vice
president of 14 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment
adviser.

</TABLE>

- ------------------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.
** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are 'interested persons' of each
Fund as defined in the 1940 Act by virtue of their positions with Mitchell
Hutchins, PaineWebber, and/or PW Group.

COMPENSATION TABLE

Trustee.........................................
John R. Torell, III,
Trustee.........................................
</TABLE>

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

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

* Represents fees paid to each trustee during the fiscal year ended June 30,
1996.

** Represents fees paid to each trustee during the fiscal year ended August
31, 1996.

*** Represents fees paid to each trustee during the fiscal year ended October
31, 1995.

**** Represents total compensation paid to each trustee during the calendar year
ended December 31, 1995.

INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS

<PAGE>
counsel for the independent trustees; (11) charges of custodians, transfer
agents and other agents; (12) costs of preparing share certificates; (13)
expenses of setting in type and printing prospectuses, statements of additional
information and supplements thereto, reports and proxy materials for existing
shareholders, and costs of mailing such materials to shareholders; (14) any
extraordinary expenses (including fees and disbursements of counsel) incurred by
the Fund; (15) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; (16) costs of
mailing and tabulating proxies and costs of meetings of shareholders, the board
and any committees thereof; (17) the cost of investment company literature and
other publications provided to trustees and officers; and (18) costs of mailing,
stationery and communications equipment.

Management determines what securities will be purchased, sold or held by
Emerging Markets Equity Fund. Under the Sub-Advisory Contract, Mitchell Hutchins
(not the Fund) pays Emerging Markets Management a fee in the amount of 1.12% of
the Fund's average daily net assets. Emerging Markets Management bears all
expenses incurred by it in connection with its services under the Sub-Advisory
Contract. Under the Sub-Advisory Contract for the fiscal years ended June 30,
1996, June 30, 1995 and for the period January 19, 1994 (commencement of
operations) through June 30, 1994, Mitchell Hutchins paid (or accrued) fees of
$ , $872,143 and $455,243, respectively, to Emerging Markets Management.

GLOBAL EQUITY FUND. Mitchell Hutchins acts as the investment adviser and
administrator of Global Equity Fund pursuant to an Advisory Contract dated
August 25, 1995 with the Trust. Under the Advisory

connection with the Sub-Advisory Contract, except any liability to the Trust,
the Fund, its shareholders or Mitchell Hutchins to which GE Investment
Management would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under the Sub-Advisory
Contract.

PERSONNEL TRADING POLICIES. Mitchell Hutchins personnel may invest in

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

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

26
<PAGE>
PORTFOLIO TRANSACTIONS

The Funds have no obligation to deal with any broker or group of brokers in
the execution of portfolio transactions. The Funds contemplate that, consistent
with the policy of obtaining the best net results, brokerage transactions may be

conducted through PaineWebber. Each Fund's board of trustees has adopted
procedures in conformity with Rule 17e-1 under the 1940 Act to ensure that all
brokerage commissions paid to PaineWebber are reasonable and fair. Specific
provisions in the Advisory Contracts authorize PaineWebber to effect portfolio
transactions for the Funds on such exchange and to retain compensation in
connection with such transactions. Any such transactions will be effected and
related compensation paid only in accordance with applicable SEC regulations.
For the fiscal years ended June 30, 1996, June 30, 1995 and the period January
19, 1994 (commencement of operations) to June 30, 1994, Emerging Markets Equity
Fund paid $ , $0, and $ , respectively, in brokerage commissions to
PaineWebber. For the fiscal years ended August 31, 1996, August 31, 1995 and
August 31, 1994, Global Equity Fund paid $ , $0 and $0, respectively, in
brokerage commissions to PaineWebber. For the fiscal years ended October 31,
1995, October 31, 1994 and October 31, 1993, Global Income Fund did not pay any
brokerage commissions to PaineWebber.

27
<PAGE>
will not receive in principal transactions the types of services which could be
purchased for hard dollars. Mitchell Hutchins or a Sub-Adviser may engage in
agency transactions in OTC equity and debt securities in return for research and
execution services. These transactions are entered into only in compliance with
procedures ensuring that the transaction (including commissions) is at least as
favorable as it would have been if effected directly with a market-maker that
did not provide research or execution services. These procedures include
Mitchell Hutchins or the Sub-Adviser receiving multiple quotes from dealers

before executing the transactions on an agency basis.

The Funds' respective portfolio turnover rates for the preceding two fiscal
years were:

<TABLE>
<S> <C>
EMERGING MARKETS EQUITY FUND
Fiscal Year ended June 30, 1996............................................................................. %
Fiscal Year ended June 30, 1995............................................................................. 76%
GLOBAL EQUITY FUND
Fiscal Year ended August 31, 1996........................................................................... %
Fiscal Year ended August 31, 1995........................................................................... 40%

28
<PAGE>
VALUATION OF SHARES

PERFORMANCE INFORMATION

TOTAL RETURN CALCULATIONS. Average annual total return quotes
('Standardized Return') used in each Fund's Performance Advertisements are
calculated according to the following formula:

<TABLE>
<S> <C>
n
P(1 + T) = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares of a specified Class
T = average annual total return of shares of that Class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at the beginning of that period.
</TABLE>

29
<PAGE>
annual change in the value of an initial $1,000 investment over the period. All
dividends and other distributions are assumed to have been reinvested at net
asset value.

The following table shows performance information for the Class Y shares of
the Funds for the periods indicated. All returns for periods of more than one
year are expressed as an average return.

EMERGING MARKETS EQUITY FUND

CLASS Y
-------
<S> <C>
Fiscal year ended June 30, 1996:
Standardized Return*..................................................................................
Non-Standardized Return...............................................................................
Inception** to June 30, 1996:
Standardized Return*..................................................................................
Non-Standardized Return...............................................................................
</TABLE>

- ------------------
* Class Y shares do not impose an initial or contingent deferred sales charge;
therefore, Non-Standardized Return is identical to Standardized Return.
** The inception date for Class Y shares of Emerging Markets Equity Fund was
January 19, 1994.

GLOBAL EQUITY FUND

<TABLE>
<CAPTION>
CLASS Y
-------
<S> <C>
Fiscal year ended August 31, 1996:
Standardized Return*..................................................................................
Non-Standardized Return...............................................................................
Inception** to August 31, 1996:
Standardized Return*..................................................................................
Non-Standardized Return...............................................................................
</TABLE>

30
<PAGE>
GLOBAL INCOME FUND

<TABLE>
<CAPTION>
CLASS Y
-------
<S> <C>
Fiscal year ended October 31, 1995:
Standardized Return*..................................................................................
Non-Standardized Return...............................................................................
Inception** to October 31, 1995:
Standardized Return*..................................................................................
Non-Standardized Return...............................................................................
</TABLE>

a-b 6
YIELD = 2 [(---+1) -1]
cd

<TABLE>
<C> <S>
where: a = interest earned during the Period attributable to a Class of shares
b = expenses accrued for the Period attributable to a Class of shares (net of
reimbursements)
c = the average daily number of shares of a Class outstanding during the Period that were
entitled to receive dividends
d = the maximum offering price per share (in the case of Class A shares) or the net asset
value per share (in the case of Class B and Class C shares) on the last day of the
Period.
</TABLE>

Except as noted below, in determining interest income earned during the
Period (variable 'a' in the above formula), Global Income Fund calculates
interest earned on each debt obligation held by it during the Period by (1)
computing the obligation's yield to maturity, based on the market value of the
obligation (including actual accrued interest) on the last business day of the
Period or, if the obligation was purchased during the Period, the purchase price
plus accrued interest and (2) dividing the yield to maturity by 360, and
multiplying the resulting quotient by the market value of the obligation
(including actual accrued interest) to determine the interest income on the
obligation for each day of the period that the obligation is in the portfolio.
Once interest earned is calculated in this fashion for each debt obligation held
by the Fund, interest earned during the Period is then determined by totalling
the interest earned on all debt obligations. For purposes of these calculations,
the maturity of an obligation with one or more call provisions is assumed to be
the next date on which the obligation reasonably can be expected to be called
or, if none, the maturity date. For the 30-day period ended September 30, 1996,
the yield for the Class Y shares of Global Income Fund was %.

OTHER INFORMATION. In Performance Advertisements, the Funds may compare
their Standardized Return and/or their Non-Standardized Return with data
published by Lipper Analytical Services, Inc. ('Lipper'), CDA Investment
Technologies, Inc. ('CDA'), Wiesenberger Investment Companies Service

('Wiesenberger'), Investment Company Data, Inc. ('ICD') or Morningstar Mutual
Funds ('Morningstar'), with the performance of recognized stock and other
indices, including (but not limited to) the Standard & Poor's 500 Composite
Stock Price Index ('S&P 500'), the Dow Jones Industrial Average, the Nasdaq
Composite Index, the Russell 2000 Index, the Wilshire 5000 Index, the Lehman
Bond Index, 30-year and 10-year U.S. Treasury bonds, the Morgan Stanley Capital
International World Index and changes in the Consumer Price Index as published
by the U.S. Department of Commerce. The Funds also may refer in such

31
<PAGE>
materials to mutual fund performance rankings and other data, such as
comparative asset, expense and fee levels, published by Lipper, CDA,
Wiesenberger, ICD or Morningstar. Performance Advertisements also may refer to
discussions of the Funds and comparative mutual fund data and ratings reported
in independent periodicals, including (but not limited to) THE WALL STREET
JOURNAL, MONEY MAGAZINE, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S,
FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST AND THE
KIPLINGER LETTERS. Comparisons in Performance Advertisements may be in graphic
form.

32
<PAGE>
Each Fund may also compare its performance to general trends in the stock
and bond markets, as illustrated by the following graph prepared by Ibbotson
Associates, Chicago.

[CHART]

The chart is shown for illustrative purposes only and does not represent any

Fund's performance. These returns consist of income, capital appreciation (or
depreciation), and should not be considered an indication or guarantee of future
investments results. Year-to-year fluctuations in certain markets have been
significant and negative returns have been experienced in certain markets from
time to time. Stocks are measured by the S&P 500 Index, an unmanaged weighted
index comprising 500 widely held common stock and varying in composition. Unlike
investors in bonds and Treasury bills, common stock investors do not receive
fixed income payments and are not entitled to repayment of principal. These
differences contribute to investment risk. Returns shown for long-term
government bonds are based on Treasury bonds with 20-year maturities. Inflation
is measured by the Consumer Price Index. The indexes are unmanaged and are not
available for investment.

- ------------------
Source: Stocks, Bonds, Bills and Inflation 1996 Yearbook(Trademark) Ibbotson
Assoc., Chi., (annual updates work by Roger G. Ibbotson & Rex A. Sinquefield).

33
<PAGE>
Over time, stocks have outperformed all other investments by a wide margin,
offering a solid hedge against inflation. From 1926 to 1995, stocks beat all
other traditional asset classes. A $10 investment in the S&P 500 grew to
$10,507, significantly more than any other investment.

TAXES

34
<PAGE>
taxes and of any dividend paid by the Fund that represents income from foreign
or U.S. possessions sources as his or her own income from those sources; and (3)
either deduct the taxes deemed paid by him or her in computing his or her
taxable income or, alternatively, use the foregoing information in calculating
the foreign tax credit against his or her federal income tax. A Fund will report
to its shareholders shortly after each taxable year their respective shares of
the income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.

Each Fund will be subject to a nondeductible 4% excise tax ('Excise Tax')
to the extent it fails to distribute by the end of any calendar year

substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.

Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. Each
Fund will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent a Fund does not qualify for this treatment,
it may be forced to defer the closing out of certain options, futures and
forward currency contracts beyond the time when it otherwise would be
advantageous to do so, in order for the Fund to continue to qualify as a RIC.

35
<PAGE>
on the securities during the taxable year, even if the Fund receives no
corresponding payment on them during the year. Because the Fund annually must
distribute substantially all of its investment company taxable income, including
any accrued original issue discount, to satisfy the Distribution Requirement and
avoid imposition of the Excise Tax, it may be required in a particular year to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives. Those distributions will be made from the Fund's cash
assets or from the proceeds of sales of portfolio securities, if necessary. The
Fund may realize capital gains or losses from those sales, which would increase
or decrease its investment company taxable income and/or net capital gain. In
addition, any such gains may be realized on the disposition of securities held
for less than three months. Because of the Short-Short Limitation, any such
gains would reduce the Fund's ability to sell other securities, or certain
options, futures, forward currency contracts or foreign currency position, held
for less than three months that it might wish to sell in the ordinary course of
its portfolio management.

OTHER INFORMATION

Each Trust is an entity of the type commonly known as a 'Massachusetts
business trust.' Under Massachusetts law, shareholders of a Fund could, under
certain circumstances, be held personally liable for the obligations of the
Trust or Fund. However, each Trust's Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust or the Fund and requires that
notice of such disclaimer be given in each note, bond, contract, instrument,
certificate or undertaking made or issued by the trustees or by any officers or
officer by or on behalf of the Trust or the Fund, the trustees or any of them in
connection with the Trust. The Declaration of Trust provides for indemnification
from the Fund's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the fund itself would be unable to meet its
obligations, a possibility that Mitchell Hutchins believes it remote and not
material. Upon payment of any liability incurred by a shareholder solely by
reason of being or having been a shareholder, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the Fund.
The trustees intend to conduct the Fund's operations in such a way as to avoid,
as far as possible, ultimate liability of the shareholders for liabilities of
the Fund.

Prior to July 1, 1991, the name of Global Income Fund was 'PaineWebber
Master Global Income Fund.' Prior to November 10, 1995, the Fund's Class C
shares were known as 'Class D' shares.

36
<PAGE>
AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for Emerging Markets Equity Fund and Global
Equity Fund. Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New
York 10036, serves as independent accountants for Global Income Fund.

FINANCIAL STATEMENTS

<PAGE>
APPENDIX

DESCRIPTION OF MOODY'S INVESTORS SERVICES, INC. ('MOODY'S') CORPORATE BOND
RATINGS

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

DECRIPTION OF STANDARD & POOR'S ('S&P') CORPORATE DEBT RATINGS

rated issues only in small degree; A. Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories; BBB. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories; BB,
B, CCC, CC, C. Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions;
C1. The rating C1 is reserved for income bonds on which no interest is being
paid; D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Restrictions........... 1
Hedging Strategies............................. 9
Trustees and Officers.......................... 17
Investment Advisory and Distribution
Arrangements................................. 23
Portfolio Transactions......................... 27
Valuation of Shares............................ 29
Performance Information........................ 29
Taxes.......................................... 34
Other Information.............................. 36
Financial Statements........................... 37
Appendix....................................... 38
</TABLE>

PaineWebber
Emerging Markets
Equity Fund

PaineWebber
Global Equity Fund

PaineWebber
Global Income Fund

Class Y Shares

-----------------------------------
Statement of Additional Information
October 31, 1996

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

PAINEWEBBER

<PAGE>

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements (to be filed)

PaineWebber Global Equity Fund

Included in Part A of the Registration Statement:

Financial Highlights for one Class A share of the Fund for
each of the four years in the period ended August 31, 1996
and for the period November 14, 1991 (commencement of
offering) to August 31, 1992

Financial Highlights for one Class B share of the Fund for
the year ended August 31, 1996 and for the period August 25,
1995 (commencement of offering) to August 31, 1995

Financial Highlights for one Class C share of the Fund for
each of the three years in the period ended August 31, 1996
and for the period May 10, 1993 (commencement of offering)
to August 31, 1993

Financial Highlights for one Class Y share of the Fund for
each of the three years in the period ended August 31, 1996
and for the period May 10, 1993 (commencement of offering)
to August 31, 1993

Included in Part B of the Registration Statement through
incorporation by reference from the Annual Report to
Shareholders, previously filed with the Securities and Exchange
Commission through EDGAR on October , 1996, Accession No. :

Portfolio of Investments at August 31, 1996

Statement of Assets and Liabilities at August 31, 1996

Statement of Operations for the year ended August 31, 1996

Statement of Changes in Net Assets for each of the two years
in the period ended August 31, 1996

Notes to Financial Statements

Financial Highlights for one Class B share of the Fund for
the year ended August 31, 1996 and for the period August 25,
1995 (commencement of offering) to August 31, 1995

Financial Highlights for one Class C share of the Fund for
each of the three years in the period ended August 31, 1996

C-1

<PAGE>

and for the period May 10, 1993 (commencement of offering)
through August 31, 1993

Financial Highlights for one Class Y share of the Fund for
each of the three years in the period ended August 31, 1996
and for the period May 10, 1993 (commencement of offering)
through August 31, 1993

Report of Ernst & Young LLP, Independent Auditors, dated
October , 1996

(b) Exhibits:

<TABLE>

<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
1 (a) Declaration of Trust1/
(b) Amendment to Declaration of Trust effective September 3,
19911/
(c) Amendment to Declaration of Trust effective February 16,
19951/
(d) Amendment to Declaration of Trust effective April 26, 19951/
(e) Amendment to Declaration of Trust effective November 20,
19951/
(f) Amendment to Declaration of Trust effective February 28,
19963/
(g) Amendment to Declaration of Trust effective April 18, 19963/
2 By-Laws of the Trust*
3 Voting Trust Agreement - None
4 Instruments defining the rights of the holders of Registrant's
shares of beneficial interest 2/
5 (a) Investment Advisory and Administration Contract1/
(b) Sub-Investment Advisory Agreement1/
6 (a) Distribution Contract for Class A Shares3/
(b) Distribution Contract for Class B Shares3/
(c) Distribution Contract for Class C Shares3/
(d) Distribution Contract for Class Y Shares3/
(e) Exclusive Dealer Agreement with respect to Class A Shares3/
(f) Exclusive Dealer Agreement with respect to Class B Shares3/
(g) Exclusive Dealer Agreement with respect to Class C Shares3/
(h) Exclusive Dealer Agreement with respect to Class Y Shares3/
7 Bonus, profit sharing or pension plans - none
8 Custody Contract*
9 Transfer Agency Services and Shareholder Services Agreement1/
10 Opinions and consents of counsel as to the legality of shares
offered were filed prior to effective date of Registrant's
initial registration statement.
11 Consent of Ernst & Young LLP (to be filed)
12 Financial statements omitted from prospectus - none
13 Form of Purchase Agreement*
14 Model Retirement Plan - none
15 (a) Shareholder Servicing and Distribution Plan*
(b) Amendment to Amended and Restated Shareholder Servicing and
Distribution Plan effective December 16, 19941/
(c) Shareholder Servicing Agreement1/
(c) Distribution Related Services Agreement1/
16 Schedule for computation of performance quotations (to be filed)
</TABLE>

C-2

<PAGE>

<TABLE>

<S> <C>
17 and
27 Financial Data Schedule (to be filed)
18 Plan pursuant to Rule 18f-3 (filed herewith)
</TABLE>

_______________________________

* Previously filed.

1/ Incorporated by reference from Post-Effective Amendment No. 14 to
the registration statement of PaineWebber Investment Trust, SEC
File No. 33-39659, filed on December 29, 1995.

2/ Incorporated by reference from Articles IV, V, VI, VII, and X of
Registrant's Declaration of Trust, as amended, and from Articles
II and XI of Registrant's By-Laws, as amended.

3/ Incorporated by reference from Post-Effective Amendment No. 15 to
the registration statement of PaineWebber Investment Trust, SEC
File No. 33-39659, filed on July 1, 1996.

C-3

<PAGE>

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

None.

Item 26. Number of Holders of Securities

Number of Record
Shareholders as of
Title of Class July 31, 1996
- -------------- ------------------
<S> <C>

Shares of Beneficial Interest,
par value $0.001 per share

PaineWebber Global Equity Fund

Class A Shares 28,637
Class B Shares 14,483
Class C Shares 6,566
Class Y Shares 588

PaineWebber Tactical Allocation Fund

Class A shares 1,262
Class B shares 1,615
Class C shares 3,032
Class Y shares 290

</TABLE>

Item 27. Indemnification

Section 4.2 of Article IV of the Registrant's Declaration of
Trust provides that no Trustee, officer, employee or agent of the
Trust shall be liable to the Trust, its shareholders, or to any
shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to
compel in any way any former or acting Trustee to redress any breach
of trust) except for his or her own bad faith, willful misfeasance,
gross negligence or reckless disregard of the duties involved in the
conduct of his office.

Section 4.3(a) of Article IV of the Registrant's Declaration of
Trust provides that the appropriate series of the Registrant will
indemnify its Trustees and officers to the fullest extent permitted by
law against all liability and against all expenses reasonably incurred
or paid by such Trustees and officers in connection with any claim,
action, suit or proceeding in which such Trustee or officer becomes
involved as a party or otherwise by virtue of his or her being or
having been a Trustee or officer and against amounts paid or incurred
by him or her in the settlement thereof. Additionally, Section 4.3(b)
of Article IV provides that no such person shall be indemnified
(i) where such person is liable to the Trust, a series thereof or the
shareholders by reason of willful misfeasance, bad faith, gross

C-4

<PAGE>

negligence or reckless disregard of the duties involved in the conduct

of his or her office, (ii) where such person has been finally
adjudicated not to have acted in good faith in the reasonable belief
that his or her action was in the best interest of the Trust, or a
series thereof, or (iii) in the event of a settlement or other
disposition not involving a final adjudication as provided in
(ii) above resulting in a payment by a Trustee or officer, unless
there has been a determination by the court of other body approving
the settlement or other disposition or based upon a review of readily
available facts by vote of a majority of the non-interested Trustees
or written opinion of independent legal counsel, that such Trustee or
officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his or her office. Section 4.3(b) of Article IV further provides
that the rights of indemnification may be insured against by policies
maintained by the Trust. Section 4.4 of Article IV provides that no
Trustee shall be obligated to give any bond or other security for the
performance of any of his or her duties hereunder.

Section 4.6 of Article IV provides that each Trustee, officer or
employee of the Trust or a series thereof shall, in the performance of
his or her duties, be fully and completely justified and protected
with regard to any act or any failure to act resulting from reliance
in good faith upon the books of account or other records of the Trust
or a series thereof, upon an opinion of counsel, or upon reports made
to the Trust or a series thereof by any of its officers or employees
or by the Investment Adviser, the Administrator, the Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel
or expert may also be a Trustee.

Section 9 of the Investment Advisory and Administration Contract
with Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins")
provides that Mitchell Hutchins shall not be liable for any error of
judgment or mistake of law or for any loss suffered by any series of
the Registrant in connection with the matters to which the Contract
relates, except for a loss resulting from the willful misfeasance, bad
faith, or gross negligence of Mitchell Hutchins in the performance of
its duties or from its reckless disregard of its obligations and
duties under the Contract. Section 13 of the Contract provides that
the Trustees shall not be liable for any obligations of the Trust or
any series under the Contract and that Mitchell Hutchins shall look
only to the assets and property of the Registrant in settlement of
such right or claim and not to the assets and property of the
Trustees.

Section 9 of the Sub-Investment Advisory Agreement between
Mitchell Hutchins and GE Investment Management Incorporated ("GE
Investment Management") provides that GE Investment Management shall
not be liable for any error of judgment or mistake of law or for any
loss suffered by the Trust in connection with the matters to which the
Agreement relates, except for a loss resulting from the willful
misfeasance, bad faith, or gross negligence of GE Investment
Management in the performance of its duties or from its reckless

disregard of its obligations and duties under the Agreement. Section

C-5

<PAGE>

9 of the Agreement also provides that the Trustees shall not be liable
for any obligations of the Trust under the Agreement and that Mitchell
Hutchins and GE Investment Management shall look only to the assets
and property of the Trust in settlement of such right or claim and not
to the assets and property of the Trustees.

Section 9 of each Distribution Contract provides that the Trust
will indemnify Mitchell Hutchins and its officers, directors and
controlling persons against all liabilities arising from any alleged
untrue statement of material fact in the Registration Statement or
from any alleged omission to state in the Registration Statement a
material fact required to be stated in it or necessary to make the
statements in it, in light of the circumstances under which they were
made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with
information furnished by Mitchell Hutchins to the Trust for use in the
Registration Statement; and provided that this indemnity agreement
shall not protect any such persons against liabilities arising by
reason of their bad faith, gross negligence or willful misfeasance;
and shall not inure to the benefit of any such persons unless a court
of competent jurisdiction or controlling precedent determines that
such result is not against public policy as expressed in the
Securities Act of 1933. Section 9 of each Distribution Contract also
provides that Mitchell Hutchins agrees to indemnify, defend and hold
the Trust, its officers and Trustees free and harmless of any claims
arising out of any alleged untrue statement or any alleged omission of
material fact contained in information furnished by Mitchell Hutchins
for use in the Registration Statement or arising out of an agreement
between Mitchell Hutchins and any retail dealer, or arising out of
supplementary literature or advertising used by Mitchell Hutchins in
connection with the Contract.

Section 10 of each Distribution Contract contains provisions
similar to Section 13 of the Investment Advisory and Administration
Contract.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be provided to Trustees,
officers and controlling persons of the Trust, pursuant to the
foregoing provisions or otherwise, the Trust has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Trust of expenses incurred or paid by a Trustee, officer or
controlling person of the Trust in connection with the successful
defense of any action, suit or proceeding or payment pursuant to any
insurance policy) is asserted against the Trust by such Trustee,

officer or controlling person in connection with the securities being
registered, the Trust will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

C-6

<PAGE>

Item 28. Business and Other Connections of Investment Adviser

(a) Mitchell Hutchins Asset Management Inc.

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

(b) GE Investment Management Incorporated

GE Investment Management ("GEIM") (the investment sub-adviser for
PaineWebber Global Equity Fund) is a registered investment adviser and is
wholly owned by General Electric Company. GEIM is primarily engaged in
the investment advisory business. Information as to the officers and
directors of GE Investment Management is included in its Form ADV, as
filed with the Securities and Exchange Commission (registration number
801-31947) and is incorporated herein by reference.

Item 29. Principal Underwriters

(a) Mitchell Hutchins serves as principal underwriter and/or
investment adviser for the following investment companies:

ALL-AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
GLOBAL SMALL CAP FUND INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
MANAGED HIGH YIELD FUND INC.
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.

PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
PAINEWEBBER SERIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
TRIPLE A AND GOVERNMENT SERIES - 1997, INC.
2002 TARGET TERM TRUST INC.

(b) Mitchell Hutchins is the Registrant's principal underwriter.
PaineWebber acts as exclusive dealer of the Registrant's shares. The
directors and officers of Mitchell Hutchins, their principal business
addresses, and their positions and offices with Mitchell Hutchins are
identified in its Form ADV, as filed with the Securities and Exchange

C-7

<PAGE>

Commission (registration number 801-13219). The directors and officers of
PaineWebber, their principal business addresses, and their positions and
offices with PaineWebber are identified in its Form ADV, as filed with the
Securities and Exchange Commission (registration number 801-7163). The
foregoing information is hereby incorporated herein by reference. The
information set forth below is furnished for those directors and officers
of Mitchell Hutchins or PaineWebber who also serve as trustees or officers
of the Registrant:

<TABLE>
<CAPTION>
Positions and Positions and Offices
Name and Principal Offices With Underwriter or
Business Address With Registrant Exclusive Dealer
------------------ --------------- ---------------------
<S> <C> <C>
Margo N. Alexander Trustee and President, Chief
1285 Avenue of the Americas President Executive Officer and
New York, NY 10019 Director of Mitchell
Hutchins; Executive
Vice President and
Director of PaineWebber

Mary C. Farrell Trustee Managing Director,
1285 Avenue of the Americas Senior Investment
New York, NY 10019T. Strategist and Member
of the Investment
Policy Committee of
PaineWebber

Kirkham Barneby Vice President Managing Director and
1285 Avenue of the Americas Chief Investment
New York, NY 10019 Officer-Quantitative

Investments of Mitchell
Hutchins

Teresa M. Boyle Vice President First Vice President
1285 Avenue of the Americas and Manager--Advisory
New York, NY 10019 Administration of
Mitchell Hutchins

C. William Maher Vice President First Vice President
1285 Avenue of the Americas and Assistant and a Senior Manager of
New York, NY 10019 Treasurer the Mutual Fund Finance
Division of Mitchell
Hutchins

Ann E. Moran Vice President Vice President of
1285 Avenue of the Americas and Assistant Mitchell Hutchins
New York, NY 10019 Treasurer

Dianne E. O'Donnell Vice President Senior Vice President
1285 Avenue of the Americas and Secretary and Deputy General
New York, NY 10019 Counsel of Mitchell
Hutchins
</TABLE>

C-8

<PAGE>

<TABLE>
<S> <C> <C>
Victoria E. Schonfeld Vice President Managing Director and
1285 Avenue of the Americas General Counsel of
New York, NY 10019 Mitchell Hutchins

Paul H. Schubert Vice President First Vice President
1285 Avenue of the Americas and Assistant and a Senior Manager of
New York, NY 10019 Treasurer the Mutual Fund Finance
Division of Mitchell
Hutchins

Julian F. Sluyters Vice President Senior Vice President
1285 Avenue of the Americas and Treasurer and Director of the
New York, NY 10019 Mutual Fund Finance
Division of Mitchell
Hutchins

Mark A. Tincher Vice President Managing Director and
1285 Avenue of the Americas Chief Investment
New York, NY 10019 Officer - U.S. Equity
Investments of
Mitchell Hutchins

Keith A. Weller Vice President First Vice President
1285 Avenue of the Americas & Assistant and Associate Counsel
New York, NY 10019 Secretary of Mitchell Hutchins
</TABLE>

Item 30. Location of Accounts and Records

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

Item 31. Management Services

Not applicable.

Item 32. Undertakings

(a) Registrant undertakes to call a meeting of its shareholders for the
purpose of voting upon the question of removal of a trustee or trustees of
Registrant when requested in writing to do so by the holders of at least 10%
of Registrant's outstanding shares and, in connection with the meeting, to

C-9

<PAGE>

comply with the provisions of Section 16(c) of the 1940 Act relating to
communications with the shareholders of certain common-law trusts.

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

C-10

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused
this Post-Effective Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New York and State of New York, on the 28th day of August,
1996.

PAINEWEBBER INVESTMENT TRUST

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

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

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Margo N. Alexander President and Trustee August 28, 1996
- ----------------------------------- (Chief Executive
Margo N. Alexander * Officer)

/s/ E. Garrett Bewkes, Jr. Trustee and Chairman August 28, 1996
- ----------------------------------- of the Board of
E. Garrett Bewkes, Jr. * Trustees

/s/ Richard Q. Armstrong Trustee August 28, 1996
- -----------------------------------
Richard Q. Armstrong *

/s/ Richard R. Burt Trustee August 28, 1996
- -----------------------------------
Richard R. Burt *

/s/ Mary C. Farrell Trustee August 28, 1996
- -----------------------------------
Mary C. Farrell *

/s/ Meyer Feldberg Trustee August 28, 1996
- -----------------------------------
Meyer Feldberg *

/s/ George W. Gowen Trustee August 28, 1996
- -----------------------------------
George W. Gowen *

/s/ Frederic V. Malek Trustee August 28, 1996
- -----------------------------------
Frederic V. Malek *

/s/ Carl W. Schafer Trustee August 28, 1996
- -----------------------------------
Carl W. Schafer *
</TABLE>

<PAGE>

SIGNATURES (Continued)

<TABLE>
<S> <C> <C>
/s/ John R. Torell III Trustee August 28, 1996
- -----------------------------------
John R. Torell III *

/s/ Julian F. Sluyters Vice President and August 28, 1996
- ----------------------------------- Treasurer (Chief
Julian F. Sluyters Financial and
Accounting Officer)
</TABLE>

* Signature affixed by Elinor W. Gammon pursuant to power of
attorney dated May 21, 1996 and incorporated by reference from
Post-Effective Amendment No. 30 to the registration statement of
PaineWebber Managed Municipal Trust, SEC File No. 2-89016, filed
June 27, 1996.

<PAGE>

PAINEWEBBER INVESTMENT TRUST

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- -----------------------
<S> <C>
1 (a) Declaration of Trust1/
(b) Amendment to Declaration of Trust effective September 3, 19911/
(c) Amendment to Declaration of Trust effective February 16, 19951/
(d) Amendment to Declaration of Trust effective April 26, 19951/
(e) Amendment to Declaration of Trust effective November 20, 19951/
(f) Amendment to Declaration of Trust effective February 28, 19963/
(g) Amendment to Declaration of Trust effective April 18, 19963/
2 By-Laws of the Trust*
3 Voting Trust Agreement - None
4 Instruments defining the rights of the holders of Registrant's shares
of beneficial interest 2/
5 (a) Investment Advisory and Administration Contract1/
(b) Sub-Investment Advisory Agreement1/
6 (a) Distribution Contract for Class A Shares3/
(b) Distribution Contract for Class B Shares3/
(c) Distribution Contract for Class C Shares3/
(d) Distribution Contract for Class Y Shares3/
(e) Exclusive Dealer Agreement with respect to Class A Shares3/
(f) Exclusive Dealer Agreement with respect to Class B Shares3/
(g) Exclusive Dealer Agreement with respect to Class C Shares3/
(h) Exclusive Dealer Agreement with respect to Class Y Shares3/
7 Bonus, profit sharing or pension plans - none
8 Custody Contract*
9 Transfer Agency Services and Shareholder Services Agreement1/
10 Opinions and consents of counsel as to the legality of shares offered
were filed prior to effective date of Registrant's initial registration
statement.
11 Consent of Ernst & Young LLP (to be filed)
12 Financial statements omitted from prospectus - none
13 Form of Purchase Agreement*
14 Model Retirement Plan - none
15 (a) Shareholder Servicing and Distribution Plan*
(b) Amendment to Amended and Restated Shareholder Servicing and
Distribution Plan effective December 16, 19941/
(c) Shareholder Servicing Agreement1/
(c) Distribution Related Services Agreement1/
16 Schedule for computation of performance quotations (to be filed)
17 and
27 Financial Data Schedule (to be filed)
18 Plan pursuant to Rule 18f-3 (filed herewith)

</TABLE>

_______________________________

* Previously filed.

1/ Incorporated by reference from Post-Effective Amendment No. 14 to the
registration statement of PaineWebber Investment Trust, SEC File No.
33-39659, filed on December 29, 1995.

<PAGE>

2/ Incorporated by reference from Articles IV, V, VI, VII, and X of
Registrant's Declaration of Trust, as amended, and from Articles II and
XI of Registrant's By-Laws, as amended.

3/ Incorporated by reference from Post-Effective Amendment No. 15 to the
registration statement of PaineWebber Investment Trust, SEC File No.
33-39659, filed on July 1, 1996.

<PAGE>

EXHIBIT 18

PAINEWEBBER INVESTMENT TRUST
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3

PaineWebber Investment Trust hereby adopts this amended and restated
Multiple Class Plan pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended ("1940 Act") on behalf of its current operating series,
PaineWebber Global Equity Fund and PaineWebber Tactical Allocation Fund, and any
series that may be established in the future (referred to hereinafter
collectively as the "Funds" and individually as a "Fund").

A. GENERAL DESCRIPTION OF CLASSES THAT ARE OFFERED:

1. Class A Shares. Class A shares of each Fund are sold to the
general public subject to an initial sales charge. The initial sales charge for
each Fund is waived for certain eligible purchasers and reduced or waived for
certain large volume purchases.

The maximum sales charge is 4% of the public offering price for Class A
shares of a Fund that invests primarily in debt securities.

The maximum sales charge is 4.5% of the public offering price for Class
A shares of a Fund that invests primarily in equity securities or a combination
of equity and debt securities.

Class A shares of each Fund are subject to an annual service fee of
.25% of the average daily net assets of the Class A shares of each Fund paid
pursuant to a plan of distribution adopted pursuant to Rule 12b-1 under the 1940
Act.

Class A shares of each Fund will be subject to a contingent deferred
sales charge ("CDSC") on redemptions of shares (i) purchased without an initial
sales charge due to a sales charge waiver for purchases of $1 million or more
and (ii) held less than one year. The Class A CDSC is equal to 1% of the lower
of: (i)the net asset value of the shares at the time of purchase or (ii)the
net asset value of the shares at the time of redemption. Class A shares of each
Fund held one year or longer and Class A shares of each Fund acquired through
reinvestment of dividends or capital gains distributions on shares otherwise
subject to a ClassA CDSC are not subject to the CDSC. The CDSC for Class A
shares of each Fund shall not apply to shares purchased prior to November 10,
1995 and will be waived under certain circumstances.

<PAGE>

PaineWebber Investment Trust
Multiple Class Plan
Page 2

2. Class B Shares. Class B shares of each Fund are sold to the
general public subject to a CDSC, but without imposition of an initial sales
charge.

The maximum CDSC for Class B shares of each Fund is equal to 5% of the
lower of: (i) the net asset value of the shares at the time of purchase or (ii)
the net asset value of the shares at the time of redemption.

Class B shares of each Fund held six years or longer and Class B shares
of each Fund acquired through reinvestment of dividends or capital gains
distributions are not subject to the CDSC.

Class B shares of each Fund are subject to an annual service fee of
.25% of average daily net assets and a distribution fee of .75% of average daily
net assets of the Class B shares of each Fund, each paid pursuant to a plan of
distribution adopted pursuant to Rule 12b-1 under the 1940 Act.

Class B shares of each Fund convert to Class A shares approximately six
years after issuance at relative net asset value.

3. Class C Shares. Class C shares of each Fund are sold to the
general public without imposition of a sales charge.

Class C shares of a Fund that invests primarily in equity securities or
a combination of equity and debt securities are subject to an annual service fee
of .25% of average daily net assets and a distribution fee of .75% of average
daily net assets of Class C shares of such Fund, each pursuant to a plan of
distribution adopted pursuant to Rule 12b-1 under the 1940 Act.

Class C shares of a Fund that invests primarily in debt securities are
subject to an annual service fee of .25% of average daily net assets and a
distribution fee of .50% of average daily net assets of Class C shares of such
Fund, each pursuant to a plan of distribution adopted pursuant to Rule 12b-1
under the 1940 Act.

Class C shares of a Fund that invests primarily in debt securities will
be subject to a CDSC on redemptions of Class C shares held less than one year
equal to .75% of the lower of: (i)the net asset value of the shares at the time
of purchase or (ii)the net asset value of the shares at the time of redemption;
provided that such CDSC shall not apply to Class C shares purchased prior to
November 10, 1995.

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Multiple Class Plan
Page 3

Class C shares of a Fund that invests primarily in equity securities or
in a combination of equity and debt securities will be subject to a CDSC on
redemptions of Class C shares held less than one year equal to 1% of the lower
of: (i) the net asset value of the shares at the time of purchase or (ii) the

net asset value of the shares at the time of redemption; provided that such CDSC
shall not apply to Class C shares purchased prior to November 10, 1995.

Class C shares of each Fund held one year or longer and Class C shares
of each Fund acquired through reinvestment of dividends or capital gains
distributions are not subject to the CDSC. The CDSC for Class C shares of each
Fund will be waived under certain circumstances.

4. Class Y Shares. Class Y shares are sold without imposition
of an initial sales charge or CDSC and are not subject to any service or
distribution fees.

Class Y shares of each Fund are available for purchase only by: (i)
employee benefit and retirement plans, other than individual retirement accounts
and self-employed retirement plans, of Paine Webber Group Inc. and its
affiliates; (ii) certain unit investment trusts sponsored by PaineWebber
Incorporated ("PaineWebber"); (iii) participants in certain wrap fee investment
programs that are currently, or will in the future be, sponsored by PaineWebber
or its affiliates and that charge a separate fee for program services, provided
that shares are purchased through or in connection with such programs; (iv) the
holders of Class Y shares of any former Mitchell Hutchins/Kidder Peabody
("MH/KP") mutual fund, provided that such shares are issued in connection with
the reorganization of a MH/KP mutual fund into that Fund; (v) investors
purchasing $10,000,000 or more at one time in any combination of PaineWebber
proprietary funds in the Flexible Pricing System; (vi) an employee benefit plan
qualified under section 401 (including a salary reduction plan qualified under
section 401(k)) or section 403(b) of the Internal Revenue Code (each an
"employee benefit plan"), provided that such employee benefit plan has 5,000 or
more eligible employees; (vii) an employee benefit plan with assets of
$50,000,000 or more; and (viii) any investment company advised by PaineWebber or
its affiliates.

B. EXPENSE ALLOCATIONS OF EACH CLASS:

Certain expenses may be attributable to a particular Class of shares of
each Fund ("Class Expenses"). Class Expenses are charged directly to the net
assets of the particular Class and, thus, are borne on a pro rata basis by the
outstanding shares of that Class.

In addition to the distribution and service fees described above, each
Class may also pay a different amount of the following other expenses:

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PaineWebber Investment Trust
Multiple Class Plan
Page 4

(1) printing and postage expenses related to preparing
and distributing materials such as shareholder
reports, prospectuses, and proxies to current

shareholders of a specific Class;

(2) Blue Sky registration fees incurred by a specific
Class of shares;

(3) SEC registration fees incurred by a specific Class
of shares;

(4) expenses of administrative personnel and services
required to support the shareholders of a specific
Class of shares;

(5) Trustees' fees incurred as a result of issues
relating to a specific Class of shares;

(6) litigation expenses or other legal expenses relating
to a specific Class of shares; and

(7) transfer agent fees identified as being attributable
to a specific Class.

C. EXCHANGE PRIVILEGES:

Class A, Class B and Class C shares of each Fund may be exchanged for
shares of the corresponding Class of other PaineWebber mutual funds and MH/KP
mutual funds, or may be acquired through an exchange of shares of the
corresponding Class of those funds. Class Y shares of the Funds are not
exchangeable.

These exchange privileges may be modified or terminated by a Fund, and
exchanges may only be made into funds that are legally registered for sale in
the investor's state of residence.

D. CLASS DESIGNATION:

Subject to approval by the Board of Trustees of PaineWebber Investment
Trust, a Fund may alter the nomenclature for the designations of one or more of
its classes of shares.

E. ADDITIONAL INFORMATION:

This Multiple Class Plan is qualified by and subject to the terms of
the then current prospectus for the applicable Classes; provided, however, that
none of the terms set forth in any such prospectus shall be inconsistent with
the terms of the Classes contained in this Plan. The

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PaineWebber Investment Trust
Multiple Class Plan
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prospectus for each Fund contains additional information about the Classes

and each Fund's multiple class structure.

F. DATE OF EFFECTIVENESS:

This Multiple Class Plan is effective as of the date hereof, provided
that this Plan shall not become effective with respect to any Fund unless such
action has first been approved by the vote of a majority of the Board and by
vote of a majority of those trustees of the Fund who are not interested persons
of PaineWebber Investment Trust.

July 24, 1996