============= Page 1 of 4 ============= ~Yf~ S R ileetre ,, I bber'Strate Fnnd`i vest stocks Fund ~ + :' gy n s in on the Highlighted Stocks list compiled by PaineWebber's Investment Strategy Group. The Group attempts to identify emerging economic, social and political trends-and the compa- fites expected to :benefit'from them-before they are widely recognized. ieker•l_d.Kerschner, one of Wall Street's most well-respected h(~ ~ro,garded stuck-pickers, maintains the Highlighted Stocks f~;iphsfIikcIytoibenefit~fromthe identified investment themes. a only way investors can purchase, PaineWebber Highlighted Stocks list, Professional Management Edward M. Kerschner, - Ll Investment Consultant • Chief Investment Strategist of PaineWebber Incorporated and Chairman of the Investment Policy Committee, providing investment strategy advice to PaineWebber clients. T Kirkham Barneby, Portfolio Manager • Mitchell Hurchins' Chief Investment Officer, Quantitative Investments. • Portfolio Manager of PaineWebber Tactical Allocation Fund. r • More than 20 years' experience in the securities industry; Mr, Kerschner joined PaineWebber in 1982. • Among the most well-respected investment strategists on Wall Street: a - Consistently recognized by Institutional Investor with positions on its All-America Research Team for both portfolio strategy and quantitative analysis- Frequently featured as a capital markets R expert in the The Wall Street Journal The 0 Nets York Times, Barron's, Money. Smart Money and other publications. Developed the PaineWebber Highlighted G i Stocks list in the mid-19805. LBF004-00001 • Manages more than. 53.7 billion in assets. • Responsible for asset allocation decisions for numerous PaineWebber mutual fund and investment portfolios and management of several indexed portfolios. • Performs the day-to-day management of PaineWebber Strategy Fund, carrying out the trading, cash flow and rebalancing activities necessary to keep the Fund's portfolio in line with the composition of the PaineWebber Ifighlighted Stocks list. w 4 147. C ~e• ~~rT zk t C V ~' M~A ~h Q1 ~. r a ~` GOVERNMENT EXHIBIT 266 Crim. No. H-04-25 (S-2) ============= Page 2 of 4 ============= PaineWebber Equity e • ganizacions on Wall Street. The Department as a whole and numerous Among rh well /respected research or individual equity research analysis have consistently been cited in InstitzttionalInvestor' annual All-America Research Tcarxt surveys; + The Wall StreetJournal named 15 PaineWebber analyses in its most recent All-Scar .Analysts Survey (June 1999). More than 50 analysts covering over 800 stocks from more than 50 industries. PaineWebber Highlighted Stocks List • Combines expertise of Edward Kerschner and PaineWebber's Equity Research Department. • Drawn from a group of stocks rated "Buy" or "Attractive" by PaineWcbber's Equity Research analysts. • Mr. Kerschner composes the Highlighted Stocks list by selecting approximately 25 companies 6clieved most likely to benefit from identified investment themes. PaineWebber Highlighted Stocks Historical Price Returns (1/1/B8-8/31/99)2 Z 1988 1989 1990' 1991 1992 1993 994 1 1995 1996'j '•1998. . 1997 1999? , Avera e'' , . , , , , g z Highlighted Stocks +23.6% +32.0% +5.4°fo +41.6% +5.9% +28.3% +5.5% +35.8% t27.2% +42.4% +61.09'° +11.4% +26.4% "Open" HLStocks4 +23.8% +31:3% +5.1% +41.6% +6.1% +26.4% +5.2% +35.1% +25.6% +37.8% +54,3% +8.2% +24.8% S&P 500 +12.4% +27.3°, -6.6% +26.3% +4.5% +7.1% -1.5% +34.1% +20.3% +31.0% +25.7% +7.4% +15.5% R- m PaineWebber Highlighted Stocks list (as of October 1, 1999)1 o America Online Delta Airlines MCI WorldCom Sun IMicrosystar American Express Disney Medtronic Time Warner Bank of New York Gap Microsoft Wal-Mart R Bed Bath & Beyond Gateway Motorola Warner-Lambert Carnival Corp. Home Depot Nextal Xerox -~ Chase Manhattan Illinois Tool Works Pfizer Clear Channel Communications IBM Schering-Plough Costco Lucent Technologies Smurfit-Stone Container v n RFnna-nnnm ============= Page 3 of 4 ============= Investment Process Economic Social Trends Trends Political Trends ' `n O iscussi oe'aiid"debate, developing of investment themes PoineWebber Equity Research's Recommended Stocks Stocks studied:?' analyzed in light of themes and strong company fundamentals Portfolio Manager T. IKirkham Barneby purchases for the Fund only stocks en the Highlighted Stocks list and sells stocks that are removed from the List. Mr. Barneby executes the buys and sells after public announcement of changes to the Llst. Generally, the Fund's assets will be equally weighted among the stocks an the Highlighted Stocks list, Ongoing review of themes and those stocks identified as beneficiaries leads to adding names to or removing names from the Highlighted Stocks list This process assesses whether y the Highlighted Stocks remain If kely to benefit from identified themes, -77; -„s, - t - 'dward M. Kerschner investment Consultant • Identifies investment themes T. Kirkham Barneby Portfolio Manager • Employs quantitative discipline Current Investment Themes' • The New Millennium American (September 1998) • Leverages PaineWebber • Uses active trade management Muted Equity Research • Makes additions/deletions after Cycle Cyclicals (April 1999) • Publishes the Highlighted public announcement of changes Stour list to the List • Information Revolution Wars • Determines additions/ • Rcbalances portfolio to maintain (May 1999) deletions to the list equal weighting t institutional investor bases this ranking an the opinions of directors of research, chief investment officers, portfolio managers and analysts of major money management insdtuahons, 2 As of August3l,1999. The price returns are based only on capital appreciation or depreciation of the stocks included in the Highlighted Stocks list, excluding dividends end transaction tees, such es commissions, fees and Interest charges, or the costs of running a mutual fund, such as management fees, distribution fees and other expenses. Actual transactions and the effect of dividends, fees and costs will result in returns diet differ from those of the Hlghliphred Stocks list. The results for the Highlighted Srockslist portfolio represent an equal-weighted arithmetic average of the stocks held at any point during the month, and are calculated monthly based on each -stock's capital appreciation or depreciation during the period that it is on the List, That number is then divided by the highest number of Stocks an the List at any point during the month, to UI w O a, UU ay m 0 The close-price returns are calculated using the prices of the stocks at the close of the stock market the day before changes to the Highlighted Stocks list are announced or, if changes are announced after the market close, that day's closing price, The open-price returns are calculated using the prices of the stocks at the open on the day such changes di are announced. Because the Highlighted Stocks list is a paper partfalio, its price returns do nor. 'O • Reflect the execution of actual purchases or sales. There is no guarantee that a mutual fund following the Highlighted Stocks list would be able to exo'.ute purchases end sales at the prices used to calculate the price returns of the List CD • Reflect the market impact on the prices of stocks on the List that may he incurred batweon the time announcements of additions and deletions to the Highlighted Stocks list are y made and the time a mutual fund following the Highlighted Stocks list would be able to execute purchases and sales. • Reflect any "re-balancing' of actual investments when stacks are added to or deleted from the Highlighted Stocks iist, the S&P 500 Index is an unmanaged weighted Index and not available for direct investment. 3 Compound annual rate. 4 'Open' price returns are calculated Using the prices atthe open of the stock market after changes to the List are, announced. t? 5 As of October 1, 1999. Investment themes and the stocks on the Highlighted Stocks list are subjectto change. The Fund's portfolio changes as names on the List change. LBFOOA-00003 ============= Page 4 of 4 ============= Quick Reference Guide: PaineWebber Strategy Fund Portfolio Manager T Kirkham Barnaby, Mitchell Hutchins Asset Management Inc. Investment Consultant Edward M. Kerschner, PaineWebber's Chief Investment Strategist Goal The Fund seeks long-term capital appreciation by investing in stocks on the PaineWebber Highlighted Stocks list. Minimum Investment • $1,000; $100 for additional investments. • Minimum investment may be.waived or reduced for IRAs. Dividends Annually, if any Class A Class B Class C Class Y Billing Symbols MFPWKA MFPWKB MFPWKC MFPWKY V7 Offering Price $10.00+Sales Charge $10.00 $10.00 $10.00 Q y PricinwVp Front 4.5%* None None None c CQSC None 5%,4%,3%,2%,2% 1.0% (For 1 Year) None ~ d and, 1%Jorsix years Trailers 25 bps annually, paid 25 bps annually ,,, paid 100 bps annually, paid None ($10 million or monthly, starting , monthly; starting monthly, beginning in qualified plans & PACE C immediately immediately month 13 Multi-Advisor only) A 'For the Inltiel subscription period ending on or ab out November 29, 19y5, Mitchel l Hutchins will reallow the full a mount of the sales chorea to so ' acted dealers. Available in y PaineWebber InsightOneA'. 0 Investor Concerns W The Fund may be appropriate for investors seeking long-term capital appreciation who wish to diversify a portion of their assets into equity securities and who are willing to withstand short-term fluctuations in the equity markers $ in return for potentially higher returns over the long term. Investors should be aware that the value of the Fund's UJi portfolio changes daily and can be affected by changes in interest rates, general economic conditions, general mar- ket ket conditions and other political, social and economic developments as well as specific matters relating to the corn- panics panics in whose securities the Fund invests. The Fund's value may be more volatile than a diversified stock mutual ° fund because its portfolio is composed of the stocks on the PaineWebber Highlighted Stocks list and is not as broadly = diversified as an equity mucual fund that invests across a wider spectrum of securities, industries or market sectors. An investment in the Fund is only one component of a balanced investment plan, and should not be considered to be a sufficiently diversified investment program by itself. The Fund is newly organized and has no operating history. No assurance can be given chat the Fund will achieve its investment objective. JE Sales/Marketing Support Marketing Materials U • On InfoNet, go to Products & Services, select Mitchell • PaineWebber Strategy Fund brochure with Hutchins Asset Management and see What's New and bound prospectus (#S714) m Product Information. • Client-approved fact sheer (#S713); • Call the MH Regional Sales Liaison Desk at 800/936-7295. Cover letter on InfoNet Inna_nnnna a Mutual funds are sold by prospectus, which includes additional information on risks, charges and expenses. Clients should read it carefully before investing " STR999 R 19na1