PAINEWEBBER AMERICA FUND /NY/, 485APOS, 1995-09-08

PAINEWEBBER AMERICA FUND /NY/
485APOS, 1995-09-08

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<PAGE>

As filed with the Securities and Exchange Commission on September 8, 1995
1933 Act Registration No. 2-78626
1940 Act Registration No. 811-3502

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. 35 [ X ]
---- -----

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

Amendment No. 33
---

(Check appropriate box or boxes.)

PAINEWEBBER AMERICA FUND
(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

GREGORY K. TODD, 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.
Kirkpatrick & Lockhart LLP
South Lobby - 9th Floor
1800 M Street, N.W.
Washington, D.C. 20036-5891
Telephone (202) 778-9000

It is proposed that this filing will become effective:

______ Immediately upon filing pursuant to Rule 485(b)
______ On ___________________ pursuant to Rule 485(b)
_X____ 60 days after filing pursuant to Rule 485(a)(i)
______ On ___________________ pursuant to Rule 485(a)(i)
______ 75 days after filing pursuant to Rule 485(a)(ii)
______ On ___________________ pursuant to Rule 485(a)(ii)
<PAGE>

PaineWebber America Fund

Contents of Registration Statement

This registration statement consists of the following papers and documents:

. Cover Sheet

. Contents of Registration Statement

. Cross Reference Sheets

. PaineWebber Growth and Income Fund - Class A, B and C Shares
------------------------------------------------------------

Part A - Prospectus

Part B - Statement of Additional Information

. PaineWebber Growth and Income Fund - Class Y Shares
---------------------------------------------------

Part A - Prospectus

Part B - Statement of Additional Information

. Part C - Other Information

. Signature Page

. Exhibits
<PAGE>

PAINEWEBBER GROWTH AND INCOME FUND

Class A, B and C Shares

Form N-lA Cross Reference Sheet
<TABLE>
<CAPTION>
Part A Item No.
and Caption Prospectus Caption
------------------------------------------------ -----------------------------------------------
<C> <S> <C>
1. Cover Page...................................... Cover Page
2. Synopsis........................................ Prospectus Summary
3. Condensed Financial Information................. Financial Highlights; Performance Information
4. General Description of Registrant............... Prospectus Summary; Investment Objective and
Policies; General Information
5. Management of the Fund.......................... Management; General Information
6. Capital Stock and Other Securities.............. Cover Page; Conversion of Class B Shares;
Dividends and Taxes; General Information
7. Purchase of Securities Being Offered............ Purchases; Exchanges; Valuation of Shares;
other Services and Information; Management
8. Redemption or Repurchase........................ Redemptions; Other Services and Information
9. Pending Legal Proceedings....................... Not Applicable

Part B Item No. Statement of Additional
and Caption Information Caption
------------------------------------------------ -----------------------------------------------
10. Cover Page...................................... Cover Page
11. Table of Contents............................... Table of Contents
12. General Information and History................. Other Information
13. Investment Objectives and Policies.............. Investment Policies and Restrictions; Hedging
Strategies; Portfolio Transactions
14. Management of the Fund.......................... Trustees and Officers
15. Control Persons and Principal Holders of Trustees and Officers
Securities......................................
16. Investment Advisory and Other Services.......... Investment Advisory and Distribution
Arrangements; Other Information
17. Brokerage Allocation............................ Portfolio Transactions
18. Capital Stock and Other Securities.............. Conversion of Class B Shares; Other Information
19. Purchase, Redemption and Pricing of Securities Reduced Sales Charges, Additional Exchange and
Being Offered................................... Redemption Information and Other Services;
Valuation of Shares
</TABLE>
<PAGE>

<TABLE>
<C> <S> <C>
20. Tax Status...................................... Taxes
21. Underwriters.................................... Investment Advisory and Distribution
Arrangements
22. Calculation of Performance Data................. Performance Information
23. Financial Statements............................ Financial Statements
</TABLE>
<PAGE>

PAINEWEBBER GROWTH AND INCOME FUND

Class Y Shares

7. Purchase of Securities Being Offered............ Purchases; Valuation of Shares; Management

8. Redemption or Repurchase........................ Redemptions
9. Pending Legal Proceedings....................... Not Applicable

<TABLE>
<C> <S> <C>
19. Purchase, Redemption and Pricing of Securities Reduced Sales Charges, Additional Exchange and
Being Offered................................... Redemption Information and Other Services;
Valuation of Shares
20. Tax Status...................................... Taxes
21. Underwriters.................................... Investment Advisory and Distribution
Arrangements
22. Calculation of Performance Data................. Performance Information
23. Financial Statements............................ Financial Statements
</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 Growth and Income Fund
1285 Avenue of the Americas, New York, New York 10019

Prospectus -- November , 1995
--------------------------------------------------------------------------------

The Fund is a series of PaineWebber America Fund ("Trust"). This Prospectus
concisely sets forth information about the Fund a prospective investor should
know before investing. Please retain this Prospectus for future reference. A
Statement of Additional Information dated November , 1995 (which is
incorporated by reference herein) has been filed with the Securities and
Exchange Commission. The Statement of Additional Information can be obtained
without charge, and further inquiries can be made, by contacting the Fund, your
PaineWebber investment executive or PaineWebber's correspondent firms or by
calling toll-free 1-800-647-1568.

. Professional Management

. Portfolio Diversification

. Dividend and Capital Gain Reinvestment

. Flexible Pricingsm

. Low Minimum Investment

. Automatic Investment Plan

. Systematic Withdrawal Plan

. Exchange Privileges

. Suitable For Retirement Plans

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

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.

PROSPECTIVE WISCONSIN INVESTORS SHOULD NOTE THAT THE FUND MAY INVEST UP TO 10%
OF ITS NET ASSETS IN RESTRICTED SECURITIES (OTHER THAN RULE 144A SECURITIES
DETERMINED TO BE LIQUID BY THE TRUST'S BOARD OF TRUSTEES). INVESTMENT IN
RESTRICTED SECURITIES (OTHER THAN SUCH RULE 144A SECURITIES) IN EXCESS OF 5% OF
THE FUND'S TOTAL ASSETS MAY BE CONSIDERED A SPECULATIVE ACTIVITY AND MAY RESULT
IN GREATER RISK AND INCREASED FUND EXPENSES.

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

<PAGE>

----------------------------
------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

Table of Contents
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................................................... 3
Financial Highlights....................................................... 7
Flexible Pricing System.................................................... 9
Investment Objective and Policies.......................................... 10
Purchases.................................................................. 13
Exchanges.................................................................. 17
Redemptions................................................................ 18
Conversion of Class B Shares............................................... 19
Other Services and Information............................................. 19
Dividends and Taxes........................................................ 20
Valuation of Shares........................................................ 21
Management................................................................. 22
Performance Information.................................................... 23
General Information........................................................ 24
Appendix................................................................... 25
</TABLE>

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Prospectus Page 2

<PAGE>

----------------------------
------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

Prospectus Summary
--------------------------------------------------------------------------------

See the body of the Prospectus for more information on the topics discussed in
this summary.

The Fund: PaineWebber Growth and Income Fund ("Fund") is a di-
versified series of an open-end management investment
company.

Investment Objective To provide current income and capital growth; invests
and Policies: primarily in dividend-paying equity securities be-
lieved by Mitchell Hutchins to have the potential for
rapid earnings growth; stocks are selected through a
disciplined methodology that utilizes quantitative
measures of value, earnings and price momentum, as
well as fundamental analysis.

Total Net Assets: $ million at , 1995.

Investment Adviser
and Administrator: Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), an asset management subsidiary of
PaineWebber Incorporated ("PaineWebber"), manages ap-
proximately $ billion in assets. See "Management."

Purchases: Shares of beneficial interest are available exclu-
sively through PaineWebber and its correspondent firms
for investors who are clients of PaineWebber or those
firms ("PaineWebber clients") and, for other invest-
ors, through PFPC Inc., the Fund's transfer agent
("Transfer Agent").

Flexible Pricing Investors may select Class A, Class B or Class C
System: shares, each with a public offering price that re-
flects different sales charges and expense levels. See
"Flexible Pricing System," "Purchases," "Redemptions"
and "Conversion of Class B Shares."

Class A Shares Offered at net asset value plus any applicable sales
charge (maximum is 4.5% of public offering price).

Class B Shares Offered at net asset value (a maximum contingent de-
ferred sales charge of 5% of redemption proceeds is
imposed on certain redemptions made within six years
of date of purchase). Class B shares automatically
convert into Class A shares (which pay lower ongoing
expenses) approximately six years after purchase.

Class C Shares Offered at net asset value without an initial sales
charge (a contingent deferred sales charge of 1.00% of
redemption proceeds is imposed on certain redemptions
made within one year of date of purchase). Class C
shares pay higher ongoing expenses than Class A shares
and do not convert into another Class.

Exchanges: Shares may be exchanged for shares of the correspond-
ing Class of most PaineWebber mutual funds.

Redemptions: PaineWebber clients may redeem through PaineWebber;
other shareholders must redeem through the Transfer
Agent.

Dividends: Declared and paid semi-annually; net capital gain is
distributed annually. See "Dividends and Taxes."

Reinvestment: All dividends and capital gain distributions are paid
in Fund shares of the same Class at net asset value
unless the shareholder has requested cash.

Minimum Purchase: $1,000 for the first purchase; $100 for subsequent
purchases.

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

----------------------------
------------------------------
PAINEWEBBER GROWTH AND INCOME FUND
Prospectus Summary
(Continued)
--------------------------------------------------------------------------------

Other Features:
Class A Shares Automatic investment plan Quantity discounts on initial
Systematic withdrawal plan sales charge
Rights of accumulation 365-day reinstatement privilege

Class B Shares Automatic investment plan Systematic withdrawal plan

Class C Shares Automatic investment plan Systematic withdrawal plan

---------------
WHO SHOULD INVEST. The Fund is designed for investors seeking current income
and capital growth. The Fund invests primarily in dividend-paying equity
securities believed by Mitchell Hutchins to have the potential for rapid
earnings growth; stocks are selected through a disciplined methodology that
utilizes quantitative measures of value, earnings and price momentum, as well
as fundamental analysis. While the Fund is not intended to provide a complete
or balanced investment program, it can serve as one component of an investor's
long-term program to accumulate assets for retirement, college tuition or other
major goals.

RISK FACTORS. There can be no assurance that the Fund will achieve its
investment objective, and the Fund's net asset value will fluctuate based upon
changes in the value of its portfolio securities. Certain investment grade debt
securities in which the Fund may invest have speculative characteristics. The
Fund's ability to invest in U.S. dollar-denominated foreign securities and in
convertible securities that are rated below investment grade and its use of
options and futures contracts involve special risks.

-------------
Prospectus Page 4
<PAGE>

EXPENSES OF INVESTING IN THE FUND. The following tables are intended to assist
investors in understanding the expenses associated with investing in the Fund.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum sales charge on purchases of shares (as a
percentage of public offering price)............ 4.5% None None
Sales charge on reinvested dividends............. None None None
Exchange fee..................................... $5.00 $5.00 $5.00
Maximum contingent deferred sales charge (as a
percentage of redemption proceeds).............. None(2) 5% 1%(3)
Annual Fund Operating Expenses(4)
(as a percentage of average net assets)
Management fees.................................. 0.70% 0.70% 0.70%
12b-1 fees(5).................................... 1.00 1.00
Other expenses...................................
----- ----- -----
Total operating expenses......................... % % %
===== ===== =====
</TABLE>

Example of Effect of Fund Expenses

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

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class A Shares(6).................... $ $ $ $
Class B Shares: $ $ $ $
Assuming a complete redemption at
end of period(7)(8)............... $ $ $ $
Assuming no redemption(8).......... $ $ $ $
Class C Shares....................... $ $ $ $
Assuming a complete redemption at
end of period(7).................. $ $ $ $
Assuming no redemption............. $ $ $ $
</TABLE>

This Example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund Operating
Expenses remain the same in the years shown. The above tables and the
assumption in the Example of a 5% annual return are required by regulations of
the Securities and Exchange Commission ("SEC") applicable to all mutual funds;
the assumed 5% annual return is not a prediction of, and does not represent,
the projected or actual performance of any Class of the Fund's shares.

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The actual expenses attributable to each Class of the Fund's shares will depend
upon, among other things, the level of average net assets and the extent to
which the Fund incurs variable expenses, such as transfer agency costs.
-------
(1) Sales charge waivers are available for Class A and Class B shares, reduced
sales charge purchase plans are available for Class A shares and exchange
fee waivers are available for all three Classes. The maximum 5% contingent
deferred sales charge on Class B shares applies to redemptions during the
first year after purchase; the charge generally declines by 1% annually
thereafter, reaching zero after six years. See "Purchases."

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

(2) Purchases of Class A shares of $1 million or more are not subject to a
sales charge. If shares are redeemed within one year of purchase, a
contingent deferred sales charge of 1% will be applied to the redemption.
See "Purchases."

(3) A contingent deferred sales charge of 1% will be applied to certain
redemptions of Class C shares within one year of purchase. See "Purchases."

(4) See "Management" for additional information. All expenses are those
actually incurred for the fiscal year ended August 31, 1995.

(5) 12b-1 fees have two components, as follows:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
12b-1 service fees................................. 0. % 0.25% 0.25%
12b-1 distribution fees............................ 0.00 0.75 0.75
</TABLE>

12b-1 distribution fees are asset-based sales charges. Long-term Class B
and Class C shareholders may pay more in direct and indirect sales charges
(including distribution fees) than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc. The 12b-1 service fees for Class A shares reflect a blended
annual rate of the Fund's average daily net assets of 0.25% and 0.15%
representing shares sold on or after December 2, 1988 and shares sold prior
to that date, respectively.

(6) Assumes deduction at the time of purchase of the maximum 4.5% initial sales
charge.

(7) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.

(8) Ten-year figures assume conversion of Class B shares to Class A shares at
end of sixth year.

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

----------------------------
------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

Financial Highlights
--------------------------------------------------------------------------------

The tables below provide selected per share data and ratios for one Class A
share, one Class B share and one Class C share of the Fund for each of the
periods shown. This information is supplemented by the financial statements and
accompanying notes appearing in the Fund's Annual Report to Shareholders for
the fiscal year ended August 31, 1994, which are incorporated by reference into
the Statement of Additional Information. The financial statements and notes, as
well as the information in the tables appearing below insofar as it relates to
the five years in the period ended August 31, 1994, have been audited by Ernst
& Young LLP, independent auditors, whose report thereon is included in the
Annual Report to Shareholders. Further information about the performance of the
Fund is also included in the Annual Report to Shareholders, which may be
obtained without charge. The information appearing below for periods prior to
the year ended August 31, 1990 also has been audited by Ernst & Young LLP,
whose reports thereon were unqualified.

<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- -------- -------- -------- -------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ $ 20.86 $ 20.48 $ 19.26 $ 15.87 $ 16.50 $ 13.32 $ 18.06 $ 17.41 $ 14.18
---- -------- -------- -------- -------- ------- ------- ------- -------- -------
Income (loss) from
investment operations:
Net investment income.. 0.28 0.28 0.24 0.19 0.51 0.49 0.60 0.68 0.85
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (0.41) 0.37 1.25 3.50 (0.61) 3.17 (2.36) 1.79 3.36
---- -------- -------- -------- -------- ------- ------- ------- -------- -------
Total income (loss) from
investment operations.. (0.13) 0.65 1.49 3.69 (0.10) 3.66 (1.76) 2.47 4.21
---- -------- -------- -------- -------- ------- ------- ------- -------- -------
Less dividends and
distributions:
Dividends from net
investment income..... (0.27) (0.27) (0.27) (0.30) (0.53) (0.48) (0.88) (0.76) (0.61)
Distributions from net
realized gains
(losses) on
investments........... (0.03) -- -- -- -- -- (2.10) (1.06) (0.37)
---- -------- -------- -------- -------- ------- ------- ------- -------- -------
Total dividends and
distributions......... (0.30) (0.27) (0.27) (0.30) (0.53) (0.48) (2.98) (1.82) (0.98)
---- -------- -------- -------- -------- ------- ------- ------- -------- -------
Net asset value, end of
period................. $ $ 20.43 $ 20.86 $ 20.48 $ 19.26 $ 15.87 $ 16.50 $ 13.32 $ 18.06 $ 17.41
==== ======== ======== ======== ======== ======= ======= ======= ======== =======
Total return(1)......... % (0.58)% 3.15% 7.78% 23.62% (0.72)% 28.03% (10.73)% 16.25% 31.05%
==== ======== ======== ======== ======== ======= ======= ======= ======== =======
Ratios/Supplemental
data:
Net assets, end of
period (000's)........ $ $222,432 $359,073 $358,643 $232,555 $58,649 $61,617 $62,917 $107,778 $98,226
Ratio of expenses to
average net assets**.. %* 1.20% 1.13% 1.22% 1.42% 1.41% 1.41% 1.26% 1.15% 1.15%
Ratio of net investment
income to average net
assets**.............. %* 1.29% 1.33% 1.26% 1.79% 3.11% 3.26% 4.24% 4.14% 5.32%
Portfolio turnover..... % 94.32% 36.52% 15.57% 52.00% 32.10% 79.08% 88.95% 131.70% 83.48%
</TABLE>
-------

* Annualized.

** During certain periods presented, PaineWebber/Mitchell Hutchins waived fees
or reimbursed the Fund for portions of its operating expenses. If such waiv-
ers or reimbursements had not been made for the Class A Shares, the
annualized ratio of expenses to average net assets and the annualized ratio
of net investment income to average net assets would have been 1.65% and
3.02%, respectively, for the year ended August 31, 1989 and 1.36% and 4.14%,
respectively, for the year ended August 31, 1988. For the years ended August
31, 1995, 1994, 1993, 1992, 1991, 1990 and 1987, there were no waivers or
reimbursements and, for the year ended August 31, 1986, amounts reimbursed
had no significant impact on the ratios presented above.
(1) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends and capital gain dis-
tributions at net asset value on the payable date, and a sale at net asset
value on the last day of each period reported. The figures do not include
sales charges; results for Class A shares would be lower if sales charges
were included. Total return information for periods less than one year are
not annualized.

-------------
Prospectus Page 7
<PAGE>

----------------------------
------------------------------
PAINEWEBBER GROWTH AND INCOME FUND
Financial Highlights
(Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C(2)
------------------------------------------------ ------------------------------------------
FOR THE FOR THE FOR THE
PERIOD SIX MONTHS FOR THE YEARS PERIOD
FOR THE YEARS ENDED JULY 1, ENDED ENDED JULY 2,
AUGUST 31, 1991+ TO FEBRUARY 28, AUGUST 31, 1992+ TO
------------------------------------ AUGUST 31, 1995 ----------------- AUGUST 31,
1995 1994 1993 1992 1991 (UNAUDITED) 1994 1993 1992
---- -------- -------- -------- ---------- ------------ ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ $ 20.78 $ 20.41 $ 19.23 $ 18.04 $ 20.42 $ 20.83 $ 20.47 $ 20.95
---- -------- -------- -------- ------- ------- ------- ------- -------
Income (loss) from
investment operations:
Net investment income.. 0.10 0.12 0.13 0.02 0.02 0.11 0.11 0.02
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (0.37) 0.36 1.20 1.17 (0.05) (0.38) 0.37 (0.44)
---- -------- -------- -------- ------- ------- ------- ------- -------
Total income (loss)
from investment
operations............ (0.27) 0.48 1.33 1.19 (0.03) (0.27) 0.48 (0.42)
---- -------- -------- -------- ------- ------- ------- ------- -------
Less dividends and
distributions:
Dividends from net
investment income..... (0.11) (0.11) (0.15) -- (0.03) (0.11) (0.12) (0.06)
Distributions from net
realized gains on
investments........... (0.03) -- -- -- (1.21) (0.03) -- --
---- -------- -------- -------- ------- ------- ------- ------- -------
Total dividends and
distributions......... (0.14) (0.11) (0.15) -- (1.24) (0.14) (0.12) (0.06)
---- -------- -------- -------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ $ 20.37 $ 20.78 $ 20.41 $ 19.23 $ 19.15 $ 20.42 $ 20.83 $ 20.47
==== ======== ======== ======== ======= ======= ======= ======= =======
Total return(1)......... % (1.31)% 2.34% 6.99% 6.60% 0.26% (1.29)% 2.35% 2.85%
==== ======== ======== ======== ======= ======= ======= ======= =======
Ratios/Supplemental
data:
Net assets, end of
period (000's)........ $ $289,290 $461,389 $386,275 $57,539 $29.928 $37,287 $61,869 $13,019
Ratio of expenses to
average net assets.... %* 1.97% 1.90% 1.97% 2.10%* 2.00%* 1.94% 1.87% 1.73%*
Ratio of net investment
income to average net
assets................ %* 0.51% 0.57% 4.90% 1.18%* 0.18%* 0.54% 0.61% 0.94%*
Portfolio turnover..... % 94.32% 36.52% 15.57% 52.00% 65.25% 94.32% 36.52% 15.57%
</TABLE>
-------
* Annualized.
+ Commencement of offering of shares.
(1) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends and capital gain dis-
tributions at net asset value on the payable date, and a sale at net asset
value on the last day of each period reported. The figures do not include
sales charges; results for Class B shares would be lower if sales charges
were included. Total return information for periods less than one year are
not annualized.

(2) Formerly Class D shares.

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

----------------------------
------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

Flexible Pricing System
--------------------------------------------------------------------------------

DIFFERENCES AMONG THE CLASSES

The primary distinctions among the Classes of the Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of distribution fees.
These differences are summarized in the table below. Each Class has distinct
advantages and disadvantages for different investors, and investors may choose
the Class that best suits their circumstances and objectives.

<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
------------------------ ------------------------ ----------------------
<C> <S> <C> <C>
Class A Maximum initial sales Service fee of up Initial sales charge
charge of 4.5% of the to 0.25% waived or reduced for
public offering price certain purchases
Class B Maximum contingent de- Service fee of 0.25%; Shares convert to
ferred sales charge of distribution fee of Class A shares
5% of redemption pro- 0.75% approximately six
ceeds; declines to zero years after issuance
after six years
Class C Contingent deferred Service fee of 0.25%; --
sales charge of 1.00% of distribution fee of
redemption proceeds for 0.75%
first year.
</TABLE>

FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES

In deciding which Class of shares to purchase, investors should consider the
cost of sales charges together with the cost of the ongoing annual expenses
described below, as well as any other relevant facts and circumstances.

SALES CHARGES. Class A shares are sold at net asset value plus an initial sales
charge of up to 4.5% of the public offering price. Because of this initial
sales charge, not all of a Class A shareholder's purchase price is invested in
the Fund. Class B shares are sold with no initial sales charge, but a
contingent deferred sales charge of up to 5% of the redemption proceeds applies
to redemptions made within six years of purchase. Class C shareholders pay no
initial sales charges, although a contingent deferred sales charge of 1.00%
applies to certain redemptions made within one year after purchase. Thus, the
entire amount of a Class B or Class C shareholder's purchase price is
immediately invested in the Fund.

WAIVERS AND REDUCTIONS OF CLASS A SALES CHARGES. Class A share purchases over
$50,000 and Class A share purchases made under the Fund's reduced sales charge
plan may be made at a reduced sales charge. In considering the combined cost of
sales charges and ongoing annual expenses, investors should take into account
any reduced sales charges on Class A shares for which they may be eligible.

The entire initial sales charge on Class A shares is waived for certain
eligible purchasers. Because Class A shares bear lower ongoing annual expenses
than Class B shares or Class C shares, investors eligible for complete waivers
should purchase Class A shares.

ONGOING ANNUAL EXPENSES. All three Classes of Fund shares pay an annual 12b-1
service fee of up to 0.25% of average daily net assets. Class B and Class C
shares pay an annual 12b-1 distribution fee of 0.75% of average daily net
assets. Annual 12b-1 distribution fees are a form of asset-based sales charge.
An investor should consider both ongoing annual expenses and initial or
contingent deferred sales charges in estimating the costs of investing in the
respective Classes of Fund shares over various time periods.

-------------
Prospectus Page 9
<PAGE>

------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

For example, assuming a constant net asset value, the cumulative distribution
fees on the Fund's Class B or Class C and the 4.5% maximum initial sales charge
on the Fund's Class A shares would all be approximately equal if the shares
were held for six years. Because Class B shares convert to Class A shares
(which do not bear the expense of ongoing distribution fees) approximately six
years after purchase, an investor expecting to hold Fund shares for longer than
six years would generally pay lower cumulative expenses by purchasing Class A
or Class B shares than by purchasing Class C shares. An investor expecting to
hold Fund shares for less than six years would generally pay lower cumulative
expenses by purchasing Class C shares than by purchasing Class A shares and,
due to the contingent deferred sales charges that would become payable on
redemption of Class B shares, such an investor would generally pay lower
cumulative expenses by purchasing Class C shares than Class B shares.

The foregoing examples do not reflect, among other variables, the cost or
benefit of bearing sales charges or distribution fees at the time of purchase,
upon redemption or over time, nor can they reflect fluctuations in the net
asset value of Fund shares, which will affect the actual amount of expenses
paid. Expenses borne by Classes may differ slightly because of the allocation
of other Class-specific expenses. The "Example of Effect of Fund Expenses"
under "Prospectus Summary" shows the cumulative expenses an investor would pay
over time on a hypothetical investment in each Class of Fund shares, assuming
an annual return of 5%.

OTHER INFORMATION

PaineWebber investment executives may receive different levels of compensation
for selling one particular Class of Fund shares rather than another. Investors
should understand that distribution fees and initial and contingent deferred
sales charges all are intended to compensate Mitchell Hutchins for distribution
services.

See "Purchases," "Redemptions" and "Management" for a more complete description
of the initial and contingent sales charges, service fees and distribution fees
for the three Classes of Fund shares. See also "Conversion of Class B Shares,"
"Dividends and Taxes," "Valuation of Shares" and "General Information" for
other differences among the three Classes.

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

Investment Objective and Policies
--------------------------------------------------------------------------------

The Fund's investment objective is to provide current income and capital
growth. The Fund seeks to achieve this objective by investing primarily in
dividend-paying equity securities (common and preferred stocks) believed by
Mitchell Hutchins to have the potential for rapid earnings growth. Under normal
circumstances, the Fund will invest at least 65% of its total assets in such
securities. In managing the Fund, Mitchell Hutchins follows a disciplined
methodology under which stocks from a universe of approximately 2,000 medium to
large capitalization companies are ranked utilizing quantitative measures of
value, earnings and price momentum in the context of Mitchell Hutchins'
economic forecast. Stocks are selected for the Fund based on fundamental
analysis of the highest ranking stocks.

The Fund may invest up to 35% of its total assets in equity securities not
meeting the above criteria, as well as convertible securities, U.S. government
securities, investment grade corporate debt securities and money market
instruments. See "Other Investment Policies and Risk Factors-- Debt
Securities." The Fund may invest in instruments other than common stocks when,
in the opinion of Mitchell Hutchins, their projected total return is equal to
or greater than that of common stocks or when such holdings might reduce the
volatility of the Fund's portfolio.

The Fund primarily purchases equity securities of issuers with medium to large
capitalization. The Fund generally will not invest in stocks of issuers with
market capitalization below $300 million. Over the past 65 years, the total
return of equity investments, as measured by the Standard & Poor's 500
Composite Stock Price Index ("S&P 500"), has exceeded the inflation rate, as
measured by the Consumer Price Index, as well as total return on long-term
Treasury bonds, long-

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

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PAINEWEBBER GROWTH AND INCOME FUND

term corporate bonds and short-term Treasury bills. However, year-to-year
fluctuations in each of these indices and instruments have been significant,
and total return for the S&P 500 for some periods has been negative.There can
be no assurance that this trend will continue, and the Fund's performance may
be better or worse than that of the S&P 500.

There can be no assurance that the Fund will achieve its investment objective.
The Fund's net asset value fluctuates based upon changes in the value of its
portfolio securities. The Fund's investment objective and certain investment
limitations as described in the Statement of Additional Information are
fundamental policies that may not be changed without shareholder approval. All
other investment policies may be changed by the Trust's board of trustees
without shareholder approval.

OTHER INVESTMENT POLICIES AND RISK FACTORS

DEBT SECURITIES. The Fund is permitted to purchase investment grade corporate
debt securities. Securities rated BBB by Standard & Poor's ("S&P"), Baa by
Moody's Investor Services, Inc. ("Moody's") or comparably rated by another
nationally recognized statistical rating organization ("NRSRO") 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 debt securities. The Fund
is also permitted to purchase debt securities that are not rated by S&P,
Moody's or another NRSRO but that 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. See the Statement of Additional
Information for more information about S&P and Moody's ratings.

Ratings of debt securities represent the NRSROs' opinions regarding their
quality, are not a guarantee of quality and may be reduced after the Fund has
acquired the security. Mitchell Hutchins will consider such an event in
determining whether the Fund should continue to hold the security but is not
required to dispose of it. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not reflect an assessment of the
volatility of the security's market value or the liquidity of an investment in
the security. Also, NRSROs 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.

U.S. government securities in which the Fund may invest include direct
obligations of the U.S. Treasury as well as obligations of U.S. government
agencies and instrumentalities backed by the U.S. Treasury or primarily or
solely by the credit of the issuer.

DOLLAR-DENOMINATED FOREIGN SECURITIES. The Fund may invest up to 25% of its
total assets in U.S. dollar-denominated securities of foreign issuers that are
traded on recognized U.S. exchanges or in the U.S. over-the-counter ("OTC")
market. These investments may involve special risks, arising both from
political and economic developments abroad and differences between foreign and
U.S. regulatory systems. Foreign securities may be less liquid and their prices
more volatile than comparable U.S. securities. The prices of these securities
may also be affected by fluctuations in the values of foreign currencies.

LOWER RATED CONVERTIBLE SECURITIES. A convertible security is a bond,
debenture, note, preferred stock or other security that may be converted into
or exchanged for a prescribed amount of common stock of the same or a different
issuer within a particular period of time at a specified price or formula. The
Fund may convert any convertible securities it may own into common stock, and
it may hold the common stock upon conversion.

Up to 10% of the Fund's total assets may be invested in convertible securities
that are rated below investment grade but no lower than B by S&P or Moody's or
comparably rated by another NRSRO, or if not rated by an NRSRO, determined by
Mitchell Hutchins to be of comparable quality. Convertible securities rated
below investment grade are commonly referred to as "junk bonds," are deemed by
the NRSROs to be predominantly speculative and may involve major risk exposure
to adverse conditions. Investments in convertible securities generally entail
less risk than the issuer's common stock, although the extent to which such
risk is reduced

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Prospectus Page 11
<PAGE>

------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

depends in large measure upon the degree to which the convertible security
sells above its value as a fixed income security.

Lower rated convertible securities generally offer a higher current yield than
that available from 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 fluctuation 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 principal and interest
(or, in the case of convertible preferred stock, dividends) 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
securities generally is thinner and less active than that for higher quality
securities, which may limit a Fund's ability to sell such securities at fair
value in response to changes in the economy or the financial markets. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of lower rated securities,
especially in a thinly traded market.

HEDGING STRATEGIES. The Fund may attempt to reduce the overall risk of its
investments (hedge) by using options (both exchange-traded and OTC) and futures
contracts. The Fund's ability to use these instruments may be limited by market
conditions, regulatory limits and tax considerations. The Appendix to this
Prospectus describes the hedging instruments the Fund may use. The Statement of
Additional Information contains further information on these strategies.

The Fund may write (sell) covered put and call options or buy put and call
options on securities in which it may invest and on stock indices. In addition,
the Fund may buy and sell stock index futures contracts and interest rate
futures contracts and may write covered put and call options or buy put and
call options on such futures contracts. The Fund may enter into options and
futures contracts under which the full value of its portfolio is at risk. Under
normal circumstances, however, the Fund's use of these instruments will place
at risk a much smaller portion of its assets.

The Fund might not employ any of the strategies described above, and there can
be no assurance that any strategy used will succeed. If Mitchell Hutchins
incorrectly forecasts interest rates, market values or other economic factors
in utilizing a hedging strategy for the Fund, the Fund would be in a better
position had it not hedged at all. The use of these strategies involves certain
special risks, including (1) the fact that skills needed to use hedging
instruments are different from those needed to select the Fund's securities,
(2) possible imperfect correlation, or even no correlation, between price
movements of hedging instruments and price movements of the investments being
hedged, (3) the fact that, while hedging strategies can reduce the risk of
loss, they can also reduce the opportunity for gain, or even result in losses,
by offsetting favorable price movements in hedged investments and (4) the
possible inability of the Fund to purchase or sell a portfolio security at a
time that otherwise would be favorable for it to do so, or the possible need
for the Fund to sell a portfolio security at a disadvantageous time, due to the
need for the Fund to maintain "cover" or to segregate securities in connection
with hedging transactions and the possible inability of the Fund to close out
or to liquidate its hedged position.

New financial products and risk management techniques continue to be developed.
The Fund may use these instruments and techniques to the extent consistent with
its investment objective and regulatory and federal tax considerations.

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Prospectus Page 12
<PAGE>

------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in
illiquid securities, including certain cover for OTC options and securities
whose disposition is restricted under the federal securities laws (other than
"Rule 144A securities" Mitchell Hutchins has determined to be liquid under
procedures approved by the Trust's trustees). Rule 144A establishes a "safe
harbor" from the registration requirements of the Securities Act of 1933 ("1933
Act"). 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. An insufficient number of qualified institutional buyers
interested in purchasing Rule 144A-eligible restricted securities held by the
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.

LENDING OF PORTFOLIO SECURITIES. The Fund is authorized to lend up to 10% of
the total value of its portfolio securities to broker-dealers or institutional
investors that Mitchell Hutchins deemed qualified. Lending securities enables
the Fund to earn additional income, but could result in a loss or delay in
recovering the securities.

PORTFOLIO TURNOVER. The 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 more) will
involve correspondingly greater transaction costs, which will be borne directly
by the Fund, and may increase the potential for short-term capital gains.

OTHER INFORMATION. When Mitchell Hutchins believes unusual circumstances
warrant a defensive posture, the Fund temporarily may commit all or a portion
of its assets to cash or money market instruments, including repurchase
agreements. The Fund may also engage in short sales of securities "against the
box" to defer realization of gains or losses for tax or other purposes. The
Fund may borrow money for temporary purposes, but not in excess of 10% of its
total assets, and such borrowings may include reverse repurchase agreements
aggregating up to 5% of the value of the Fund's total assets.
--------------------------------------------------------------------------------

Purchases
--------------------------------------------------------------------------------

GENERAL. Class A shares of the Fund are sold to investors subject to an initial
sales charge. Class B shares of the Fund are sold without an initial sales
charge but are subject to higher ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon certain redemptions. Class B
shares automatically convert to Class A shares approximately six years after
issuance. Class C shares are sold without an initial sales charge but are
subject to higher ongoing expenses than Class A shares and a contingent
deferred sales charge of 1% payable on certain redemptions made within one year
of purchase. Class C shares do not convert into another Class. See "Flexible
Pricing System" and "Conversion of Class B Shares."

Shares of the Fund are available through PaineWebber and its correspondent
firms or, for shareholders who are not PaineWebber clients, through the
Transfer Agent. Investors may contact a local PaineWebber office to open an
account. The minimum initial investment for the Fund is $1,000, and the minimum
for additional purchases is $100. These minimums may be waived or reduced for
investments by employees of PaineWebber or its affiliates, certain pension
plans and retirement accounts and participants in the Fund's automatic
investment plan. Purchase orders will be priced at the net asset value per
share next determined (see "Valuation of Shares") after the order is received
by PaineWebber's New York City offices or by the Transfer Agent, plus any
applicable sales charge for Class A shares. The Fund and Mitchell Hutchins
reserve the right to reject any purchase order and to suspend the offering of
Fund shares for a period of time.

When placing purchase orders, investors should specify whether the order is for
Class A, Class B or Class C shares. All share purchase orders that fail to
specify a Class will automatically be invested in Class A shares.

-------------
Prospectus Page 13
<PAGE>

------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

PURCHASES THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS. Purchases through
PaineWebber investment executives orcorrespondent firms may be made in person
or by mail, telephone or wire; the minimum wire purchase is $1 million.
Investment executives and correspondent firms are responsible for transmitting
purchase orders to PaineWebber's New York City offices promptly. Investors may
pay for purchases with checks drawn on U.S. banks or with funds held in
brokerage accounts at PaineWebber or its correspondent firms. Payment is due on
the third Business Day after the order is received at PaineWebber's New York
City offices. A "Business Day" is any day, Monday through Friday, on which the
New York Stock Exchange, Inc. ("NYSE") is open for business.

PURCHASES THROUGH THE TRANSFER AGENT. Investors who are not PaineWebber clients
may purchase shares of the Fund through the Transfer Agent. Shares of the Fund
may be purchased, and an account with the Fund established, by completing and
signing the purchase application at the end of this Prospectus and mailing it,
together with a check to cover the purchase, to the Transfer Agent: PFPC Inc.,
Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington, Delaware 19899.
Subsequent investments need not be accompanied by an application.

INITIAL SALES CHARGE--CLASS A SHARES. The public offering price of Class A
shares is the next determined net asset value, plus any applicable sales
charge, which will vary with the size of the purchase as shown in the following
table:

INITIAL SALES CHARGE SCHEDULE-- CLASS A SHARES

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

(1) Mitchell Hutchins pays compensation to PaineWebber out of its own
resources. Redemptions of shares purchased at net asset value within one
year of purchase will be subject to a contingent deferred sales charge of
1%. See "Contingent Deferred Sales Charge--Class A Shares."

Mitchell Hutchins may at times agree to reallow a higher discount to
PaineWebber, as exclusive dealer for the Fund's shares, than those shown above.
To the extent PaineWebber or any dealer receives 90% or more of the sales
charge, it may be deemed an "underwriter" under the 1933 Act.

SALES CHARGE WAIVERS--CLASS A SHARES. Class A shares of the Fund are available
without a sales charge through exchanges for Class A shares of most other
PaineWebber mutual funds. See "Exchanges." In addition, Class A shares may be
purchased without a sales charge, and exchanges of any Class of shares made
without the $5.00 exchange fee, by employees, directors and officers of
PaineWebber or its affiliates, directors or trustees and officers of any
PaineWebber mutual funds, their spouses, parents and children and advisory
clients of Mitchell Hutchins.

Class A shares also may be purchased without a sales charge if the purchase is
made through a PaineWebber investment executive who formerly was employed as a
broker with another firm registered as a broker-dealer with the SEC, provided
(1) the purchaser was the investment executive's client at the competing
brokerage firm, (2) within 90 days of the purchase of Class A shares the
purchaser redeemed shares of one or more mutual funds for which that competing
firm or its affiliates was principal underwriter, provided the purchaser either
paid a sales charge to invest in those funds, paid a contingent deferred sales
charge upon redemption or held shares of those funds for the period required
not to pay the otherwise applicable contingent deferred sales charge and (3)
the total amount of shares of all PaineWebber mutual funds purchased under this
sales charge waiver does not exceed the amount of the purchaser's redemption
proceeds from the competing firm's funds. To take advantage of this waiver, an
investor must provide satisfactory evidence that all the above-noted conditions
are met. Qualifying investors should contact their PaineWebber investment
executives for more information.

Certificate holders of unit investment trusts ("UITs") sponsored by PaineWebber
may acquire Class A shares of the Fund without regard to minimum investment
requirements and without sales charges by electing to have dividends and other
distributions from their UIT investment automatically invested in Class A
shares.

Class A shares of the Fund may be acquired without a sales charge if issued by
the Fund in

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Prospectus Page 14
<PAGE>

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PAINEWEBBER GROWTH AND INCOME FUND

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

CONTINGENT DEFERRED SALES CHARGE--CLASS A SHARES. Purchases of Class A shares
of $1 million or more may be made without a sales charge. Purchases of Class A
shares of two or more PaineWebber mutual funds may be combined for the purpose,
and the right of accumulation also applies to such purchases. See "Reduced
Sales Charge Plans--Class A Shares" below. If a shareholder redeems any Class A
shares that were purchased without a sales charge by reason of a purchase of $1
million or more within one year after the date of purchase, a contingent
deferred sales charge of 1% of the net asset value of the redeemed shares
(computed as described below under "Contingent Deferred Sales Charge--Class B
Shares") will be applied to the redemption. Class A shares that are redeemed
will not be subject to the contingent deferred sales charge, however, to the
extent that the value of such shares represents (1) capital appreciation of
Fund assets, (2) reinvestment of dividends or capital gain distributions or (3)
Class A shares redeemed more than one year after their purchase. THIS
CONTINGENT DEFERRED SALES CHARGE DOES NOT APPLY TO REDEMPTIONS OF CLASS A
SHARES PURCHASED PRIOR TO NOVEMBER 1, 1995. Class A shares of the Fund that are
purchased without a sales charge may be exchanged for Class A shares of another
fund without the imposition of a contingent deferred sales charge, although
contingent deferred sales charges may apply to the Class A shares acquired
through an exchange. For federal income tax purposes, the amount of the
contingent deferred sales charge will reduce the gain or increase the loss, as
the case may be, on the amount realized on the redemption. The amount of any
contingent deferred sales charge will be paid to Mitchell Hutchins.

REDUCED SALES CHARGE PLANS--CLASS A SHARES. If an investor or eligible group of
related Fund investors purchases Class A shares of the Fund concurrently with
Class A shares of other PaineWebber mutual funds, the purchases may be combined
to take advantage of the reduced sales charge applicable to larger purchases.
In addition, the right of accumulation permits the Fund investor or eligible
group of related Fund investors to pay the lower sales charge applicable to
larger purchases by basing the sales charge on the dollar amount of Class A
shares currently being purchased, plus the net asset value of the investor's or
group's total existing Class A shareholdings in other PaineWebber mutual funds.

An "eligible group of related Fund investors" includes an individual, the
individual's spouse, parents and children, the individual's individual
retirement account ("IRA"), certain companies controlled by the individual and
employee benefit plans of those companies, and trusts or Uniform Gifts to
Minors Act/Uniform Transfers to Minors Act accounts created by the individual
or eligible group of individuals for the benefit of the individual and/or the
individual's spouse, parents or children. The term also includes a group of
related employers and one or more qualified retirement plans of such employers.
For more information, an investor should consult the State-ment of Additional
Information or contact a PaineWebber investment executive or correspondent firm
or the Transfer Agent.

CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. The public offering price of
the Class B shares of the Fund is the next determined net asset value, and no
initial sales charge is imposed. A contingent deferred sales charge, however,
is imposed upon certain redemptions of Class B shares.

Class B shares that are redeemed will not be subject to a contingent deferred
sales charge to the extent that the value of such shares represents (1) capital
appreciation of Fund assets, (2) reinvestment of dividends or capital gain
distributions or (3) shares redeemed more than six years after their purchase.
Otherwise, redemption of Class B shares of the Fund will be subject to a
contingent deferred sales charge. The amount of any applicable contingent
deferred sales charge will be calculated by multiplying the net asset value of
such shares at the time of redemption by the applicable percentage shown in the
table below:

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Prospectus Page 15
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PAINEWEBBER GROWTH AND INCOME FUND

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
REDEMPTION NET ASSET VALUE
DURING AT REDEMPTION
---------- -----------------
<S> <C>
1st Year Since Purchase....................................... 5%
2nd Year Since Purchase....................................... 4
3rd Year Since Purchase....................................... 3
4th Year Since Purchase....................................... 2
5th Year Since Purchase....................................... 2
6th Year Since Purchase....................................... 1
7th Year Since Purchase....................................... None
</TABLE>

In determining the applicability and rate of any contingent deferred sales
charge, it will be assumed that a redemption is made first of Class B shares
representing capital appreciation, next of shares representing the reinvestment
of dividends and capital gain distributions and finally of other shares held by
the shareholder for the longest period of time. The holding period of Class B
shares acquired through an exchange with another PaineWebber mutual fund will
be calculated from the date that the Class B shares were initially acquired in
one of the other PaineWebber funds, and Class B shares being redeemed will be
considered to represent, as applicable, capital appreciation or dividend and
capital gain distribution reinvestments in such other funds. This will result
in any contingent deferred sales charge being imposed at the lowest possible
rate. For federal income tax purposes, the amount of the contingent deferred
sales charge will reduce the gain or increase the loss, as the case may be, on
the amount realized on redemption. The amount of any contingent deferred sales
charge will be paid to Mitchell Hutchins.

SALES CHARGE WAIVERS--CLASS B SHARES. The contingent deferred sales charge will
be waived for exchanges, as described below, and for redemptions in connection
with the Fund's systematic withdrawal plan. In addition, the contingent
deferred sales charge will be waived for a total or partial redemption made
within one year of the death of the shareholder. The contingent deferred sales
charge waiver is available where the decedent is either the sole shareholder or
owns the shares with his or her spouse as a joint tenant with right of
survivorship. This waiver applies only to redemption of shares held at the time
of death. The contingent deferred sales charge will also be waived in
connection with a lump-sum or other distribution in the case of an IRA, a self-
employed individual retirement plan (so-called "Keogh Plan") or a custodial
account under Section 403(b) of the Internal Revenue Code following attainment
of age 59 1/2; a total or partial redemption resulting from any distribution
following retirement in the case of a tax-qualified retirement plan; and a
redemption resulting from a tax-free return of an excess contribution to an
IRA.

Contingent deferred sales charge waivers will be granted subject to
confirmation (by PaineWebber in the case of shareholders who are PaineWebber
clients or by the Transfer Agent in the case of all other shareholders) of the
shareholder's status or holdings, as the case may be.

PURCHASE OF CLASS C SHARES. The public offering price of the Class C shares of
the Fund is the next determined net asset value. No initial sales charge is
imposed.

CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES. If a shareholder redeems
Class C shares within a year after the date of the purchase, a contingent
deferred sales charge of 1.00% of the net asset value of the redeemed shares
(computed as described above under "Contingent Deferred Sales Charge--Class B
shares") will be applied to the redemption. Class C shares that are redeemed
will not be subject to the contingent deferred sales charge, however, to the
extent that the value of such shares represents (1) capital appreciation of
Fund assets, (2) reinvestment of dividends or capital gain distributions or (3)
Class C shares redeemed more than one year after their purchase. THIS
CONTINGENT DEFERRED SALES CHARGE DOES NOT APPLY TO REDEMPTIONS OF CLASS C
SHARES PURCHASED PRIOR TO NOVEMBER 1, 1995. Class C shares of the Fund that are
purchased without a sales charge may be exchanged for Class C shares of another
fund without the imposition of a contingent deferred sales charge, although
contingent deferred sales charges may apply to the Class C shares acquired
through an exchange. For federal income tax purposes, the amount of the
contingent deferred sales charge will reduce the gain or increase the loss, as
the case may be, on the amount realized on the redemption. The amount of any
contingent deferred sales charge will be paid to Mitchell Hutchins.

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PAINEWEBBER GROWTH AND INCOME FUND
--------------------------------------------------------------------------------

Exchanges
--------------------------------------------------------------------------------

Shares of the Fund may be exchanged for shares of the corresponding Class of
other PaineWebber mutual funds, or may be acquired through an exchange of
shares of the corresponding Class of those funds. No initial sales charge is
imposed on the shares being acquired, and no contingent deferred sales charge
is imposed on the shares being disposed of, through an exchange. However,
contingent deferred sales charges may apply to redemptions of PaineWebber
mutual funds acquired through an exchange. A $5.00 exchange fee is charged for
each exchange, and exchanges may be subject to minimum investment requirements
of the fund into which exchanges are made.

The other mutual funds with which Fund shares may be exchanged include:

PaineWebber Income Funds

. GLOBAL INCOME FUND

. HIGH INCOME FUND

. INVESTMENT GRADE INCOME FUND

. LOW DURATION U.S. GOVERNMENT INCOME FUND

. PW STRATEGIC INCOME FUND

. U.S. GOVERNMENT INCOME FUND

PaineWebber Tax-Free Income Funds

. CALIFORNIA TAX-FREE INCOME FUND

. MUNICIPAL HIGH INCOME FUND

. NATIONAL TAX-FREE INCOME FUND

. NEW YORK TAX-FREE INCOME FUND

PaineWebber Growth Funds

. CAPITAL APPRECIATION FUND

. EMERGING MARKETS EQUITY FUND

. GLOBAL EQUITY FUND

. GROWTH FUND

. REGIONAL FINANCIAL GROWTH FUND

. SMALL CAP GROWTH FUND

. SMALL CAP VALUE FUND

PaineWebber Growth and Income Funds

. TACTICAL ALLOCATION FUND

. BALANCED FUND

. UTILITY INCOME FUND

PAINEWEBBER MONEY MARKET FUND

PaineWebber clients must place exchange orders through their PaineWebber
investment executives or correspondent firms unless the shares to be exchanged
are held in certificate form. Shareholders who are not PaineWebber clients or
who hold their shares in certificate form must place exchange orders in writing
with the Transfer Agent: PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box
8950, Wilmington, Delaware 19899. All exchanges will be effected based on the
relative net asset values per share next determined after the exchange order is
received at PaineWebber's New York City offices or by the Transfer Agent. See
"Valuation of Shares." Shares of the Fund purchased through PaineWebber or its
correspondent firms may be exchanged only after the settlement date has passed
and payment for such shares has been made.

OTHER EXCHANGE INFORMATION. This exchange privilege may be modified or
terminated at any time, upon at least 60 days' notice when such notice is
required by SEC rules. See the Statement of Additional Information for further
details. This exchange privilege is available only in those jurisdictions where
the sale of the PaineWebber mututal fund shares to be acquired may be legally
made. Before making any exchange, shareholders should contact their PaineWebber
investment executives or correspondent firms or the Transfer Agent to obtain
more information and prospectuses of the PaineWebber to be acquired through the
exchange.

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Prospectus Page 17

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PAINEWEBBER GROWTH AND INCOME FUND
--------------------------------------------------------------------------------

Redemptions
--------------------------------------------------------------------------------

As described below, Fund shares may be redeemed at their net asset value
(subject to any applicable contingent deferred sales charge) and redemption
proceeds will be paid after receipt of a redemption request, as described
below. PaineWebber clients may redeem non-certificated shares through
PaineWebber or its correspondent firms; all other shareholders must redeem
through the Transfer Agent. If a redeeming shareholder owns shares of more than
one Class, the shares will be redeemed in the following order unless the
shareholder specifically requests otherwise: Class A shares, then Class C
shares, and finally Class B shares.

REDEMPTION THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS. PaineWebber clients may
submit redemption requests to their investment executives or correspondent
firms in person or by telephone, mail or wire. As the Fund's agent, PaineWebber
may honor a redemption request by repurchasing Fund shares from a redeeming
shareholder at the shares' net asset value next determined after receipt of the
request by PaineWebber's New York City offices. Within three Business Days,
repurchase proceeds (less any applicable contingent deferred sales charge) will
be paid by check or credited to the shareholder's brokerage account at the
election of the shareholder. PaineWebber investment executives and
correspondent firms are responsible for promptly forwarding redemption requests
to PaineWebber's New York City offices.

PaineWebber reserves the right not to honor any redemption request, in which
case PaineWebber promptly will forward the request to the Transfer Agent for
treatment as described below.

REDEMPTION THROUGH THE TRANSFER AGENT.

Fund shareholders who are not PaineWebber clients or who wish to redeem
certificated shares must redeem their shares through the Transfer Agent by
mail; other shareholders also may redeem Fund shares through the Transfer
Agent. Shareholders should mail redemption requests directly to the Transfer
Agent: PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington,
Delaware 19899. A redemption request will be executed at the net asset value
next computed after it is received in "good order" and redemption proceeds will
be paid within seven days of receipt of the request. "Good order" means that
the request must be accompanied by the following: (1) a letter of instruction
or a stock assignment specifying the number of shares or amount of investment
to be redeemed (or that all shares credited to the Fund account be redeemed),
signed by all registered owners of the shares in the exact names in which they
are registered, (2) a guarantee of the signature of each registered owner by an
eligible institution acceptable to the Transfer Agent and in accordance with
SEC rules, such as a commercial bank, trust company or member of a recognized
stock exchange, (3) other supporting legal documents for estates, trusts,
guardianships, custodianships, partnerships and corporations and (4) duly
endorsed share certificates, if any. Shareholders are responsible for ensuring
that a request for redemption is received in "good order."

ADDITIONAL INFORMATION ON REDEMPTIONS. A shareholder who holds non-certificated
Fund shares may have redemption proceeds of $1 million or more wired to the
shareholder's PaineWebber brokerage account or a commercial bank account
designated by the shareholder. Questions about this option, or redemption
requirements generally, should be referred to the shareholder's PaineWebber
investment executive or correspondent firm, or to the Transfer Agent if the
shares are not held in a PaineWebber brokerage account. If a shareholder
requests redemption of shares which were purchased recently, the Fund may delay
payment until it is assured that good payment has been received. In the case of
purchases by check, this can take up to 15 days.

Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, it reserves the right to redeem all Fund shares in any shareholder
account of less than $500 net asset value. If the Fund elects to do so, it will
notify the shareholder and provide the shareholder the opportunity to increase
the amount invested to

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Prospectus Page 18
<PAGE>

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PAINEWEBBER GROWTH AND INCOME FUND

$500 or more within 60 days of the notice. The Fund will not redeem accounts
that fall below $500 solely as a result of a reduction in net asset value per
share.

Shareholders who have redeemed Class A shares may reinstate their Fund account
without a sales charge up to the dollar amount redeemed by purchasing Class A
shares within 365 days after the redemption. To take advantage of this
reinstatement privilege, shareholders must notify their PaineWebber investment
executive or correspondent firm at the time the privilege is exercised.

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

Conversion of Class B Shares
--------------------------------------------------------------------------------

A shareholder's Class B shares will automatically convert to Class A shares of
the Fund approximately six years after the date of issuance, together with a
pro rata portion of all Class B shares representing dividends and other
distributions paid in additional Class B shares. The Class B shares so
converted will no longer be subject to the higher expenses borne by Class B
shares. The conversion will be effected at the relative net asset values per
share of the two Classes on the first Business Day of the month in which the
sixth anniversary of the issuance of the Class B shares occurs. See "Valuation
of Shares." If a shareholder effects one or more exchanges among Class B shares
of the PaineWebber mutual funds during the six-year period, the holding periods
for the shares so exchanged will be counted toward the six-year period.
Investors interested in the services described below should consult their
PaineWebber investment executives or correspondent firms or call the Transfer
Agent toll-free at 1-800-647-1568.

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

Other Services and Information
--------------------------------------------------------------------------------

AUTOMATIC INVESTMENT PLAN. Shareholders may purchase shares of the Fund through
an automatic investment plan, under which an amount specified by the
shareholder of $50 or more each month will be sent to the Transfer Agent from
the shareholder's bank for investment in the Fund. In addition to providing a
convenient and disciplined manner of investing, participation in the automatic
investment plan enables the investor to use the technique of "dollar cost
averaging." When under the plan a shareholder invests the same dollar amount
each month, the shareholder will purchase more shares when the Fund's net asset
value per share is low and fewer shares when the net asset value per share is
high. Using this technique, a shareholder's average purchase price per share
over any given period will be lower than if the shareholder purchased a fixed
number of shares on a monthly basis during the period.

SYSTEMATIC WITHDRAWAL PLAN. Shareholders who own non-certificated Class A or
Class C shares of the Fund with a value of $5,000 or more or Class B shares of
the Fund with a value of $20,000 or more may have PaineWebber redeem a portion
of their shares monthly, quarterly or semi-annually under the systematic
withdrawal plan. No contingent deferred sales charge will be imposed on such
withdrawals for Class B or Class C shares. The minimum amount for all
withdrawals of Class A or Class C shares is $100, and minimum monthly,
quarterly and semi-annual withdrawal amounts for Class B shares are $200, $400
and $600, respectively. Quarterly withdrawals are made in March, June,
September and December, and semi-annual withdrawals are made in June and
December. A Class B shareholder of the Fund may not withdraw an amount
exceeding 12% annually of his or her "Initial Account Balance," a term that
means the value of the Fund account at the time the shareholder elects to
participate in the systematic withdrawal plan. A Class B shareholder's
participation in the systematic withdrawal plan will terminate automatically if
the Initial Account Balance (plus the net asset value

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Prospectus Page 19
<PAGE>

------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

on the date of purchase of Fund shares acquired after the election to
participate in the systematic withdrawal plan), less aggregate redemptions made
other than pursuant to the systematic withdrawal plan, is less than $20,000.
Shareholders who receive dividends or other distributions in cash may not
participate in the systematic withdrawal plan. Purchases of additional shares
of the Fund concurrent with withdrawals are ordinarily disadvantageous to
shareholders because of tax liabilities and, for Class A shares, sales charges.

INDIVIDUAL RETIREMENT ACCOUNTS. Shares of the Fund may be purchased through
IRAs available through the Fund. In addition, a Self-Directed IRA is available
through PaineWebber under which investments may be made in the Fund as well as
in other investments available through PaineWebber. Investors considering
establishing an IRA should review applicable tax laws and should consult their
tax advisers.

TRANSFER OF ACCOUNTS. If a shareholder holding shares of the Fund in a
PaineWebber brokerage account transfers his brokerage account to another firm,
the Fund shares will be transferred to an account with the Transfer Agent.
However, if the other firm has entered into a selected dealer agreement with
Mitchell Hutchins relating to the Fund, the shareholder may be able to hold
Fund shares in an account with the other firm.

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

Dividends and Taxes
--------------------------------------------------------------------------------

DIVIDENDS. The Fund pays dividends from net investment income semi-annually.
The Fund distributes annually substantially all of its net capital gain (the
excess of net long-term capital gain over net short-term capital loss) and net
short-term capital gain, if any. The Fund 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 the
Fund are calculated at the same time and in the same manner. Dividends on Class
B and Class C shares of the Fund are expected to be lower than those for its
Class A shares because of the higher expenses resulting from distribution fees
borne by the Class B and Class C shares. Dividends on each Class also might be
affected differently by the allocation of other Class-specific expenses. See
"Valuation of Shares."

The Fund's dividends and capital gain 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/or
capital gain distributions in cash, either mailed to the shareholder by check
or credited to the shareholder's PaineWebber account, should contact their
PaineWebber investment executives or correspondent firms or complete the
appropriate section of the application form.

TAXES. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code so that it will be relieved
of federal income tax on that part of its investment company taxable income
(consisting generally of net investment income and net short-term capital gain)
and net capital gain that is distributed to its shareholders.

Dividends paid by the Fund (whether in cash or in additional shares) generally
are taxable to shareholders as ordinary income. Distributions of the Fund's net
capital gain (whether paid in cash or in additional shares) are taxable to
shareholders as long-term capital gain, regardless of how long they have held
their Fund shares. Shareholders not subject to tax on their income generally
will not be required to pay tax on amounts distributed to them.

The Fund notifies its shareholders following the end of each calendar year of
the amounts of dividends and capital gain distributions paid (or deemed paid)
that year and of any portion of those dividends that qualifies for the
corporate dividends-received deduction.

The Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to any individuals and certain
other noncorporate shareholders who

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Prospectus Page 20
<PAGE>

------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

do not provide the Fund with a correct taxpayer identification number.
Withholding at that rate from dividends and capital gain distributions is also
required for those shareholders who otherwise are subject to backup
withholding.

A redemption of Fund shares may result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds payable to the
shareholder are more or less than the shareholder's adjusted basis for the
redeemed shares (which normally includes any initial sales charge paid on Class
A shares). An exchange of Fund shares for shares of another PaineWebber or fund
generally will have similar tax consequences. However, special tax rules apply
when a shareholder (1) disposes of Class A shares through a redemption or
exchange within 90 days of purchase and (2) subsequently acquires Class A
shares of a PaineWebber fund (including the Fund) without paying a sales charge
due to the 365-day reinstatement privilege or the exchange privilege. In these
cases, any gain on the disposition of the original Class A shares would be
increased, or loss decreased, by the amount of the sales charge paid when those
shares were acquired, and that amount will increase the basis of the
PaineWebber fund shares subsequently acquired. In addition, if Fund shares are
purchased within 30 days before or after redeeming other Fund shares
(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.

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

The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. There may be
other federal, state or local tax considerations applicable to a particular
investor. Prospective shareholders are therefore urged to consult their tax
advisers.

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

Valuation of Shares
--------------------------------------------------------------------------------

The net asset value of the Fund's shares fluctuates and is determined
separately for each Class as of the close of regular trading on the NYSE
(currently 4:00 p.m., Eastern time) each Business Day. The 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.

The Fund values its assets based on their current market value when market
quotations are readily available. If such value cannot be established, assets
are valued at fair value as determined in good faith by or under the direction
of the Trust's board of trustees. The amortized cost method of valuation
generally is used to value debt obligations with 60 days or less remaining to
maturity, unless the board of trustees determines that this does not represent
fair value.

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Prospectus Page 21
<PAGE>

------------------------------
PAINEWEBBER GROWTH AND INCOME FUND
--------------------------------------------------------------------------------

Management
--------------------------------------------------------------------------------

The Trust's board of trustees, as part of its overall management
responsibility, oversees various organizations responsible for the Fund's day-
to-day management. Mitchell Hutchins, investment adviser and administrator of
the Fund, makes and implements all investment decisions and supervises all
aspects of the Fund's operations. Mitchell Hutchins receives a monthly fee for
these services at the annual rate of 0.70% of average daily net assets of the
Fund. Brokerage transactions for the Fund may be conducted through PaineWebber
or its affiliates in accordance with procedures adopted by the Trust's board of
trustees.

The Fund also pays PaineWebber an annual fee of $4.00 per active shareholder
account held at PaineWebber for certain services not provided by the Transfer
Agent. The Fund incurs other expenses and, for the fiscal year ended August 31,
1995, the Fund's total expenses for its Class A, Class B and Class C shares,
stated as a percentage of net assets, were %, % and %,
respectively.

Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New York
10019. It is a wholly owned subsidiary of PaineWebber, which is in turn wholly
owned by Paine Webber Group Inc., a publicly owned financial services holding
company. At , 1995, Mitchell Hutchins was adviser or subadviser of
investment companies with separate portfolios and aggregate assets of over
$ billion.

Mark A. Tincher has been responsible for the day-to-day management of the Fund
since April 1995. Mr. Tincher is a Managing Director and Chief Investment
Officer of Equity Investments of Mitchell Hutchins responsible for overseeing
the management of domestic equity investments for Mitchell Hutchins. Prior to
joining Mitchell Hutchins in March 1995, Mr. Tincher worked for Chase Manhattan
Private Bank where he was Vice President and directed the U.S. Funds Management
and Equity Research area. At Chase since 1988, Mr. Tincher oversaw the
management of all Chase U.S. equity funds (the Vista Funds and Trust Investment
Funds).

Other members of Mitchell Hutchins' domestic equities and fixed income groups
provide input on market outlook, interest rate forecasts and other
considerations pertaining to domestic equity and fixed income investments.

Mitchell Hutchins investment personnel may engage in securities transactions
for their own accounts pursuant to a code of ethics that establishes procedures
for personal investing and restricts certain transactions.

DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins is the distributor of the Fund's
shares and has appointed PaineWebber as the exclusive dealer for the sale of
those shares. Under separate plans of distribution pertaining to the Class A
shares, the Class B shares and Class C shares ("Class A Plan," "Class B Plan"
and "Class C Plan," collectively, "Plans"), the Fund pays Mitchell Hutchins
monthly service fees at the annual rate of up to 0.25% of the average daily net
assets of each Class of shares and monthly distribution fees at the annual rate
of 0.75% of the average daily net assets of the Class B and Class C shares.

Under all three Plans, Mitchell Hutchins uses the service fees primarily to pay
PaineWebber for shareholder servicing, currently at the annual rate of up to
0.25% of the aggregate investment amounts maintained in the Fund by PaineWebber
clients. PaineWebber passes on a portion of these fees to its investment
executives to compensate them for shareholder servicing that they perform and
retains the remainder to offset its own expenses in servicing and maintaining
shareholder accounts. These expenses may include costs of the PaineWebber
branch office in which the investment executive is based, such as rent,
communications equipment, employee salaries and other overhead costs.

Mitchell Hutchins uses the distribution fees under the Class B and Class C
Plans to offset the commissions it pays to PaineWebber for selling the Fund's
Class B and Class C shares. PaineWebber passes on to its investment executives
a portion of these commissions and retains the remainder to offset its expenses
in selling Class B and Class C shares. These

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Prospectus Page 22
<PAGE>

------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

expenses may include the branch office costs noted above. In addition, Mitchell
Hutchins uses the distribution fees under the Class B and Class C Plans to
offset the Fund's marketing costs attributable to such Classes, such as
preparation of sales literature, advertising and printing and distributing
prospectuses and other shareholder materials to prospective investors. Mitchell
Hutchins also may use the distribution fees to pay additional compensation to
PaineWebber and other costs allocated to Mitchell Hutchins' and PaineWebber's
distribution activities, including employee salaries, bonuses and other
overhead expenses.

Mitchell Hutchins expects that, from time to time, PaineWebber will pay
shareholder servicing fees and sales commissions to its investment executives
at the time of sale of Class C shares of the Fund. If PaineWebber makes such
payments, it will retain the service and distribution fees on Class C shares
until it has been reimbursed and thereafter will pass a portion of the service
and distribution fees on Class C shares on to its investment executives.

Mitchell Hutchins receives the proceeds of the initial sales charge paid upon
the purchase of Class A shares and the contingent deferred sales charge paid
upon certain redemptions of shares, and may use these proceeds for any of the
distribution expenses described above. See "Purchases."

During the period they are in effect, the Plans and related distribution
contracts pertaining to each Class of shares ("Distribution Contracts")
obligate the Fund to pay service and distribution fees to Mitchell Hutchins as
compensation for its service and distribution activities, not as reimbursement
for specific expenses incurred. Thus, even if Mitchell Hutchins' expenses
exceed its service or distribution fees for the Fund, it will not be obligated
to pay more than those fees and, if Mitchell Hutchins' expenses are less than
such fees, it will retain its full fees and realize a profit. The Fund will pay
the service and distribution fees to Mitchell Hutchins until either the
applicable Plan or Distribution Contract is terminated or not renewed. In that
event, Mitchell Hutchins' expenses in excess of service and distribution fees
received or accrued through the termination date will be Mitchell Hutchins'
sole responsibility and not obligations of the Fund. In their annual
consideration of the continuation of the Plans, the trustees will review the
Plan and Mitchell Hutchins' corresponding expenses for each Class separately
from the Plans and corresponding expenses for the other two Classes.

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

Performance Information
--------------------------------------------------------------------------------

The Fund performs a standardized computation of annualized total return and may
show this return in advertisements or promotional materials. Standardized
return shows the change in value of an investment in the Fund as a steady
compound annual rate of return. Actual year-by-year returns fluctuate and may
be higher or lower than standardized return. Standardized return for the Class
A shares of the Fund reflects deduction of the Fund's maximum initial sales
charge at the time of purchase, and standardized return for the Class B shares
and Class C shares of the Fund reflects deduction of the applicable contingent
deferred sales charge imposed on a redemption of shares held for the period.
One-, five-and ten-year periods will be shown, unless the Class has been in
existence for a shorter period. Total return calculations assume reinvestment
of dividends and other distributions.

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

The Fund will include performance data for all three Classes of Fund shares in
any advertisements or promotional materials including Fund performance data.
Total return information reflects past performance and does not necessarily
indicate future results. Investment return and principal values will fluctuate,
and proceeds upon redemption may be more or less than a shareholder's cost.

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Prospectus Page 23
<PAGE>

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PAINEWEBBER GROWTH AND INCOME FUND
--------------------------------------------------------------------------------

General Information
--------------------------------------------------------------------------------

ORGANIZATION. PaineWebber America Fund is registered with the SEC as an open-
end management investment company and was organized as a business trust under
the laws of the Commonwealth of Massachusetts by Declaration of Trust dated
October 31, 1986. The trustees have authority to issue an unlimited number of
shares of beneficial interest of separate series, par value $.001 per share, of
the Trust.

The shares of beneficial interest of the Fund are divided into four Classes,
designated Class A shares, Class B shares, Class C shares and Class Y shares.
Each Class represents interests in the same assets of the Fund. The Classes
differ as follows: (1) each Class of shares has exclusive voting rights on
matters pertaining to its plan of distribution, (2) Class A shares are subject
to an initial sales charge, (3) Class B shares bear ongoing distribution fees,
are subject to a contingent deferred sales charge upon certain redemptions and
will automatically convert to Class A shares approximately six years after
issuance, (4) Class C shares are not subject to an initial sales charge, but
are subject to a contingent deferred sales charge if issued on or after
November 1, 1995 and redeemed within one year after issuance, bear ongoing
distribution fees and do not convert into another Class, (5) each Class may
bear differing amounts of certain Class-specific expenses. Class Y shares,
which may be offered only to limited classes of investors, are subject to
neither an initial or contingent deferred sales charge nor ongoing service or
distribution fees. The board of trustees of the Trust does not anticipate that
there will be any conflicts among the interests of the holders of each Class of
Fund shares. On an ongoing basis, the board of trustees will consider whether
any such conflict exists and, if so, take appropriate action.

The different sales charges and other expenses applicable to the different
classes of Fund shares may affect the performance of those classes. More
information concerning the Class Y shares of the Fund may be obtained from a
PaineWebber investment executive or correspondent firm or by calling 1-800-647-
1568.

The Trust does not hold annual shareholder meetings. There normally will be no
meetings of shareholders to elect trustees unless fewer than a majority of the
trustees of the Trust holding office have been elected by shareholders.
Shareholders of record holding at least two-thirds of the outstanding shares of
the Trust may remove a trustee by votes cast in person or by proxy at a meeting
called for that purpose. The trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
trustee when so requested in writing by the shareholders of record holding at
least 10% of the Trust's outstanding shares. Each share of the Fund has equal
voting rights, except as noted above. Each share of the Fund is entitled to
participate equally in dividends and other distributions and the proceeds of
any liquidation, except that, due to the differing expenses borne by the four
classes, these dividends and proceeds for the Class B and Class C shares are
likely to be lower than for the Class A shares and are likely to be lower for
every other Class of shares than for Class Y shares.

To avoid additional operating costs and for investor convenience, the Fund does
not issue share certificates. Ownership of shares of the Fund is recorded on a
stock register by the Transfer Agent and shareholders have the same rights of
ownership with respect to such shares as if certificates had been issued.

CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One Heritage
Drive, North Quincy, Massachusetts 02171, is custodian for the Fund. PFPC Inc.,
a subsidiary of PNC Bank, National Association, whose principal address is 400
Bellevue Parkway, Wilmington, Delaware 19809, is the Fund's transfer and
dividend disbursing agent.

CONFIRMATIONS AND STATEMENTS. Shareholders receive confirmations of purchases
and redemptions of shares of the Fund. PaineWebber clients receive statements
at least quarterly that report their Fund activity and consolidated year-end
statements that show all Fund transactions for that year. Shareholders who are
not PaineWebber clients receive quarterly statements from the Transfer Agent.
Shareholders also receive audited annual and unaudited semi-annual financial
statements of the Fund.

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Prospectus Page 24
<PAGE>

----------------------------
------------------------------
PAINEWEBBER GROWTH AND INCOME FUND

Appendix
--------------------------------------------------------------------------------

The Fund may use the hedging instruments described below:

OPTIONS ON EQUITY AND DEBT SECURITIES--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 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 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 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 at the exercise price.

OPTIONS ON STOCK INDEXES--A stock index assigns relative values to the stocks
included in the index and fluctuates with changes in the market values of those
stocks. A stock index option operates in the same way as a more traditional
stock option, except that exercise of a stock index option is effected with
cash payment and does not involve delivery of securities. Thus, upon exercise
of a stock 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 stock index.

STOCK INDEX FUTURES CONTRACTS--A stock 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 stock 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 stocks comprising the index is
made. Generally, contracts are closed out prior to the expiration date of the
contract.

INTEREST RATE FUTURES CONTRACTS--Interest rate 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 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, 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, 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, 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.

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Prospectus Page 25
<PAGE>

Application Form
THE PAINEWEBBER [_] [_] - [_] [_] [_] [_] [_] - [_] [_]
MUTUAL FUNDS PaineWebber Account No.
--------------------------------------------------------------------------------
INSTRUCTIONS DO NOT USE THIS FORM IF YOU WOULD LIKE YOUR ACCOUNT SERVICED
THROUGH PAINEWEBBER. INSTEAD, CALL YOUR PAINEWEBBER INVESTMENT
EXECUTIVE (OR YOUR LOCAL PAINEWEBBER OFFICE TO OPEN AN ACCOUNT).

ALSO, DO NOT USE THIS FORM TO OPEN A Return this completed
RETIREMENT PLAN ACCOUNT. FOR form to: PFPC Inc. P.O.
RETIREMENT PLAN FORMS OR FOR Box 8950 Wilmington,
ASSISTANCE IN COMPLETING THIS FORM Delaware 19899 ATTN:
CONTACT PFPC INC. AT 1-800-647-1568. PaineWebber Mutual Funds
PLEASE PRINT
--------------------------------------------------------------------------------

1 INITIAL INVESTMENT ($1,000 MINIMUM)

ENCLOSED IS A CHECK FOR:

$____(payable to PaineWebber Growth and Income Fund) to pur-
chase Class A [_] Class B [_] or Class C [_] shares
(Check one Class; if no Class is specified Class A shares
will be purchased)

2 ACCOUNT REGISTRATION

Not valid without
signature and
Soc. Sec. or Tax 1. Individual _______________ _________________ ___/__/____
ID # First Name Last Name MI Soc. Sec. No.
--As joint
tenants, use 2. Joint Tenancy ____________ _________________ ___/__/____
Lines 1 and 2 First Name Last Name MI Soc. Sec. No.
--As custodian ("Joint Tenants with Rights of Survivorship"
for a minor, otherwise specified)
use Lines 1
and 3 3. Gifts to Minors __________ _________________ ___/__/____
--In the name First Name Last Name MI Soc. Sec. No.
of a corporation,
trust or other Under the __________________ Uniform Gifts / Uniform Transfers
organization or State of Residence to Minors Act to Minors Act
any fiduciary of Minor
capacity, use
Line 4 4. Other Registrations ________________________ ______________
Name Tax Ident. No.

5. If Trust, Date of Trust Instrument: _______

3 ADDRESS

____________________________ U.S. Citizen [_] YES [_] NO*
Street

____________________________ ______________________________
City State Zip Code *Country of Citizenship

4 DISTRIBUTION OPTIONS See Prospectus
[_] Please select one of the following:
[_] Reinvest both dividends and capital gain distributions in
additional shares
[_] Pay dividends to my address above; reinvest capital gain
distributions
[_] Pay both dividends and capital gain distributions in cash
to my address above
[_] Reinvest dividends and pay capital gain distributions in
cash to my address above

5 SPECIAL OPTIONS (For More Information--Check Appropriate
Box)

[_] Automatic Investment Plan [_]Prototype IRA Application
[_] Systematic Withdrawal Plan

NOTE: If a selection is not made, both dividends and cap-
ital gain distributions will be paid in additional Fund
shares of the same Class.
<PAGE>

6 RIGHTS OF ACCUMULATION--CLASS A SHARES (See Prospectus)

Indicate here any other account(s) in
the group of funds that would qualify
for the cumulative quantity discount as
outlined in the Prospectus.

_________________________ ______________ _______________________
Fund Name Account No. Registered Owner

7 PLEASE INDICATE BELOW IF YOU ARE AFFILIATED WITH PAINEWEBBER

"Affiliated" persons are defined as officers, directors/trustees
and employees of the PaineWebber funds, PaineWebber or its
affiliates, and their parents, spouses and children.

________________________________________________
Nature of Relationship

8 SIGNATURE (S) AND TAX CERTIFICATION (S)

I warrant that I have full authority and am of legal age to
purchase shares of the Fund and have received and read a
current Prospectus of the Fund and agree to its terms. The Fund
and its Transfer Agent will not be liable for acting upon
instructions or inquiries believed genuine. Under penalties of
perjury, I certify that (1) my taxpayer identification number
provided in this application is correct and (2) I am not
subject to backup withholding because (i) I have not been
notified that I am subject to backup withholding as a result of
failure to report interest or dividends or (ii) the IRS has
notified me that I am no longer subject to backup withholding
(strike out clause (2) if incorrect).

__________________________ __________________________ _________
Individual (or Custodian) Joint Registrant (if any) Date

__________________________ __________________________ _________
Corporate Officer, Partner, Title Date
Trustee, etc.

9 INVESTMENT EXECUTIVE IDENTIFICATION (To Be Completed By In-
vestment Executive Only)

__________________________ __________________________
Broker No./Name Branch Wire Code
( )
__________________________ __________________________
Branch Address Telephone

10 CORRESPONDENT FIRM IDENTIFICATION (To Be Completed By Corre-
spondent Firm Only)

__________________________ __________________________
Name Address

__________________________
MAIL COMPLETED FORM TO YOUR PAINEWEBBER INVESTMENT EXECUTIVE OR
CORRESPONDENT FIRM OR TO: PFPC INC., P.O. BOX 8950, WILMINGTON,
DELAWARE 19899.
<PAGE>

Shares of the Fund can be exchanged for shares of the following PaineWebber
Mutual Funds:

INCOME FUNDS

.Global Income Fund

.High Income Fund

.Investment Grade Income Fund

. Low Duration U.S. Government Income Fund

.Strategic Income Fund

.U.S. Government Income Fund

TAX-FREE INCOME FUNDS

.California Tax-Free Income Fund

.Municipal High Income Fund

.National Tax-Free Income Fund

.New York Tax-Free Income Fund

GROWTH FUNDS

.Capital Appreciation Fund

.Emerging Markets Equity Fund

.Global Equity Fund

.Growth Fund

.Regional Financial Growth Fund

.Small Cap Growth Fund

.Small Cap Value Fund

GROWTH AND INCOME FUNDS

.Tactical Allocation Fund

.Balanced Fund

.Utility Income Fund

PW MONEY MARKET FUND

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

A prospectus containing more complete information for any of the above funds,
including charges and expenses, can be obtained from a PaineWebber investment
executive or correspondent firm. Read it carefully before investing.

[LOGO OF RECYCLED PAPER APPEARS HERE]

PaineWebber

Growth and Income

Fund

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND
OR ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.

PROSPECTUS

November , 1995
-----------------------------
<PAGE>

PAINEWEBBER GROWTH AND INCOME FUND

1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019

STATEMENT OF ADDITIONAL INFORMATION

PaineWebber Growth and Income Fund ("Fund") is a diversified series of
PaineWebber America Fund ("Trust"), a professionally managed, open-end
investment company organized as a Massachusetts business trust. The Fund seeks
to provide current income and capital growth; it invests primarily in dividend-
paying equity securities believed by Mitchell Hutchins to have the potential
for rapid earnings growth; stocks are selected through a disciplined
methodology that utilizes quantitative measures of value, earnings and price
momentum, as well as fundamental analysis. The Fund's investment adviser,
administrator and distributor is Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins"), a wholly owned subsidiary of PaineWebber Incorporated
("PaineWebber"). As distributor for the Fund, Mitchell Hutchins has appointed
PaineWebber to serve as the exclusive dealer for the sale of Fund shares. This
Statement of Additional Information is not a prospectus and should be read only
in conjunction with the Fund's current Prospectus, dated November , 1995. 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 November , 1995.

INVESTMENT POLICIES AND RESTRICTIONS

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

YIELD FACTORS AND RATINGS. Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's ("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 Fund 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.

SPECIAL CONSIDERATIONS RELATING TO FOREIGN SECURITIES. To the extent that the
Fund invests in U.S. dollar-denominated 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 Fund 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 Fund may invest in foreign securities by purchasing American Depository
Receipts ("ADRs"). Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed
<PAGE>

for use in the U.S. securities markets. ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities.
For purposes of the Fund's investment policies, ADRs are deemed to have the
same classification as the underlying securities they represent. Thus, an ADR
representing ownership of common stock will be treated as common stock.

Investment income on certain foreign securities in which the Fund 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 Fund would be subject.

CONVERTIBLE SECURITIES. A convertible security entitles the holder to receive
interest paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities have characteristics similar to non-
convertible debt securities in that they ordinarily provide a stable stream of
income with generally higher yields than those of common stocks of the same or
similar issuers. Convertible securities rank senior to common stock in a
corporation's capital structure but are usually subordinated to comparable non-
convertible securities.

Convertible securities have unique investment characteristics in that they
generally (1) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (2) are less subject to fluctuation in
value than the underlying stock since they have fixed income characteristics
and (3) provide the potential for capital appreciation if the market price of
the underlying common stock increases. The value of a convertible security is a
function of its "investment value" (determined by its yield comparison with the
yields of other securities of comparable maturity and quality that do not have
a conversion privilege) and its "conversion value" (the security's worth, at
market value, if converted into the underlying common stock). The investment
value of a convertible security is influenced by changes in interest rates,
with investment value declining as interest rates increase and increasing as
interest rates decline. The credit standing of the issuer and other factors
also may have an effect on the convertible security's investment value. The
conversion value of a convertible security is determined by the market price of
the underlying common stock. If the conversion value is low relative to the
investment value, the price of the convertible security is governed principally
by its investment value, and generally the conversion value decreases as the
convertible security approaches maturity. To the extent the market price of the
underlying common stock approaches or exceeds the conversion price, the price
of the convertible security will be increasingly influenced by its conversion
value. In addition, a convertible security generally will sell at a premium
over its conversion value determined by the extent to which investors place
value on the right to acquire the underlying common stock while holding a fixed
income security.

A convertible security may be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument. If a convertible security held by the Fund is called for
redemption, the Fund will be required to permit the issuer to redeem the
security, convert it into the underlying common stock or sell it to a third
party.

ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in
illiquid securities. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven

2
<PAGE>

days in the ordinary course of business at approximately the amount at which
the 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 has
determined are liquid pursuant to guidelines established by the Trust's board
of trustees. The assets used as cover for OTC options written by the Fund will
be considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Fund 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"). Where registration is required, the 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 the Fund may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the 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 the 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.

The Trust's board of trustees has delegated the function of making day-to-day
determinations of liquidity to Mitchell Hutchins, pursuant to guidelines
approved by the board. Mitchell Hutchins 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 monitors the
liquidity of restricted securities in the Fund's portfolio and reports
periodically on such decisions to the board.

3
<PAGE>

REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
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 and 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 the
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 the Fund if the other party
to a repurchase agreement becomes insolvent.

The Fund intends to enter into repurchase agreements only with banks and
dealers in transactions believed by Mitchell Hutchins to present minimal credit
risks in accordance with guidelines established by the Trust's board of
trustees. Mitchell Hutchins reviews and monitors the creditworthiness of those
institutions under the board's general supervision.

REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements with banks and securities dealers up to an aggregate value of not
more than 5% of its total assets. Such agreements involve the sale of
securities held by the Fund subject to its 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 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. As described in the prospectus, the Fund is
authorized to lend up to 10% of the total value of its portfolio securities to
broker-dealers or institutional investors that Mitchell Hutchins deems
qualified, but only when the borrower maintains with the Fund's custodian bank
collateral either in cash or money market instruments in an amount, marked to
market daily, at least equal to the market value of the securities loaned, plus
accrued interest and dividends. 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. The Fund
will retain authority to terminate any loans at any time. The 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. The 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. The 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.

4
<PAGE>

SHORT SALES "AGAINST THE BOX". As indicated in the prospectus, the 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 the Fund,
and the Fund is obligated to replace the securities borrowed at a date in the
future. When the 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. The Fund
will incur transaction costs, including interest expense, in connection with
opening, maintaining and closing short sales against the box. The Fund
currently does not intend to have obligations under short-sales that at any
time during the coming year exceed 5% of the Fund's net assets.

The Fund might make a short sale "against the box" in order to hedge against
market risks when Mitchell Hutchins believes that the price of a security may
decline, thereby causing a decline in the value of a security owned by the Fund
or a security convertible into or exchangeable for a security owned by the
Fund, or when Mitchell Hutchins wants to sell a security that the 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 the 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 the Fund enters into certain transactions to make
future payments to third parties, including reverse repurchase agreements, it
will maintain with an approved custodian in a segregated account cash, U.S.
government securities or other liquid high-grade debt 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 and futures contracts.

INVESTMENT LIMITATIONS OF THE FUND

The Fund may not (1) purchase any securities other than those its investment
objective permits it to purchase; (2) purchase securities of any one issuer
(except U.S. government securities) if as a result more than 5% of the Fund's
total assets would be invested in such issuer or the Fund would own or hold
more than 10% of the outstanding voting securities of that issuer, provided,
however, that up to 25% of the value of the Fund's total assets may be invested
without regard to these limitations; (3) purchase securities on margin, except
for short-term credit necessary for clearance of portfolio transactions and
except that the Fund may make margin deposits in connection with its use of
options, futures contracts and options on futures contracts; (4) underwrite
securities of other issuers, except to the extent that, in connection with the
disposition of portfolio securities, the Fund may be deemed an underwriter
under the federal securities laws; (5) make short sales of securities or
maintain a short position, except that the Fund may (a) make short sales and
may maintain short positions in connection with its use of options, futures
contracts and options on futures contracts and (b) sell short "against the
box"; (6) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
which invest

5
<PAGE>

in real estate or interests therein; (7) purchase or sell commodities or
commodity contracts, except that the Fund may purchase or sell stock index
futures, interest rate futures and options thereon; (8) invest in oil, gas or
mineral-related programs or leases; (9) make loans, except through loans of
portfolio securities as described herein and except through repurchase
agreements; provided that for purposes of this restriction the acquisition of
bonds, debentures, or other corporate debt securities and investment in
government obligations, short-term commercial paper, certificates of deposit
and bankers' acceptances shall not be deemed to be the making of loans; (10)
purchase any securities issued by any other investment company, except in
connection with the merger, consolidation or acquisition of all the securities
or assets of such an issuer; (11) issue senior securities or borrow money,
except from banks for temporary purposes and except for reverse repurchase
agreements, and then in an aggregate amount not in excess of 10% of the Fund's
total assets; provided further that the Fund will not purchase securities while
borrowings in excess of 5% of the Fund's total assets are outstanding; or (12)
make an investment in any one industry if the investment would cause the
aggregate value of the Fund's investments in such industry to exceed 25% of the
Fund's total assets.

The foregoing fundamental investment limitations cannot be changed 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.

The following investment restrictions may be changed by the Trust's board of
trustees without shareholder approval: the Fund may not (1) purchase or retain
the securities of any issuer if, to the knowledge of the Fund's management, the
officers and trustees of the Trust and the officers and directors of Mitchell
Hutchins (each owning beneficially more than 0.5% of the outstanding securities
of an issuer) own in the aggregate more than 5% of the securities of the
issuer; (2) purchase any security if as a result more than 5% of its total
assets would be invested in securities of companies that together with any
predecessors have been in continuous operation for less than three years; (3)
invest more than 10% of its net assets 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 it has valued the
securities and includes, among other things, repurchase agreements maturing in
more than seven days; (4) make investments in warrants if such investments,
valued at the lower of cost or market, exceed 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 unlisted warrants, valued at the lower of cost or market, do not
exceed 2% of its 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 securities, stock or bond indices or futures contracts; or (5) 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 to be of comparable quality. This non-fundamental policy (5) can be
changed only upon 30 days' advance notice to shareholders. The Fund will
continue to interpret fundamental investment limitation (6) to prohibit
investment in real estate limited partnerships.

6
<PAGE>

HEDGING STRATEGIES

GENERAL DESCRIPTION OF HEDGING STRATEGIES. As discussed in the Prospectus,
Mitchell Hutchins 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 the
Fund's portfolio. The particular Hedging Instruments are described in the
Appendix to the Prospectus.

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 the Fund's portfolio. Thus, in a short hedge the 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,
the Fund might purchase a put option on a security to hedge against a potential
decline in the value of that security. If the price of the security declined
below the exercise price of the put, the 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, the 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 the Fund intends to acquire. Thus, in a
long hedge the 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, the 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, the Fund could exercise the call and thus limit its
acquisition cost to the exercise price plus the premium paid and transactions
costs. Alternatively, the 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 the 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 the 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, the Fund's ability to use Hedging Instruments will be
limited by tax considerations. See "Taxes."

7
<PAGE>

as new options, futures contracts or other techniques are developed. Mitchell
Hutchins may utilize these opportunities to the extent that they are consistent
with the Fund's investment objective and permitted by the Fund's investment
limitations and applicable regulatory authorities. The Fund's 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 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 is 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. Because the Fund invests primarily in
common stocks of issuers meeting the specific criteria described in the
Prospectus, there might be a significant lack of correlation between the
portfolio and the stock indices underlying any such Hedging Instruments used by
the Fund.

(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 the Fund entered into a
short hedge because Mitchell Hutchins projected a decline in the price of a
security in the 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, the 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, the 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 were 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 the 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

8
<PAGE>

sell a portfolio security at a disadvantageous time. The 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 the
Fund.

COVER FOR HEDGING STRATEGIES. The Fund will not use Hedging Instruments for
speculative purposes or for purposes of leverage. Transactions using Hedging
Instruments, other than purchased options, expose the Fund to an obligation to
another party. The 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 short-term liquid debt securities, with a
value sufficient at all times to cover its potential obligations to the extent
not covered as provided in (1) above. The Fund will comply with SEC guidelines
regarding cover for hedging transactions and will, if the guidelines so
require, set aside cash, U.S. government securities or other liquid, high-grade
debt 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
the 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 Fund may purchase put and call options, and write (sell) covered
put or call options, on equity and debt securities and stock indices. 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 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. If the covered option is an OTC option,
the securities or other assets used as cover would be considered illiquid to
the extent described under "Investment Policies and Limitations--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.

The Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, the 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

9
<PAGE>

transaction. Conversely, the 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 the Fund to
realize profits or limit losses on an option position prior to its exercise or
expiration.

The Fund may purchase and write both exchange-traded and OTC options.
Currently, many options on equity securities are exchange-traded. Exchange
markets for options on debt securities 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 the Fund and its contra party (usually a securities dealer or
a bank) with no clearing organization guarantee. Thus, when the 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 Fund 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 used by the Fund 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 Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Fund intends 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
Fund will enter into OTC options only with contra parties that are expected to
be capable of entering into closing transactions with the Fund, there is no
assurance that the 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, the Fund might be unable to close out an OTC option
position at any time prior to its expiration.

If the 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 Fund's use of options is governed by
the following guidelines, which can be changed by the Trust's board of trustees
without shareholder vote:

(1) 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 the Fund's total
assets.

10
<PAGE>

(2) 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 the Fund's net assets.

(3) The aggregate premiums paid on all options (including options on
securities and stock or 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 Fund may purchase and sell stock index futures contracts and
interest rate futures contracts. The 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 strategies similar to those
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 the 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 the Fund at the
termination of the transaction if all contractual obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, the
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 the Fund's obligations to or from a futures
broker. When the Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when the 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 the 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 Fund intends 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.

11
<PAGE>

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 the 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. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the future or option or to maintain cash or securities in a
segregated account.

Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or related options might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the futures and related options
markets are subject to daily variation margin calls and might be compelled to
liquidate futures or related options positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the futures market are
less onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the futures and securities markets
involving arbitrage, "program trading" and other investment strategies might
result in temporary price distortions.

LIMITATIONS ON THE USE OF FUTURES. The Fund's use of futures is governed by
the following guidelines, which can be changed by the Trust's board of trustees
without shareholder vote:

(1) To the extent the Fund enters into futures contracts, 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 the Fund's net
assets.

(2) The aggregate premiums paid on all options (including options on
securities and stock or 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.

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

12
<PAGE>

TRUSTEES AND OFFICERS

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

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE THE TRUST OTHER DIRECTORSHIPS
---------------------- ------------- --------------------
<S> <C> <C>
E. Garrett Bewkes, Trustee and Mr. Bewkes is a director of Paine
Jr.**; 68 Chairman of the Webber Group Inc. ("PW Group")
Board of Trustees (holding company of PaineWebber
and Mitchell Hutchins) and a con-
sultant to PW Group. Prior to
1988, he was chairman of the
board, president and chief execu-
tive officer of American Bakeries
Company. Mr. Bewkes is also a di-
rector of Interstate Bakeries
Corporation, NaPro
BioTherapeutics, Inc. and a di-
rector or trustee of 26 other in-
vestment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Meyer Feldberg; 53 Trustee Mr. Feldberg is Dean and Professor
Columbia University of Management of the Graduate
101 Uris Hall School of Business, Columbia Uni-
New York, New York 10027 versity. Prior to 1989, he was
president of the Illinois Insti-
tute of Technology. Dean Feldberg
is also a
director of AMSCO International
Inc., Federated Department
Stores, Inc., Inco Homes Corpora-
tion and New World Communications
Group Incorporated and a director
or trustee of 18 other investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
George W. Gowen; 65 Trustee Mr. Gowen is a partner in the law
666 Third Avenue firm of Dunnington, Bartholow &
New York, New York 10017 Miller. Prior to May 1994, he was
a partner in the law firm of Fry-
er, Ross & Gowen. Mr. Gowen is
also a director of Columbia Real
Estate Investments, Inc. and a
director or trustee of 16 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>

13
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE THE TRUST OTHER DIRECTORSHIPS
---------------------- ------------- --------------------
<S> <C> <C>
Frederic V. Malek; 58 Trustee Mr. Malek is chairman of Thayer
901 15th Street, N.W. Capital Partners (investment
Suite 300 bank) and a co-chairman and di-
Washington, D.C. 20005 rector of CB Commercial 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 North-
west Airlines Inc., NWA Inc.
(holding company of Northwest
Airlines Inc.) and Wings Holdings
Inc. (holding company of NWA
Inc.). Prior to 1989, he was em-
ployed by the Marriott Corpora-
tion (hotels, restaurants, air-
line catering and contract feed-
ing), where he most recently was
an executive vice president and
president of Marriott Hotels and
Resorts. Mr. Malek is also a di-
rector of American Management
Systems, Inc., Automatic Data
Processing, Inc., Avis, Inc., FPL
Group, Inc., ICF International,
Manor Care, Inc. and National Ed-
ucation Corporation and a direc-
tor or trustee of 16 other in-
vestment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Frank P. L. Minard**; 50 Trustee Mr. Minard is chairman and a di-
rector of Mitchell Hutchins,
chairman of the board of Mitchell
Hutchins Institutional Investors
Inc. and a director of
PaineWebber. Prior to 1993, Mr.
Minard was managing director of
Oppenheimer Capital in New York
and Director of Oppenheimer Capi-
tal Ltd. in London. Mr. Minard is
also a director or trustee of 27
other investment companies for
which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

14
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE THE TRUST OTHER DIRECTORSHIPS
---------------------- ------------- --------------------
<S> <C> <C>
Judith Davidson Moyers; 60 Trustee Mrs. Moyers is president of Public
Public Affairs Affairs Television, Inc., an edu-
Television cational consultant and a home
356 W. 58th Street economist. Mrs. Moyers is also a
New York, New York 10019 director of Columbia Real Estate
Investments, Inc. and Ogden Cor-
poration and a director or
trustee of 16 other investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Thomas F. Murray; 84 Trustee Mr. Murray is a real estate and
400 Park Avenue financial consultant. Mr. Murray
New York, New York 10022 is also a director and chairman
of American Continental Proper-
ties, Inc., a trustee of Pruden-
tial Realty Trust and a director
or trustee of 16 other investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Margo N. Alexander; 48 President Ms. Alexander is president, chief
executive officer and a director
of Mitchell Hutchins. Prior to
January 1995, Ms. Alexander was
an executive vice president of
PaineWebber. Ms. Alexander is
also president of 38 other in-
vestment companies or which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Teresa M. Boyle; 36 Vice President Ms. Boyle is a first vice presi-
dent and manager--advisory admin-
istration of Mitchell Hutchins.
Prior to November 1993, she was
compliance manager of Hyperion
Capital Management, Inc., an in-
vestment advisory firm. Prior to
April 1993, Ms. Boyle was a vice
president and manager--legal ad-
ministration of Mitchell
Hutchins. Ms. Boyle is also a
vice president of 38 other in-
vestment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE THE TRUST OTHER DIRECTORSHIPS
---------------------- ------------- --------------------
<S> <C> <C>
Joan L. Cohen; 31 Vice President and Ms. Cohen is a vice president and
Assistant Secretary attorney of Mitchell Hutchins.
Prior to December 1993, she was
an associate at the law firm of
Seward & Kissel. Ms. Cohen is
also a vice president and assis-
tant secretary of 26 other in-
vestment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Ellen R. Harris; 49 Vice President Ms. Harris is chief domestic eq-
uity strategist and a managing
director of Mitchell Hutchins.
Ms. Harris is also a vice presi-
dent of 19 other investment com-
panies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
C. William Maher; 34 Vice President and Mr. Maher is a first vice presi-
Assistant Treasurer dent and the senior manager of
the Fund Administration Division
of Mitchell Hutchins. Mr. Maher
is also a vice president and as-
sistant treasurer of 38 other in-
vestment 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
Assistant Treasurer Mitchell Hutchins. Ms. Moran is
also a vice president and assis-
tant treasurer of 38 other in-
vestment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Dianne E. O'Donnell; 43 Vice President and Ms. O'Donnell is a senior vice
Secretary president and deputy general
counsel of Mitchell Hutchins. Ms.
O'Donnell is also a vice presi-
dent and secretary of 38 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE THE TRUST OTHER DIRECTORSHIPS
---------------------- ------------- --------------------
<S> <C> <C>
Victoria E. Schonfeld; Vice President Ms. Schonfeld is a managing direc-
44 tor and general counsel of Mitch-
ell Hutchins. From April 1990 to
May 1994, she was a partner in
the law firm of Arnold & Porter.
Prior to April 1990, she was a
partner in the law firm of
Shereff, Friedman, Hoffman &
Goodman. Ms. Schonfeld is also a
vice president of 38 other in-
vestment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Paul H. Schubert; 32 Vice President and Mr. Schubert is a first vice pres-
Assistant Treasurer ident of Mitchell Hutchins. From
August 1992 to August 1994, he
was a vice president at BlackRock
Financial Management, L.P. Prior
to August 1992, he was an audit
manager with Ernst & Young LLP.
Mr. Schubert is also a vice pres-
ident and assistant treasurer of
38 other investment companies for
which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Julian F. Sluyters; 35 Vice President and Mr. Sluyters is a senior vice
Treasurer president and 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 also a vice president
and treasurer of 38 other invest-
ment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Gregory K. Todd; 38 Vice President and Mr. Todd is a first vice president
Assistant Secretary and associate general counsel of
Mitchell Hutchins. Prior to 1993,
he was a partner in the law firm
of Shereff, Friedman, Hoffman &
Goodman. Mr. Todd is also a vice
president and assistant secretary
of 38 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

17
<PAGE>

--------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.

** Messrs. Bewkes and Minard are "interested persons" of the Trust as defined
in the Investment Company Act of 1940 ("1940 Act") by virtue of their
positions with PW Group, PaineWebber and/or Mitchell Hutchins.

The Trust pays trustees who are not "interested persons" of the Trust $1,500
annually and $250 per meeting of the board or any committee thereof. Trustees
also are reimbursed for any expenses incurred in attending meetings. Trustees
and officers of the Trust own in the aggregate less than 1% of the shares of
the Fund. Because Mitchell Hutchins and PaineWebber perform substantially all
of the services necessary for the operation of the Trust and, the Trust
requires no employees. No officer, director or employee of Mitchell Hutchins or
PaineWebber presently receives any compensation from the Trust for acting as a
trustee or officer.

The table below includes certain information relating to the compensation of
the Trust's trustees who held office during the fiscal year ended August 31,
1995.

COMPENSATION TABLE

<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS FROM THE
AGGREGATE ACCRUED AS ESTIMATED TRUST AND THE
COMPENSATION PART OF A ANNUAL FUND COMPLEX
FROM FUND'S BENEFITS UPON PAID TO
NAME OF PERSON, POSITION THE TRUST* EXPENSES RETIREMENT TRUSTEES**
------------------------ ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
E. Garrett Bewkes, Jr.,
Trustee and chairman of
the board of trustees..... -- -- -- --
Meyer Feldberg,
Trustee................... $ -- -- $86,050
George W. Gowen,
Trustee................... -- -- 71,425
Frederic V. Malek,
Trustee................... -- -- 77,875
Frank P.L. Minard,
Trustee................... -- -- --
Judith Davidson Moyers,
Trustee................... -- -- 71,125
Thomas F. Murray,
Trustee................... -- -- 71,925
</TABLE>
--------

* Represents fees paid to each trustee during the fiscal year ended August 31,
1995.
** Represents total compensation paid to each trustee during the calendar year
ended December 31, 1994.

INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS

INVESTMENT ADVISORY ARRANGEMENTS. Mitchell Hutchins acts as the investment
adviser and administrator of the Fund pursuant to a contract with the Trust
dated March 1, 1989 ("Advisory

18
<PAGE>

Contract"). Under the Advisory Contract, the Fund pays Mitchell Hutchins a fee,
computed daily and paid monthly, at the annual rate of 0.70% of the Fund's
daily net assets.

For the fiscal years ended August 31, 1995, August 31, 1994 and August 31,
1993, the Fund paid (or accrued) to Mitchell Hutchins investment advisory and
administration fees of $ , $4,892,163 and $6,413,944, respectively.

Between May 19, 1994 and February , 1995, Mitchell Hutchins Institutional
Investors Inc. ("MHII"), a wholly owned subsidiary of Mitchell Hutchins, served
as sub-adviser to the Fund pursuant to a sub-advisory contract between MHII and
Mitchell Hutchins under which Mitchell Hutchins (not the Fund) paid MHII a fee
in the annual amount of 0.25% of the Fund's average daily net assets. During
the periods from September 1, 1994 to February , 1995 and May 19, 1994 to
August 31, 1994, Mitchell Hutchins paid or accrued to MHII sub-advisory fees of
$ and $405,821, respectively.

Under a service agreement with the Trust pursuant to which PaineWebber
provides certain services to the Fund not otherwise provided by the Fund's
transfer agent, which agreement is reviewed by the Trust's board of trustees
annually, during the fiscal years ended August 31, 1995, August 31, 1994 and
August 31, 1993, the Fund paid (or accrued) to PaineWebber service fees of
$ , $303,496 and $355,724, respectively.

Under the terms of the Advisory Contract, the Fund bears all expenses
incurred in its operation that are not specifically assumed by Mitchell
Hutchins. Expenses borne by the 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 Fund 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, uncollectable 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 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.

As required by state regulation, Mitchell Hutchins will reimburse the Fund if
and to the extent that the aggregate operating expenses of the Fund in any
fiscal year exceed applicable limits.

19
<PAGE>

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 and extraordinary items, are
excluded from this limitation. For the fiscal years ended August 31, 1995,
August 31, 1994 and August 31, 1993, no reimbursements were required pursuant
to such limitation.

Under the Advisory Contract, Mitchell Hutchins will not be liable for any
error of judgment or mistake of law or for any loss suffered by the 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. The Advisory Contract
terminates automatically upon assignment and is terminable at any time without
penalty by the 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.

The following table shows the approximate net assets as of July 31, 1995,
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>
INVESTMENT NET
CATEGORY ASSETS
---------- ---------
($ MIL)
<S> <C>
Domestic (excluding Money Market).............................. $ 5,622.2
Global......................................................... 3,187.0
Equity/Balanced................................................ 2,799.2
Fixed Income (excluding Money Market).......................... 6,010.0
Taxable Fixed Income......................................... 4,257.1
Tax-Free Fixed Income........................................ 1,752.9
Money Market Funds............................................. 20,864.7
</TABLE>

Mitchell Hutchins personnel may invest in securities for their own accounts
pursuant to a code of ethics that describes the fiduciary duty owed to
shareholders of the 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.

DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor of the
Class A, Class B and Class C shares under separate distribution contracts with
the Trust dated July 7, 1993 and , 1995 (collectively, "Distribution
Contracts") that require Mitchell Hutchins to use its best efforts, consistent
with its other businesses, to sell shares of the Fund. Shares of the Fund are
offered continuously. Under separate exclusive dealer agreements between
Mitchell Hutchins and PaineWebber dated July 7, 1993 and , 1995 relating
to the Class A, Class B and Class C

20
<PAGE>

shares (collectively, "Exclusive Dealer Agreements"), PaineWebber and its
correspondent firms sell the Fund's shares.

Under separate plans of distribution pertaining to the Class A, Class B and
Class C shares adopted by the 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"), the 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, except that the Class A Plan for the Fund
provides that the service fee paid with respect to shares sold prior to
December 2, 1988 ("Old Shares") is paid at the annual rate of 0.15% of the
Fund's net assets represented by such Old Shares. Shares acquired through new
purchases, reinvestment of dividends and other distributions and exchanges on
or after December 2, 1988 are not considered "Old Shares" for this purpose.
Under the Class B Plan and the Class C Plan, the Fund pays Mitchell Hutchins a
distribution fee, accrued daily and payable monthly, at the annual rate of
0.75% of the average daily net assets of the Class B shares and Class C shares,
respectively.

Among other things, each Plan provides that (1) Mitchell Hutchins will submit
to the Trust's board of trustees at least quarterly, and the trustees will
review, reports regarding all amounts expended under the Plan and the purposes
for which such expenditures were made, (2) the Plan will continue in effect
only so long as it is approved at least annually, and any material amendment
thereto is approved, by the board of trustees, including those trustees who are
not "interested persons" of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to the
Plan, acting in person at a meeting called for that purpose, (3) payments by
the 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 Fund and (4) while the Plan remains in effect, the
selection and nomination of trustees who are not "interested persons" of the
Trust shall be committed to the discretion of the trustees who are not
"interested persons" of the Trust.

In reporting amounts expended under the Plans to the trustees, Mitchell
Hutchins allocates expenses attributable to the sale of each Class of Fund
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 Fund shares
will not be used to subsidize the sale of any other Class of Fund shares.

For the fiscal year ended August 31, 1995, the Fund paid (or accrued) the
following fees to Mitchell Hutchins under the Plans:

<TABLE>
<S> <C>
Class A........................................................ $
Class B........................................................ $
Class C........................................................ $
</TABLE>

21
<PAGE>

Mitchell Hutchins estimates that it and its parent corporation, PaineWebber,
incurred the following shareholder service-related and distribution-related
expenses with respect to the Fund during the fiscal year ended August 31,
1995:

CLASS A

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

CLASS B

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

CLASS C

"Marketing and advertising" includes various internal costs allocated by
Mitchell Hutchins to its efforts at distributing Fund 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 Fund's shares, including the PaineWebber retail branch system.

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

22
<PAGE>

In approving the Class A Plan, the trustees 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 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 the
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 considered all the features of
the distribution system, including (1) the advantage to investors in having no
initial sales charges deducted from the Fund's 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 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.

23
<PAGE>

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 the Fund,
which fees would increase if the Plan were successful and the Fund attained and
maintained significant asset levels.

Under the Distribution Contract 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.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31,
------------------------------
1995 1994 1993
---------- -------- ----------
<S> <C> <C> <C>
Earned.................................... $ $186,333 $1,794,698
Retained.................................. 11,944 108,359
</TABLE>

For the fiscal year ended August 31, 1995, Mitchell Hutchins earned and
retained $ contingent deferred sales charges paid upon certain redemptions
of Class B shares.

PORTFOLIO TRANSACTIONS

Subject to policies established by the Trust's board of trustees, Mitchell
Hutchins is responsible for the execution of the Fund's portfolio transactions
and the allocation of brokerage transactions. In executing portfolio
transactions, Mitchell Hutchins seeks to obtain the best net results for the
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. 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 Fund 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. While Mitchell Hutchins generally seeks
reasonably competitive commission rates and dealer spreads, payment of the
lowest commission or spread is not necessarily consistent with obtaining the
best net results. For the fiscal years ended August 31, 1995, August 31, 1994
and August 31, 1993, the Fund paid $ , $1,901,499 and $1,131,909,
respectively, in brokerage commissions.

The Fund has no obligation to deal with any broker or group of brokers in the
execution of portfolio transactions. The Fund contemplates that, consistent
with the policy of obtaining the best net results, brokerage transactions may
be conducted through Mitchell Hutchins or its affiliates, including
PaineWebber. The Trust'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 Mitchell Hutchins or its affiliates are reasonable and fair. Specific
provisions in the Advisory Contract authorize Mitchell Hutchins and any of its
affiliates that is a member of a national securities exchange to effect
portfolio transactions for the Fund on such exchange and to retain compensation
in connection with

24
<PAGE>

such transactions. Any such transactions will be effected and related
compensation paid only in accordance with applicable SEC regulations. For the
fiscal year ended August 31, 1995, the Fund paid $ in brokerage
commissions to PaineWebber, which represented % of the total brokerage
commissions paid by the Fund and % of the total dollar amount of
transactions involving payment of commissions. For the fiscal years ended
August 31, 1994 and August 31, 1995, the Fund paid $47,142 and $108,080,
respectively, in brokerage commissions to PaineWebber.

Transactions in futures contracts are executed through futures commission
merchants ("FCMs"), who receive brokerage commissions for their services. The
Fund's procedures in selecting FCMs to execute its transactions in futures
contracts, including procedures permitting the use of Mitchell Hutchins and
its affiliates, are similar to those in effect with respect to brokerage
transactions in securities.

Consistent with the interests of the Fund and subject to the review of the
Trust's board of trustees, Mitchell Hutchins may cause the Fund to purchase
and sell portfolio securities through brokers who provide the Fund with
research, analysis, advice and similar services. In return for such services,
the Fund may pay to those brokers a higher commission than may be charged by
other brokers, provided that Mitchell Hutchins determines in good faith that
such commission is reasonable in terms either of that particular transaction
or of the overall responsibility of Mitchell Hutchins to the Fund and its
other clients and that the total commissions paid by the Fund will be
reasonable in relation to the benefits to the Fund over the long term. For the
fiscal year ended August 31, 1995, Mitchell Hutchins or MHII directed $ in
portfolio transactions to brokers chosen because they provided research
services, for which the Fund paid $ in commissions.

For purchases or sales with broker-dealer firms which act as principal,
Mitchell Hutchins seeks best execution. Although Mitchell Hutchins may receive
certain research or execution services in connection with these transactions,
Mitchell Hutchins 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 will not enter into any explicit soft dollar arrangements
relating to principal transactions and will not receive in principal
transactions the types of services which could be purchased for hard dollars.
Mitchell Hutchins 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 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 Fund effects securities transactions may be used by
Mitchell Hutchins in advising other funds or accounts it advises and,
conversely, research services furnished to Mitchell Hutchins in connection
with other funds or accounts Mitchell Hutchins advises may be used by Mitchell
Hutchins in advising the Fund. Information and research received from brokers
will be in addition to, and not in lieu of, the services required to be
performed by Mitchell Hutchins under the Advisory Contract.

Investment decisions for the Fund and for other investment accounts managed
by Mitchell Hutchins 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 the Fund and one

25
<PAGE>

or more of such accounts. In such cases, simultaneous transactions are
inevitable. Purchases or sales are then averaged as to price and allocated
between the 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 Fund is concerned, or upon its ability to complete its
entire order, in other cases it is believed that coordination and the ability
to participate in volume transactions will be beneficial to the Fund.

The Fund will not purchase securities that are offered in underwritings in
which Mitchell Hutchins or any of its affiliates is a member of the
underwriting or selling group, except pursuant to procedures adopted by the
Trust's board of trustees 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 Mitchell Hutchins or any
affiliate thereof not participate in or benefit from the sale to the Fund.

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 Fund 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 Fund 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; or

(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).

RIGHTS OF ACCUMULATION--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

26
<PAGE>

above) are permitted to purchase Class A shares of the Fund 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 prior to July 1, 1991 are
exchanged for Class B shares of the Fund, 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 Fund acquired through the
exchange.

ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION. As discussed in the
Prospectus, eligible shares of the Fund 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 the
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 the 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 Fund reserves
the right to honor any request for redemption by making payment in whole or in
part in securities chosen by the Fund and valued in the same way as they would
be valued for purposes of computing the Fund's net asset value. If payment is
made in securities, a shareholder may incur brokerage expenses in converting
these securities into cash. The Trust has elected, however, to be governed by
Rule 18f-1 under the 1940 Act, under which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net asset value
of the Fund during any 90-day period for one shareholder. This election is
irrevocable unless the SEC permits its withdrawal. The Fund may suspend

27
<PAGE>

redemption privileges or postpone the date of payment during any period (1)
when the New York Stock Exchange, Inc. ("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 the 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 the
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 Fund of sufficient
Fund shares to provide the withdrawal payment specified by participants in the
Fund's 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 Fund 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.

PAINEWEBBER RMA RESOURCE ACCUMULATION PLAN SM;
PAINEWEBBER RESOURCE MANAGEMENT ACCOUNT (R)(RMA (R))

Shares of the 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

28
<PAGE>

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:

. 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;

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

29
<PAGE>

. 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 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;

. 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;

. 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;

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

. 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

. 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 Fund will automatically convert to Class A shares,
based on the relative net asset values per share of each 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 the 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 the 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.

30
<PAGE>

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 Fund 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.

VALUATION OF SHARES

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

Securities that are listed on U.S. 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 the Sub-Adviser as the primary market. Securities traded in the
OTC market and listed on 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 the Trust's board of trustees.

PERFORMANCE INFORMATION

The Fund's 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 the Fund's Performance Advertisements are calculated according
to the following formula:

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

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

31
<PAGE>

submission of the advertisement for publication. Total return, or "T" in the
formula above, is computed by finding the average annual change in the value of
an initial $1,000 investment over the period. In calculating the ending
redeemable value, for Class A shares, the maximum 4.5% sales charge 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
and 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 Fund 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 Fund calculates 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 Fund for the periods indicated. All returns for
periods of more than one year are expressed as an average return.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Fiscal year ended August 31, 1995:
Standardized Return*..................................
Non-Standardized Return...............................
Five years ended August 31, 1995:
Standardized Return*..................................
Non-Standardized Return...............................
Ten years ended August 31, 1995:
Standardized Return*..................................
Non-Standardized Return...............................
Inception** to August 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 4.5%. 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.
Class C shares impose a contingent deferred sales charge only on redemptions
made within a year of purchase; therefore, for periods longer than one year,
Non-Standardized Return is identical to Standardized Return.

** The inception date for each Class of shares is as follows: Class A--December
20, 1983, Class B--July 1, 1991 and Class C--July 2, 1992.

32
<PAGE>

OTHER INFORMATION. In Performance Advertisements, the Fund may compare its
Standardized Return and/or its 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 Fund 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 Fund 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 Fund 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 the Fund investment are reinvested
in additional Fund shares, any future income or capital appreciation of the
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 the Fund investment would increase more quickly than if dividends
or other distributions had been paid in cash.

The Fund may also compare its performance with the performance of bank
certificates of deposit (CDs) as measured by the CDA Investment Technologies,
Inc. 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 Fund's 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 Fund
are not insured or guaranteed by the U.S. government and returns and net asset
value will fluctuate. The securities held by the Fund generally have longer
maturities than most CDs and may reflect interest rate fluctuations for longer
term securities. An investment in the Fund involves greater risks than an
investment in either a money market fund or a CD.

The 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.

33
<PAGE>

[MAC ART]

Over time, stocks have outperformed all other investments by a wide margin,
offering a solid hedge against inflation. From 1926 to 1993, stocks beat all
other traditional asset classes. A $10 investment in the S&P 500 grew to
$8,001, significantly more than any other investment.

The chart shown is for illustrative purposes only and does not represent the
Fund's performance and should not be considered an indication or guarantee of
future results. Year-to-year fluctuations of the S&P 500 have been significant,
and total return for some periods has been negative. The S&P 500 includes
companies with larger market capitalizations than those in which the Fund
invests. 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.

TAXES

In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code, the 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 and net short-
term capital gain) ("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 other income (including gains
from options or futures) derived with respect to its business of investing in
securities ("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, options or futures held for less than three months ("Short-

34
<PAGE>

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 the 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 the 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 the 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 the 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 Fund shares 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.

The 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.

The Fund may invest in the stock of "passive foreign investment companies"
("PFICs") if such stock is denominated in U.S. dollars and otherwise 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, the 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 the 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

35
<PAGE>

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
may 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 Fund, 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, involves complex rules that will determine for
income tax purposes the character and timing of recognition of the gains and
losses the Fund realizes in connection therewith. Income from transactions in
options and futures derived by the Fund with respect to its business of
investing in securities will qualify as permissible income under the Income
Requirement. However, income from the disposition of options and futures
contracts will be subject to the Short-Short Limitation if they are held for
less than three months.

If the 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. The
Fund will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Fund does not qualify for this
treatment, it may be forced to defer the closing out of certain options and
futures beyond the time when it otherwise would be advantageous to do so, in
order for the Fund to continue to qualify as a RIC.

OTHER INFORMATION

The Fund's name was changed from "PaineWebber Classic Growth and Income Fund"
to PaineWebber Dividend Growth Fund effective May 17, 1991 and to its current
name effective April 3, 1995. Effective on May 17, 1991, the Fund was combined
in a tax-free reorganization with PaineWebber Classic Dividend Growth Fund,
which was at the time another series of the Trust. As a result of the
reorganization, each shareholder of PaineWebber Classic Dividend Growth Fund
became a shareholder of Growth and Income Fund. Prior to , 1995 the Class
C shares of the Fund were known as "Class D" shares.

PaineWebber America Fund is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of the
Fund could, under certain circumstances, be held personally liable for the
obligations of the Trust or Fund. However, the 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,

36
<PAGE>

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

CLASS-SPECIFIC EXPENSES. The 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 M Street, N.W.,
Washington, D.C., 20036-5891, counsel to the Fund, has passed upon the legality
of the shares offered by the Prospectus. Kirkpatrick & Lockhart LLP also acts
as counsel to PaineWebber and Mitchell Hutchins in connection with other
matters.

AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for the Fund.

FINANCIAL STATEMENTS

The Fund's Annual Report to Shareholders for the fiscal year ended August 31,
1995 is a separate document supplied with this Statement of Additional
Information and the financial statements, accompanying notes and (with respect
to the Annual Report to Shareholders) report of independent auditors appearing
therein are incorporated herein by this reference.

37
<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 edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues; AA. Bonds which are
rated Aa are judged to be of high quality by all standards. Together with the
Aaa group they comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risks appear somewhat larger than in Aaa securities; A. Bonds which are
rated A possess many favorable investment attributes and are to be considered
as upper medium grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future; BAA. Bonds which are rated
Baa are considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest 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.

DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("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

38
<PAGE>

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.

39
<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN- FORMATION OR TO MAKE ANY REPRE-
SENTATIONS 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 FUND OR ITS DISTRIBUTOR. THE PROSPECTUS AND THIS
STATEMENT OF ADDITIONAL INFORMATION DO NOT CONSTITUTE AN OFFERING BY THE FUND
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAW-
FULLY BE MADE.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Restrictions...................................... 1
Hedging Strategies........................................................ 7
Trustees and Officers..................................................... 13
Investment Advisory and Distribution Arrangements......................... 18
Portfolio Transactions.................................................... 24
Reduced Sales Charges, Additional Exchange and Redemption Information and
Other Services........................................................... 26
Conversion of Class B Shares.............................................. 30
Valuation of Shares....................................................... 31
Performance Information................................................... 31
Taxes..................................................................... 34
Other Information......................................................... 36
Financial Statements...................................................... 37
Appendix.................................................................. 38
</TABLE>

[LOGO OF RECYCLED PAPER APPEARS HERE]

PAINEWEBBER

GROWTH AND INCOME FUND

--------------------------------------------------------------------------------
Statement of Additional Information

November , 1995
---------------------

PAINEWEBBER
<PAGE>

PAINEWEBBER PAINEWEBBER

GROWTH AND INCOME FUND GROWTH FUND

CLASS Y SHARES
1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019

. PaineWebber Growth and Income Fund ("Growth and Income Fund") seeks to pro-
vide current income and capital growth and invests primarily in dividend-
paying equity securities believed by Mitchell Hutchins to have the potential
for rapid earnings growth; stocks are selected through a disciplined method-
ology that utilizes quantitative measures of value, earnings and price mo-
mentum, as well as fundamental analysis.

. PaineWebber Growth Fund ("Growth Fund") seeks long-term capital appreciation
and invests primarily in equity securities issued by companies deemed by its
investment adviser to have substantial potential for capital growth.

This Prospectus concisely sets forth information about the Funds a prospec-
tive investor should know before investing. Please retain this Prospectus for
future reference. A Statement of Additional Information dated November , 1995
(which is incorporated by reference herein), has been filed with the Securi-
ties and Exchange Commission. The Statement of Additional Information can be
obtained without charge, and further inquiries can be made, by contacting the
Fund, your PaineWebber investment executive or PaineWebber's correspondent
firms or by calling toll-free 1-800-647-1568. Participants in the PaineWebber
Savings Investment Plan ("PW SIP") may make further inquiries by contacting
the PaineWebber Incorporated Benefits Department, 1000 Harbor Boulevard, 10th
Floor, Weehawken, New Jersey 07087 or by calling 1-201-902-4444.
----------------

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, and to the trustee of the PW
SIP on behalf of that Plan. See "Purchases."

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

Growth and Income Fund and Growth Fund are series of PaineWebber America
Fund and PaineWebber Olympus Fund, respectively (each a "Trust"), which are
Massachusetts business trusts.

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

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.

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

The date of this Prospectus is November , 1995

PAINEWEBBER INCORPORATED
<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTA-
TIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS OR THEIR DISTRIBUTOR.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR THEIR DISTRIBU-
TOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.

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

FUND EXPENSES

The following tables are intended to assist investors in understanding the
expenses associated with investing in Class Y shares of each Fund.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Maximum sales charge on purchases of shares................................ None
Sales charge on reinvested dividends....................................... None
Redemption fee or deferred sales charge.................................... None
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)

<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND GROWTH FUND
----------- -----------
<S> <C> <C>
Management fees......................................... 0.70% 0.75%
12b-1 fees.............................................. 0.00 0.00
Other expenses.......................................... 0. 0.
---- ----
Total estimated operating expenses...................... 0. % 0. %
==== ====
</TABLE>

EXAMPLE OF EFFECT OF FUND EXPENSES

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

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
GROWTH AND INCOME FUND................ $ $ $ $
GROWTH FUND........................... $ $ $ $
</TABLE>

This Example assumes that all dividends and other distributions are rein-
vested and that the percentage amounts listed under Annual Fund Operating Ex-
penses remain the same in the years shown. The above tables and the assumption
in the Example of a 5% annual return are required by regulations of the Securi-
ties and Exchange Commission ("SEC") applicable to all mutual funds; the as-
sumed 5% annual return is not a prediction of, and does not represent, the pro-
jected or actual performance of the Class Y shares of either Fund.

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES, AND A FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The
actual expenses attributable to a Fund's Class Y shares will depend upon, among
other things, the level of average net assets and the extent to which the Fund
incurs variable expenses, such as transfer agency costs.

2
<PAGE>

FINANCIAL HIGHLIGHTS

The table below provides selected per share data and ratios for one Class C
share of each Fund for the periods shown. This information is supplemented by
the financial statements and accompanying notes appearing in each Fund's An-
nual Report to Shareholders for the fiscal year ended August 31, 1995, which
are incorporated by reference into the Statement of Additional Information.
Further information about the performance of each Fund is also included in the
Annual Report to Shareholders, which may be obtained without charge. The fi-
nancial statements and notes, as well as the information in the table appear-
ing below, have been audited by Ernst & Young LLP, independent auditors, whose
report thereon is included in the Annual Report to Shareholders. Further in-
formation about each Fund's performance also is included in the Annual Report
to Shareholders, which may be obtained without charge.

<TABLE>
<CAPTION>
CLASS Y(2)
-----------------------------------------------------------------------------
GROWTH AND INCOME FUND GROWTH FUND
------------------------------------ ---------------------
FOR THE
FOR THE PERIOD
YEARS ENDED FEBRUARY 12, FOR THE YEARS ENDED
AUGUST 31, 1992+ TO AUGUST 31,++
---------------------- AUGUST 31, ------------------------------
1995 1994 1993 1992 1995 1994 1993 1992
---- ------- ------- ------------ ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ $ 20.86 $ 20.48 $ 20.95 $ 20.71 $ 16.83 $ 17.50
------- ------- ------- --- ------- ------- -------
Income (loss) from
investment operations:
Net investment income.. 0,33 0.33 0.16 0.03 0.08 0.05
Net realized and
unrealized gains
(losses) from
investment
transactions.......... (0.40) 0.37 (0.49) 0.55 4.42 (0.11)
------- ------- ------- --- ------- ------- -------
Total income (loss) from
investment operations.. (0.07) 0.70 (0.33) 0.58 4.50 (0.06)
------- ------- ------- --- ------- ------- -------
Less dividends and
distributions:
Dividends from net
investment income..... (0.34) (0.32) (0.14) -- -- (0.01)
Distributions from net
realized gains on
investments and
foreign currency
transactions.......... (0.03) -- -- (1.07) (0.62) (0.60)
------- ------- ------- --- ------- ------- -------
Total dividends and
distributions......... (0.37) (0.32) (0.14) (1.07) (0.62) (0.61)
------- ------- ------- --- ------- ------- -------
Net asset value, end of
period................. $ $20.42 $ 20.86 $ 20.48 $20.22 $ 20.71 $ 16.83
======= ======= ======= === ======= ======= =======
Total Return(1)......... (0.31)% 3.44% (1.15)% 2.67% 27.26% (0.52)%
======= ======= ======= === ======= ======= =======
Ratios/Supplemental
data:
Net assets, end of
period (000's)........ $ $14,690 $17,005 $10,560 $30,521 $20,706 $11,581
Ratio of expenses to
average net assets.... 0.90% 0.86% 0.93%* 0.94% 0.95% 1.12%
Ratio of net investment
income to average net
assets................ 1.60% 1.62% 1.56%* 0.40% 0.60% 0.38%
Portfolio turnover..... 94.32% 36.52% 15.57% 24.41% 35.81% 32.49%
</TABLE>
--------
*Annualized.
+ Commencement of offering of shares.
++ A per share breakdown for Class C shares has been omitted for the period
August 25, 1991 (commencement of offering of shares) to August 31, 1991 due
to immaterial amounts.
(1) Total return is calculated assuming a $1,000 investment on the first day
of each period reported, reinvestment of all dividends and capital gain
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. Total return informa-
tion for periods less than one year are not annualized.

(2) Formerly Class C shares.

3
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

INVESTMENT OBJECTIVES AND PRIMARY INVESTMENTS

The investment objective of GROWTH AND INCOME FUND is to provide current in-
come and capital growth. Growth and Income Fund seeks to achieve this objective
by investing primarily in dividend-paying equity securities believed by Mitch-
ell Hutchins to have the potential for rapid earnings growth; stocks are se-
lected through a disciplined methodology that utilizes quantitative measures of
value, earnings and price momentum, as well as fundamental analysis.

The investment objective of GROWTH FUND is to provide long-term capital ap-
preciation. Growth Fund seeks to achieve this objective by investing primarily
in equity securities (common and preferred stocks and securities convertible
into common stock) issued by companies that, in the judgment of its investment
adviser have substantial potential for capital growth.

Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") serves as in-
vestment adviser and administrator for each Fund.

There can be no assurance that either Fund will achieve its investment objec-
tive. Each Fund's net asset value fluctuates based upon changes in the value of
its portfolio securities. Each Fund's investment objective and certain invest-
ment limitations as described in the Statement of Additional Information are
fundamental policies that may not be changed without shareholder approval. All
other investment policies may be changed by each Trust's board of trustees
without shareholder approval.

GROWTH AND INCOME FUND

Growth and Income Fund's investment objective is to provide current income
and capital growth. The Fund seeks to achieve this objective by investing pri-
marily in dividend-paying equity securities (common and preferred stocks) be-
lieved by Mitchell Hutchins to have the potential for rapid earnings growth.
Under normal circumstances, the Fund will invest at least 65% of its total as-
sets in such securities. In managing the Fund, Mitchell Hutchins follows a dis-
ciplined methodology under which stocks from a universe of approximately 2,000
medium to large capitalization companies are ranked utilizing quantitative mea-
sures of value, earnings and price momentum in the context of Mitchell
Hutchins' economic forecast. Stocks are selected for the Fund based on funda-
mental analysis of the highest ranking stocks.

Growth and Income Fund may invest up to 35% of its total assets in equity se-
curities not meeting the above criteria, as well as convertible securities,
U.S. government securities, investment grade corporate debt securities and
money market instruments. See "Other Investment Policies and Risk Factors--Debt
Securities." Growth and Income Fund may invest in instruments other than common
stocks when, in the opinion of Mitchell Hutchins, their projected total return
is equal to or greater than that of common stocks or when such holdings might
reduce the volatility of the Fund's portfolio.

Growth and Income Fund primarily purchases equity securities of issuers with
medium to large capitalization. The Fund generally will not invest in stocks of
issuers with market capitalization below $300 million. Over the past 65 years,
the total return of equity investments, as measured by the Standard & Poor's
500 Composite Stock Price Index ("S&P 500"), has exceeded the inflation rate,
as measured by the Consumer Price Index, as well as total return on long-term
Treasury bonds, long-term corporate bonds and short-term Treasury bills. Howev-
er, year-to-year fluctuations in each of these indexes and instruments have
been significant,

4
<PAGE>

and total return for the S&P 500 for some periods has been negative. There can
be no assurance that this trend will continue, and the Fund's performance may
be better or worse than that of the S&P 500.

GROWTH FUND

In selecting equity securities for investment by Growth Fund, Mitchell
Hutchins considers all those factors it believes affect potential capital ap-
preciation, including an issuer's current and projected revenues, earnings,
cash flow and assets, as well as general market conditions in relevant indus-
tries. Under normal circumstances, at least 65% of Growth Fund's assets is in-
vested in equity securities. Growth Fund may invest up to 35%, and for tempo-
rary purposes more than 35%, of its assets in U.S. government securities and
non-convertible corporate debt securities. In seeking capital appreciation, the
Fund would invest in debt securities when, for instance, Mitchell Hutchins an-
ticipates that market interest rates may decline or credit factors or ratings
affecting particular issues may improve. Growth Fund may invest in corporate
debt securities rated lower than investment grade. See "Other Investment Poli-
cies and Risk Factors--Debt Securities."

OTHER INVESTMENT POLICIES AND RISK FACTORS

DEBT SECURITIES. Each Fund is permitted to purchase investment grade corpo-
rate debt securities. Securities rated BBB by Standard & Poor's ("S&P"), Baa by
Moody's Investor Services, Inc. ("Moody's") or comparably rated by another na-
tionally recognized statistical rating organization ("NRSRO") are investment
grade but Moody's considers securities rated Baa to have speculative character-
istics. Changes in economic conditions or other circumstances are more likely
to lead to a weakened capacity for such securities to make principal and inter-
est payments than is the case for higher-rated debt securities. Growth Fund is
also permitted to invest up to 35% of its total assets in debt securities (in-
cluding convertible debt securities) rated as low as B+ by S&P, B1 by Moody's
or comparably rated by another NRSRO. Growth and Income Fund is permitted to
invest up to 10% of its total assets in convertible securities rated below in-
vestment grade but no lower than B by S&P or Moody's or comparably rated by an-
other NRSRO.These securities are deemed by those NRSROs to be predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal and may involve major risk exposure to adverse conditions. Such secu-
rities are commonly referred to as "junk bonds." Each Fund is also permitted to
purchase debt securities that are not rated by S&P, Moody's or another NRSRO
but that 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 computa-tion of any percentage limitations applicable to the comparable
rated securities. See the Statement of Additional Information for more informa-
tion about S&P and Moody's ratings.

Ratings of debt securities represent the NRSROs' opinions regarding their
quality, are not a guarantee of quality and may be reduced after the Fund has
acquired the security. Mitchell Hutchins will consider such an event in deter-
mining whether the Fund should continue to hold the security but is not re-
quired to dispose of it. Credit ratings attempt to evaluate the safety of prin-
cipal and interest payments and do not reflect an assessment of the volatility
of the security's market value or the liquidity of an investment in the securi-
ty. Also, NRSROs 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.

Lower rated debt securities generally offer a higher current yield than that
available for

5
<PAGE>

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 re-
financing. 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 dra-
matically. However, such higher yields did not reflect the value of the income
stream that holders of such securities expected, but rather the risk that hold-
ers of such securities could lose a substantial portion of their value as a re-
sult of the issuers' financial restructuring or default. There can be no assur-
ance 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 a Fund's ability to sell such securities at fair value in re-
sponse 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 rated securities, especially in a
thinly traded market.

U.S. government securities in which the Funds may invest include direct obli-
gations of the U.S. Treasury as well as obligations of U.S. government agencies
and instrumentalities backed by the U.S. Treasury or primarily or solely by the
credit of the issuer.

DOLLAR-DENOMINATED FOREIGN SECURITIES. Each Fund each may invest up to 25% of
its total assets in U.S. dollar-denominated securities of foreign issuers that
are traded on recognized U.S. exchanges or in the U.S. over-the-counter ("OTC")
market. These investments may involve special risks, arising both from politi-
cal and economic developments abroad and differences between foreign and U.S
regulatory systems. Foreign securities may be less liquid and their prices more
volatile than comparable U.S. securities. The prices of these securities may
also be affected by fluctuations in the values of foreign currencies.

CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. The Funds may con-
vert any convertible securities they may own into common stock, and they may
hold the common stock upon conversion.

A convertible security entitles the holder to receive interest paid or ac-
crued on debt or dividends paid on preferred stock until the convertible secu-
rity matures or is redeemed, converted or exchanged. Convertible securities
have unique investment characteristics in that they generally (1) have higher
yields than common stocks, but lower yields than comparable non-convertible se-
curities, (2) are less subject to fluctuation in value than the underlying
stock because they have fixed income characteristics and (3) provide the poten-
tial for capital appreciation if the market price of the

6
<PAGE>

underlying common stock increases. While no securities investment is without
some risk, investments in convertible securities generally entail less risk
than the issuer's common stock, although the extent to which such risk is re-
duced depends in large measure upon the degree to which the convertible secu-
rity sells above its value as a fixed income security.

HEDGING STRATEGIES. Each Fund may attempt to reduce the overall risk of its
investments (hedge) by using options (both exchange-traded and OTC) and futures
contracts. A Fund's ability to use these instruments may be limited by market
conditions, regulatory limits and tax considerations. The Appendix to this Pro-
spectus describes the hedging instruments a Fund may use. The Statement of Ad-
ditional Information contains further information on these strategies.

The Funds may write (sell) covered put and call options or buy put and call
options on securities in which they may invest and on stock indices. In addi-
tion, the Funds may buy and sell stock index futures contracts and interest
rate futures contracts and may write covered put and call options or buy put
and call options on such futures contracts. Because each Fund intends to use
options and futures for hedging purposes, each Fund may enter into options and
futures contracts under which the full value of its portfolio is at risk. Under
normal conditions, however, each Fund's use of these instruments will place at
risk a much smaller portion of its assets.

The Funds might not employ any of the strategies described above, and there
can be no assurance that any strategy used will succeed. If Mitchell Hutchins
incorrectly forecasts interest rates, market values or other economic factors
in utilizing a hedging strategy for a Fund, the Fund would be in a better posi-
tion had it not hedged at all. The use of these strategies involves certain
special risks, including (1) the fact that skills needed to use hedging instru-
ments are different from those needed to select a Fund's securities, (2) possi-
ble imperfect correlation, or even no correlation, between price movements of
hedging instruments and price movements of the investments being hedged, (3)
the fact that, while hedging strategies can reduce the risk of loss, they can
also reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in hedged investments and (4) the possible inability
of a Fund to purchase or sell a portfolio security at a time that otherwise
would be favorable for it to do so, or the possible need for a Fund to sell a
portfolio security at a disadvantageous time, due to the need for a Fund to
maintain "cover" or to segregate securities in connection with hedging transac-
tions and the possible inability of such Fund to close out or to liquidate its
hedged position.

New financial products and risk management techniques continue to be devel-
oped. Each Fund may use these instruments and techniques to the extent consis-
tent with its investment objective and regulatory and federal tax considera-
tions.

ILLIQUID SECURITIES. Each Fund may invest up to 10% of its net assets in il-
liquid securities, including certain cover for OTC options and securities whose
disposition is restricted under the federal securities laws (other than "Rule
144A securities" Mitchell Hutchins has determined to be liquid under procedures
approved by the Trust's trustees). Rule 144A establishes a "safe harbor" from
the registration requirements of the Securities Act of 1933. Institutional mar-
kets for restricted securities have developed as a result of Rule 144A, provid-
ing both readily ascertainable values for restricted securities and the ability
to liquidate an investment to satisfy share redemption orders. An insufficient
number of qualified institutional buyers interested in purchasing Rule 144A-el-
igible restricted securities held by a Fund, however,

7
<PAGE>

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.

PORTFOLIO TURNOVER. Each 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 for (100% or more)
a particular Fund will involve correspondingly greater transaction costs,
which will be borne directly by that Fund, and may increase the potential for
taxable short-term capital gains.

LENDING OF PORTFOLIO SECURITIES. Each Fund is authorized to lend up to 10%
of the total value of its portfolio securities to broker-dealers or institu-
tional investors that Mitchell Hutchins deems qualified. Lending securities
enables a Fund to earn additional income, but could result in a loss or delay
in recovering the securities.

OTHER INFORMATION. When Mitchell Hutchins believes unusual circumstances
warrant a defensive posture, each Fund temporarily may commit all or a portion
of its assets to cash or money market instruments, including repurchase agree-
ments. The Funds may also engage in short sales of securities "against the
box" to defer realization of gains or losses for tax or other purposes. Each
Fund may borrow money for temporary purposes, but not in excess of 10% of its
total assets, and such borrowings may include reverse repurchase agreements
aggregating up to 5% of the Fund's total assets.

PURCHASES

Class Y shares are sold to eligible investors at the net asset value next
determined (see "Valuation of Shares") after the purchase order is received at
PaineWebber's New York City offices or, for purchases by the trustee of the PW
SIP by the Fund's 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. Each Fund and Mitchell Hutchins reserve the
right to reject any purchase order and to suspend the offering of the Class Y
shares for a period of time. Mitchell Hutchins, the distributor for each
Fund's Class Y shares, has appointed PaineWebber Incorporated ("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 System and certain specified
other mutual funds) may take part in INSIGHT, a total portfolio asset alloca-
tion 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 combi-
nation of funds, monitoring of investment performance and comprehensive quar-
terly reports that cover market trends, portfolio summaries and personalized
account information. Participating in INSIGHT is subject to payment of an ad-
visory 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. Employ-
ees 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 auto-
matic redemption of money market fund shares) or, if a qualified plan, in-
voiced. Please contact your PaineWebber investment executive or

8
<PAGE>

PaineWebber correspondent firm or call 1-800-697-1568 for more information con-
cerning mutual funds that are available to INSIGHT participants or for other
INSIGHT program information.

PURCHASES BY THE TRUSTEE OF THE PW SIP. The Class Y shares also are offered
for sale to the trustee of the PW SIP, a defined contribution plan sponsored by
Paine Webber Group Inc. ("PW Group"). The trustee of the PW SIP purchases and
redeems Class Y shares to implement the investment choices of individual plan
participants with respect to their PW SIP contributions. INDIVIDUAL PLAN PAR-
TICIPANTS SHOULD CONSULT THE PLAN INFORMATION STATEMENT AND SUMMARY PLAN DE-
SCRIPTION OF THE PW SIP (COLLECTIVELY THE "PLAN DOCUMENTS") FOR A DESCRIPTION
OF THE PROCEDURES AND LIMITATIONS APPLICABLE TO MAKING AND CHANGING INVESTMENT
CHOICES. Copies of the Plan Documents are available from the PaineWebber Incor-
porated Benefits Department, 1000 Harbor Boulevard, 10th Floor, Weehawken, New
Jersey 07087 (telephone 1-201-902-4444).

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

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 mu-
tual fund into that Fund. This category includes former employees of Kid-
der, Peabody & Co., Incorporated ("Kidder, Peabody"), their associated ac-
counts, 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 connec-
tion 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.

The Fund is authorized to offer Class Y shares to other employee benefit and
retirement plans of PW Group and its affiliates and certain other investment
advisory programs that are sponsored by PaineWebber and that may invest in
PaineWebber mutual funds. At present, however, INSIGHT participants and the PW
SIP are the only purchasers in these two categories.

REDEMPTIONS

As described below, Class Y shares may be redeemed at their net asset value
and redemption proceeds will be paid after receipt of a redemption request, as
described below.

REDEMPTIONS THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS. INSIGHT participants
who are Class Y shareholders may submit redemption requests to their investment
executives or correspondent firms in person or by telephone, mail or wire. As
the Fund's agent, PaineWebber may honor a redemption request by repurchasing
Class Y shares from a redeeming shareholder at the shares net asset value next
determined after receipt of the request by PaineWebber's New York City offices.
Within three Business Days after receipt of the request, repurchase proceeds
will be paid by check or credited to the shareholder's brokerage account at the
election of the shareholder. PaineWebber investment executives and
correspondent firms are responsible for promptly forwarding redemption requests
to PaineWebber's New York City offices.

9
<PAGE>

PaineWebber reserves the right not to honor any redemption request, in which
case PaineWebber promptly will forward the request to the Transfer Agent for
treatment as described below.

REDEMPTION THROUGH THE TRANSFER AGENT. Shareholders also may redeem Fund
shares through the Transfer Agent. Shareholders should mail redemption requests
directly to the Transfer Agent: PFPC Inc., Attn: PaineWebber Mutual Funds, P.O.
Box 8950, Wilmington, Delaware 19899. A redemption request will be executed at
the net asset value next computed after it is received in "good order," and re-
demption proceeds will be paid within seven days of the receipt of the request.
"Good order" means that the request must be accompanied by the following: (1) a
letter of instruction or a stock assignment specifying the number of shares or
amount of investment to be redeemed (or that all shares credited to the Fund
account be redeemed), signed by all registered owners of the shares in the ex-
act 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 com-
pany or member of a recognized stock exchange, (3) other supporting legal docu-
ments for estates, trusts, guardianships, custodianships, partnerships and cor-
porations and (4) duly endorsed share certificates, if any. Shareholders are
responsible for ensuring that a request for redemption is received in "good or-
der."

REDEMPTIONS FOR PARTICIPANTS IN PW SIP. The trustee of the PW SIP redeems
Class Y shares to implement the investment choices of individual plan partici-
pants with respect to their PW SIP contributions, as described in the Plan Doc-
uments referenced under "Purchases" above. As described in the Plan Documents,
the average net asset value per share at which Class Y shares are redeemed by
the trustee of the PW SIP might be more or less than the net asset value per
share prevailing at the time that such participants made their investment
choices.

ADDITIONAL INFORMATION ON REDEMPTIONS. A shareholder (other than a partici-
pant in the PW SIP) may have redemption proceeds of $1 million or more wired to
the shareholder's PaineWebber brokerage account or a commercial bank account
designated by the shareholder. Questions about this option, or redemption re-
quirements generally, should be referred to the shareholder's PaineWebber in-
vestment executive or correspondent firm. If a shareholder requests redemption
of 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.

Because each Fund incurs certain fixed costs in maintaining shareholder ac-
counts, the Fund reserves the right to redeem all Fund shares in any share-
holder account having a net asset value below the lesser of $500 or the current
minimum for initial purchasers. If a Fund elects to do so, it will notify the
shareholder and provide the shareholder the opportunity to increase the amount
invested to the minimum required level or more within 60 days of the notice. A
Fund will not redeem accounts that fall below the minimum required level solely
as a result of a reduction in net asset value per share.

DIVIDENDS AND TAXES

DIVIDENDS. Growth Fund pays dividends from net investment income annually.
Growth and Income Fund pays dividends from net investment income semi-annually.
Each Fund distributes annually substantially all of its net capital gain (the
excess of net long-term capital gain over net short-term capital loss) and net

10
<PAGE>

short-term capital gain, if any. Each Fund may make additional distributions
if necessary to avoid a 4% excise tax on certain undistributed income and cap-
ital gain.

Each Fund's dividends and other distributions on its Class Y are paid in ad-
ditional Fund shares at net asset value unless the shareholder has requested
cash payments. Class Y shareholders who wish to receive dividends and/or other
distributions in cash, either mailed to the shareholder by check or credited
to the shareholder's PaineWebber account, should contact their PaineWebber in-
vestment executives or corespondent firms. For PW SIP participants, the Fund's
Class Y dividends and distributions are paid in additional Class Y shares at
net asset value unless the Transfer Agent is instructed otherwise.

TAXES. Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code so that it will be relieved
of federal income tax on that part of its investment company taxable income
(consisting generally of net investment income and net short-term capital
gain) and net capital gain that is distributed to its shareholders.

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

Each Fund notifies its shareholders following the end of each calendar year
of the amounts of dividends and capital gain distributions paid (or deemed
paid) that year. Under certain circumstances, the notice also will specify the
shareholder's share of any foreign taxes paid by the Fund, in which event the
shareholder would be required to include in his gross income his pro rata
share of those taxes but might be entitled to claim a credit or deduction for
those taxes.

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

A redemption of Fund shares may result in taxable gain or loss to the re-
deeming shareholder, depending upon whether the redemption proceeds payable to
the shareholder are more or less than the shareholder's adjusted basis for the
redeemed shares. However, if shares of the Fund are purchased within 30 days
before or after redeeming other shares of the Fund (regardless of Class) at a
loss, all or a portion of that loss will not be deductible and will increase
the basis of the newly purchased shares.

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

The foregoing is only a summary of some of the important federal tax consid-
erations generally affecting each Fund and its shareholders; see the Statement
of Additional Information for a further discussion. There may be other feder

11
<PAGE>

al, state or local tax considerations applicable to a particular investor. Pro-
spective investors are urged to consult their tax advisers.

VALUATION OF SHARES

The net asset value of each Fund's share fluctuates and is determined as of
the close of regular trading on the New York Stock Exchange Inc. ("NYSE") (cur-
rently 4:00 p.m., Eastern time) each Business Day. A "Business Day" is any day,
Monday through Friday, on which the NYSE is open for business. Each Fund's net
asset value per share is computed 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 where market
quotations are readily available. If such value cannot be established, assets
are valued at fair value as determined in good faith by or under the direction
of each Trust's board of trustees. The amortized cost method of valuation gen-
erally is used to value debt obligations with 60 days or less remaining to ma-
turity, unless the board of trustees determines that this does not represent
fair value. It should be recognized that judgment plays a greater role in valu-
ing lower rated debt securities in which the Funds may invest, because there is
less reliable, objective data available.

MANAGEMENT

The board of trustees for each Trust, as part of its overall management re-
sponsibility, oversees various organizations responsible for the Fund's day-to-
day management. Mitchell Hutchins, investment adviser and administrator of each
Fund, makes and implements all investment decisions and supervises all aspects
of the operations of the Funds. Brokerage transactions for the Funds may be
conducted through PaineWebber or its affiliates in accordance with procedures
adopted by each Trust's board of trustees.

Mitchell Hutchins receives a monthly fee for these services, at the annual
rate of 0.75% Growth Fund and 0.70% of average daily net assets for Growth and
Income Fund. The advisory fees for Growth Fund are higher than those paid by
most investment companies to their advisers, but Mitchell Hutchins believes the
fees are comparable to the advisory fees paid by other funds with similar in-
vestment objectives and policies.

Each Fund incurs other expenses and, for the fiscal year ended August 31,
1995, each Fund's total expenses for its Class Y shares, stated as a percentage
of net assets, were as follows: 0. % for Growth and Income Fund and 0. % for
Growth Fund. See "Fund Expenses."

Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New
York 10019. It is a wholly owned subsidiary of PaineWebber, which is in turn
wholly owned by PW Group, the sponsor of the PW SIP and a publicly owned finan-
cial services holding company. As of , 1995, Mitchell Hutchins was ad-
viser or a sub-adviser to investment companies with separate portfolios
and aggregate assets of over $ billion.

12
<PAGE>

rected the U.S. Funds Management and Equity Research area. At Chase since 1988,
Mr. Tincher oversaw the management of all Chase U.S. equity funds (the Vista
Funds and Trust Investment Funds).

Ellen R. Harris has been primarily responsible for the day-to-day portfolio
management of Growth Fund since its inception. Ms. Harris is a vice president
of PaineWebber Olympus Fund and chief domestic equity strategist, a managing
director and chief investment officer--domestic of Mitchell Hutchins. Prior to
joining Mitchell Hutchins in 1983 as a portfolio manager, Ms. Harris served as
a vice president and portfolio manager at American General Capital Management
(now American Capital Management).

Other members of Mitchell Hutchins' domestic equities and fixed income groups
provide input on market outlook, interest rate forecasts and other considera-
tions pertaining to domestic equity and fixed income investments.

Mitchell Hutchins investment personnel may engage in securities transactions
for their own accounts pursuant to a code of ethics that establishes procedures
for persons investing and restricts certain transactions.

PERFORMANCE INFORMATION

Each Fund performs a standardized computation of annualized total return and
may show this return in advertisements or promotional materials. Standardized
return shows the change in value of an investment in the Fund as a steady com-
pound annual rate of return. Actual year-by-year returns fluctuate and may be
higher or lower than standardized return. One-, five- and ten-year periods will
be shown, unless the Class has been in existence for a shorter period. Total
return calculations assume reinvestment of dividends and other distributions.

Each Fund may use other total return presentations in conjunction with stan-
dardized return. These may cover the same or different periods than those used
for standardized return and may include cumulative returns, average annual
rates, actual year-by-year rates or any combination thereof.

Total return information reflects past performance and does not necessarily
indicate future results. Investment return and principal values will fluctuate,
and proceeds upon redemption may be more or less than a shareholder's cost.

GENERAL INFORMATION

ORGANIZATION. Each Fund is organized as a series of a Massachusetts business
trust (each a "Trust"), which is registered with the SEC as an open-end manage-
ment investment company. The two Trusts were organized under separate Declara-
tions of Trust, each dated October 31, 1986.

The trustees have authority to issue an unlimited number of shares of benefi-
cial interest of separate series, par value $.001 per share, of each Trust. Al-
though each Fund is offering only its own shares, it is possible that a Fund
could become liable for a misstatement in this Prospectus about another Fund.
The trustees of the Trusts have considered this factor in approving the use of
a combined Prospectus.

The shares of beneficial interest of each Fund are divided into four Classes,
designated Class A shares, Class B shares, Class C shares and Class Y shares.
Each Class represents interests in the same assets of each Fund. The Clas

13
<PAGE>

ses differ as follows: (1) Class A, Class B and Class C shares, unlike Class C
shares, bear certain fees under plans of distribution and have exclusive voting
rights on matters pertaining to those plans, (2) Class A shares are subject to
an initial sales charge, (3) Class B shares bear ongoing distribution fees, are
subject to a contingent deferred sales charge upon certain redemptions and will
automatically convert to Class A shares approximately six years after issuance,
(4) Class C shares are not subject to an initial sales charge but are subject
to a contingent deferred sales charge if issued on or after November 1, 1995
and redeemed within one year after issuance, bear ongoing distribution fees and
do not convert into another Class, (5) Class Y shares are subject to neither an
initial or contingent deferred sales charge nor ongoing service or distribution
fees and (6) each Class may bear differing amounts of certain Class-specific
expenses. The board of trustees of each Trust does not anticipate that there
will be any conflicts among the interests of the holders of each Class of Fund
shares. On an ongoing basis, each board of trustees will consider whether any
such conflict exists and, if so, take appropriate action.

The different sales charges and other expenses applicable to the different
Classes of each Fund's shares may affect the performance of those Classes. More
information concerning the other classes of each Fund's shares offered to the
public may be obtained from a PaineWebber investment executive or correspondent
firm or by calling 1-800-647-1568.

The Trusts do not hold annual shareholder meetings. There normally will be no
meetings of shareholders to elect trustees unless fewer than a majority of the
trustees of a Trust holding office have been elected by shareholders. Share-
holders of record holding at least two-thirds of the outstanding shares of a
Trust may remove a trustee by votes cast in person or by proxy at a meeting
called for that purpose. The trustees are required to call a meeting of share-
holders for the purpose of voting upon the question of removal of any trustee
when so requested in writing by the shareholders of record of not less than 10%
of a Trust's outstanding shares. Each share of a Fund has equal voting rights,
except as noted above. Each share of a Fund is entitled to participate equally
in dividends and distributions and the proceeds of any liquidation, except
that, due to the differing expenses borne by the four Classes, these dividends
and proceeds are likely to be lower for the other Classes than for Class Y
shares.

To avoid additional operating costs and for investor convenience, share cer-
tificates are not issued. Ownership of shares of each Fund is recorded on a
stock register by the Transfer Agent and shareholders have the same rights of
ownership with respect to such shares as if certificates had been issued.

CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One Heri-
tage Drive, North Quincy, Massachusetts 02171, is custodian for Growth and In-
come Fund and Growth Fund. Brown Brothers Harriman & Co., 40 Water Street, Bos-
ton, Massachusetts 02109, is custodian for Atlas Fund and employs foreign sub-
custodians to provide custody of the Fund's foreign assets. PFPC Inc., a sub-
sidiary of PNC Bank, National Association, whose principal address is 400
Bellevue Parkway, Wilmington, Delaware 19809, is the Funds' transfer and divi-
dend disbursing agent.

CONFIRMATIONS AND STATEMENTS. Shareholders receive confirmations of purchases
and redemptions of shares of each Fund. PaineWebber clients receive statements
at least quarterly that report their Fund activity and consolidated year-end
statements that show all Fund transactions for that year. Shareholders also re-
ceive audited annual and unaudited semi-annual financial statements of the
Funds. The PW SIP receives confirmations of

14
<PAGE>

purchases and redemptions of shares of the Funds and quarterly statements from
the Transfer Agent. The PW SIP also receives audited annual and unaudited semi-
annual financial statements of the Funds. PW SIP participants receive periodic
information about their plan participation from the PW SIP plan administrator.

15
<PAGE>

APPENDIX

The Funds may use the hedging instruments described below:

OPTIONS ON EQUITY AND DEBT SECURITIES--A call option is a short-term con-
tract pursuant to which the purchaser of the option, in return for a premi-
um, has the right to buy the security underlying the option at a specified
price at any time during the term of the option. The writer of the call op-
tion, who receives the premium, has the obligation, upon exercise of the
option during the option term, to deliver the underlying security 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 under-
lying security at a specified price during the option term. The writer of
the put option, who receives the premium, has the obligation, upon the ex-
ercise of the option during the option term, to buy the underlying security
at the exercise price.

OPTIONS ON STOCK INDEXES--A stock index assigns relative values to the
stocks included in the index and fluctuates with changes in the market val-
ues of those stocks. A stock index option operates in the same way as a
more traditional stock option, except that exercise of a stock index option
is effected with cash payment and does not involve delivery of securities.
Thus, upon exercise of a stock index option, the purchaser will realize,
and the writer will pay, an amount based on the difference between the ex-
ercise price and the closing price of the stock index.

STOCK INDEX FUTURES CONTRACTS--A stock index futures contract is a bilat-
eral 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 stock index value at the
close of trading of the contract and the price at which the futures con-
tract is originally struck. No physical delivery of the stocks comprising
the index is made. Generally, contracts are closed out prior to the expira-
tion date of the contract.

INTEREST RATE FUTURES CONTRACTS--Interest rate futures contracts are bi-
lateral agreements pursuant to which one party agrees to make, and the
other party agrees to accept, delivery of a specified type of debt security
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 se-
curities, 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 con-
tract 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 op-
tion, upon exercise, will assume a short position in the case of a call and
a long position in the case of a put. case of a put.

16
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.............................................................. 2
Financial Highlights....................................................... 3
Investment Objectives and Policies......................................... 4
Purchases.................................................................. 8
Redemptions................................................................ 9
Dividends and Taxes........................................................ 10
Valuation of Shares........................................................ 12
Management................................................................. 12
Performance Information.................................................... 13
General Information........................................................ 13
Appendix................................................................... 16
</TABLE>

[LOGO OF RECYCLED PAPER APPEARS HERE]

[LOGO OF PAINEWEBBER APPEARS HERE]

GROWTH AND INCOME FUND

GROWTH FUND

Class Y Shares

PROSPECTUS

November , 1995
----------------------------

<PAGE>

PAINEWEBBER GROWTH AND INCOME FUND
PAINEWEBBER GROWTH FUND

CLASS Y SHARES
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019

STATEMENT OF ADDITIONAL INFORMATION

The two funds named above (each a "Fund") are diversified series of
PaineWebber America Fund and PaineWebber Olympus Fund, respectively (each a
"Trust"), professionally managed, open-end investment companies organized as
Massachusetts business trusts. PaineWebber Growth and Income Fund ("Growth and
Income Fund") seeks current income and capital growth; it invests primarily in
dividend-paying equity securities believed by Mitchell Hutchins to have the
potential for rapid earnings growth; stocks are selected through a disciplined
methodology that utilizes quantitative measures of value, earnings and price
momentum, as well as fundamental analysis. PaineWebber Growth Fund ("Growth
Fund") seeks long-term capital appreciation; it invests primarily in equity
securities issued by companies deemed by Growth Fund's investment adviser to
have substantial potential for capital growth. The Funds' investment adviser,
administrator and distributor 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. This
Statement of Additional Information is not a prospectus and should be read only
in conjunction with the Funds' current Prospectus, dated November , 1995. 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.
Participants in the PaineWebber Savings Investment Plan may obtain a copy of
the Prospectus by contacting the PaineWebber Incorporated Benefits Department,
1000 Harbour Boulevard, 10th Floor, Weehawken, New Jersey 07087 or by calling
1-201-902-4444. This Statement of Additional Information is dated November ,
1995.

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 ("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.
<PAGE>

As noted in the Prospectus, the Funds may invest 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.

SPECIAL CONSIDERATIONS RELATING TO FOREIGN SECURITIES. To the extent the
Funds invest in U.S. dollar denominated 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"). Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. For purposes of the Funds' investment policies,
ADRs are deemed to have the same classification as the underlying securities
they represent. Thus, an ADR representing ownership of common stock will be
treated as common stock.

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.

2
<PAGE>

of the underlying common stock. If the conversion value is low relative to the
investment value, the price of the convertible security is governed principally
by its investment value, and generally the conversion value decreases as the
convertible security approaches maturity. To the extent the market price of the
underlying common stock approaches or exceeds the conversion price, the price
of the convertible security will be increasingly influenced by its conversion
value. In addition, a convertible security generally will sell at a premium
over its conversion value determined by the extent to which investors place
value on the right to acquire the underlying common stock while holding a fixed
income security.

ILLIQUID SECURITIES. Each Fund may invest up to 10% 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 has determined are liquid
pursuant to guidelines established by the Trusts' boards of trustees. The
assets used as cover for OTC options written by a Fund will be considered
illiquid unless the OTC options are sold to qualified dealers who agree that
the Fund 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"). 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 the Fund may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.

3
<PAGE>

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 a Fund might be
unable to dispose of such securities promptly or at favorable prices.

The board of trustees for each Trust has delegated the function of making
day-to-day determinations of liquidity to Mitchell Hutchins, pursuant to
guidelines approved by the board. Mitchell Hutchins 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 will monitor the liquidity of restricted securities in each Fund's
portfolio and report periodically on such decisions to the board of trustees.

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 and price reflecting a market rate of interest unrelated to
the coupon rate or maturity of the purchased securities. A 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 which was paid by a
Fund upon acquisition is accrued as interest and included in that Fund's 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.

Each Fund intends to enter into repurchase agreements only with banks and
dealers in transactions believed by Mitchell Hutchins to present minimal credit
risks in accordance with guidelines established by the Trusts' boards of
trustees. Mitchell Hutchins reviews and monitors the creditworthiness of those
institutions under the boards' general supervision.

REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse repurchase
agreements with banks and securities dealers up to an aggregate value of not
more than 5% of the Fund's total assets. Such agreements involve the sale of
securities held by a 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 purposes. While a reverse repurchase agreement is
outstanding, a Fund's custodian

4
<PAGE>

segregates assets to cover the Fund's obligations under the reverse repurchase
agreement. See "Investment Policies and Restrictions--Segregated Accounts."

LENDING OF PORTFOLIO SECURITIES. As indicated in the Prospectus, each Fund is
authorized to lend up to 10% of the total value of its portfolio securities to
broker-dealers or institutional investors that Mitchell Hutchins deems
qualified, but only when the borrower maintains with the Fund's custodian bank
collateral either in cash or money market instruments in an amount, marked to
market daily, at least equal to the market value of the securities loaned, plus
accrued interest and dividends. 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. A 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. A 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. A 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". As indicated in the prospectus, 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 the Fund,
and the 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. A Fund will
incur transaction costs, including interest expense, in connection with
opening, maintaining and closing short sales against the box. None of the Funds
currently intend to have obligations under short-sales that at any time during
the coming year exceed 5% of the Fund's net assets.

A Fund might make a short sale "against the box" in order to hedge against
market risks when Mitchell Hutchins believes that the price of a security may
decline, thereby causing a decline in the value of a security owned by the Fund
or a security convertible into or exchangeable for a security owned by the
Fund, or when Mitchell Hutchins wants to sell a security that the 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 the 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.

5
<PAGE>

SEGREGATED ACCOUNTS. When a Fund enters into certain transactions to make
future payments to third parties, including reverse repurchase agreements, the
Fund will maintain with an approved custodian in a segregated cash account,
U.S. government securities or other liquid high-grade debt 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 and futures contracts.

INVESTMENT LIMITATIONS OF THE FUNDS

GROWTH AND INCOME FUND. Growth and Income Fund may not (1) purchase any
securities other than those its investment objective permits it to purchase;
(2) purchase securities of any one issuer (except U.S. government securities)
if as a result more than 5% of Growth and Income Fund's total assets would be
invested in such issuer or Growth and Income Fund would own or hold more than
10% of the outstanding voting securities of that issuer, provided, however,
that up to 25% of the value of Growth and Income Fund's total assets may be
invested without regard to these limitations; (3) purchase securities on
margin, except for short-term credit necessary for clearance of portfolio
transactions and except that Growth and Income Fund may make margin deposits in
connection with its use of options, futures contracts and options on futures
contracts; (4) underwrite securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, Growth and
Income Fund may be deemed an underwriter under the federal securities laws; (5)
make short sales of securities or maintain a short position, except that Growth
and Income Fund may (a) make short sales and may maintain short positions in
connection with its use of options, futures contracts and options on futures
contracts and (b) sell short "against the box"; (6) purchase or sell real
estate, provided that Growth and Income Fund may invest in securities secured
by real estate or interests therein or issued by companies which invest in real
estate or interest therein; (7) purchase or sell commodities or commodity
contracts, except that Growth and Income Fund may purchase or sell stock index
futures, interest rate futures and options thereon; (8) invest in oil, gas or
mineral-related programs or leases; (9) make loans, except through loans of
portfolio securities as described herein and except through repurchase
agreements; provided that for purposes of this restriction the acquisition of
bonds, debentures, or other corporate debt securities and investment in
government obligations, short-term commercial paper, certificates of deposit
and bankers' acceptances shall not be deemed to be the making of loans; (10)
purchase any securities issued by any other investment company, except in
connection with the merger, consolidation or acquisition of all the securities
or assets of such an issuer; (11) issue senior securities or borrow money,
except from banks for temporary purposes and except for reverse repurchase
agreements, and then in an aggregate amount not in excess of 10% of Growth and
Income Fund's total assets; provided further that Growth and Income Fund will
not purchase securities while borrowings in excess of 5% of Growth and Income
Fund's total assets are outstanding; or (12) make an investment in any one
industry if the investment would cause the aggregate value of Growth and Income
Fund's investments in such industry to exceed 25% of Growth and Income Fund's
total assets.

The foregoing fundamental investment limitations cannot be changed without
the affirmative vote of the lesser of (a) more than 50% of the outstanding
shares of Growth and Income Fund or (b) 67% or more of the shares present at a
shareholders' meeting if more than 50% of the outstanding

6
<PAGE>

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.

The following investment restrictions may be changed by the Trust's board of
trustees without shareholder approval: Growth and Income Fund may not (1)
purchase or retain the securities of any issuer if, to the knowledge of Growth
and Income Fund's management, the officers and trustees of the Trust and the
officers and directors of Mitchell Hutchins (each owning beneficially more than
0.5% of the outstanding securities of an issuer) own in the aggregate more than
5% of the securities of the issuer; (2) purchase any security if as a result
more than 5% of it's total assets would be invested in securities of companies
that together with any predecessors have been in continuous operation for less
than three years; (3) invest more than 10% of its net assets 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 it has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days; or (4) make investments in
warrants if such investments, valued at the lower of cost or market, exceed 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 unlisted warrants, valued at the lower of
cost or market, do not exceed 2% of the it'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 securities, stock or bond indices or futures
contracts; or (5) 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 to be of comparable quality. This non-
fundamental policy (5) can be changed only upon 30 days' advance notice to
shareholders.

The Fund will continue to interpret fundamental investment limitation (6) to
prohibit investment in real estate limited partnerships.

GROWTH FUND. Growth Fund may not (1) issue senior securities or borrow money,
except from banks for temporary purposes and except for reverse repurchase
agreements, and then in an aggregate amount not in excess of 10% of Growth
Fund's total assets; provided further that Growth Fund will not purchase
securities while borrowings (including reverse repurchase agreements) in excess
of 5% of Growth Fund's total assets are outstanding; (2) make an investment in
any one industry if the investment would cause the aggregate value of Growth
Fund's investments in such industry to exceed 25% of Growth Fund's total
assets; (3) purchase securities of any one issuer (except U.S. government
securities) if as a result more than 5% of Growth Fund's total assets would be
invested in such issuer or Growth Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, provided, however, that up to 25%
of the value of Growth Fund's total assets may be invested without regard to
these limitations; (4) purchase securities on margin, except for short-term
credit necessary for clearance of portfolio transactions and except that Growth
Fund may make margin deposits in connection with its use of options, futures
contracts and options on futures contracts; (5) underwrite securities of other
issuers, except to the extent that, in connection with the disposition of
portfolio securities, Growth Fund may be deemed an underwriter under federal
securities laws; (6) make short sales of securities or maintain a short

7
<PAGE>

position, except that Growth Fund may (a) make short sales and may maintain
short positions in connection with its use of options, futures contracts and
options on future contracts and (b) sell short "against the box"; (7) purchase
or sell real estate, provided that Growth Fund may invest in securities secured
by real estate or interests therein or issued by companies that invest in real
estate or interests therein; (8) purchase or sell commodities or commodity
contracts, except that Growth Fund may purchase or sell stock index futures and
interest rate futures and options thereon; (9) invest in oil, gas or mineral-
related programs or leases; (10) make loans, except through loans of portfolio
securities as described herein and except through repurchase agreements;
provided that for purposes of this restriction the acquisition of bonds,
debentures, or other corporate debt securities and investments in government
obligations, short-term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of loans; or (11) purchase any
securities issued by any other investment company, except by purchase in the
open market where no commission or profit, other than a customary brokers'
commission, is earned by any sponsor or dealer associated with the investment
company whose shares are acquired as a result of such purchase, provided that
such securities in the aggregate do not represent more than 10% of Growth
Fund's total assets, and except in connection with the merger, consolidation or
acquisition of all the securities or assets of such an issuer.

The foregoing fundamental investment limitations cannot be changed without
the affirmative vote of the lesser of (a) more than 50% of the outstanding
shares of Growth 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.

The following investment restrictions may be changed by the Trust's board of
trustees without shareholder approval: Growth Fund may not (1) purchase or
retain the securities of any issuer if, to the knowledge of Growth Fund's
management, the officers and trustees of the Trust and the officers and
directors of Mitchell Hutchins (each owning beneficially more than 0.5% of the
outstanding securities of an issuer) own in the aggregate more than 5% of the
securities of the issuer; (2) purchase any security if as a result more than 5%
of its total assets would be invested in securities of companies that together
with any predecessors have been in continuous operation for less than three
years; (3) invest more than 10% of its net assets 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 it has valued
the securities and includes, among other things, repurchase agreements maturing
in more than seven days; (4) make investments in warrants if such investments,
valued at the lower of cost or market, exceed 5% of the value of its net
assets, which amount may include warrants that are not listed on the NYSE on
Amex, provided that such unlisted warrants, valued at the lower of cost or
market, do not exceed 2% of its 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 securities, stock or bond indices or futures contracts;
or (5) 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 to be of comparable quality. This non-
fundamental

8
<PAGE>

policy (5) can be changed only upon 30 days' advance notice to shareholders.
The Fund will continue to interpret fundamental investment limitation (7) to
prohibit investment in real estate limited partnerships.

HEDGING STRATEGIES

GENERAL DESCRIPTION OF HEDGING STRATEGIES. As discussed in the Prospectus,
Mitchell Hutchins 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 the
Funds' portfolios. The particular Hedging Instruments are described in the
Appendix to the Prospectus.

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 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, the 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, the 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, the Fund could exercise the call and thus limit its acquisition cost
to the exercise price plus the premium paid and transactions costs.
Alternatively, the 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."

9
<PAGE>

In addition to the products, strategies and risks described below and in the
Prospectus, Mitchell Hutchins expects to discover additional opportunities in
connection with options, futures contracts, forward currency contracts and
other hedging techniques. These new opportunities may become available as
Mitchell Hutchins develops new techniques, as regulatory authorities broaden
the range of permitted transactions and as new options, futures contracts or
other techniques are developed. Mitchell Hutchins may utilize these
opportunities to the extent that they are consistent with the Funds' investment
objectives and permitted by the Funds' 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.

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

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.

(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 projected a decline in the price of a
security in the 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, the 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

10
<PAGE>

involving obligations to third parties (i.e., Hedging Instruments other than
purchased options). If a Fund were 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 a 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 the Fund.

COVER FOR HEDGING STRATEGIES. The Funds will not use Hedging Instruments for
speculative purposes or for purposes of leverage. Transactions using Hedging
Instruments, other than purchased options, expose a Fund 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 short-term liquid debt 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, U.S. government securities or other liquid, high-grade
debt 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, on equity and debt securities and stock indices.
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 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 the Funds would be considered illiquid to the
extent described under "Investment Policies and Limitations--Illiquid
Securities."

11
<PAGE>

underlying investment and general market conditions. Options normally have
expiration dates of up to nine months. Options that expire unexercised have no
value.

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

The Funds may purchase and write both exchange-traded and OTC options.
Currently, many options on equity securities are exchange-traded. 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 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.

A Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. Each Fund intends 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 a Fund
will enter into OTC options only with contra parties that are expected to be
capable of entering into closing transactions with the Fund, there is no
assurance that the 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, the 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 a 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.

12
<PAGE>

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

(1) A 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 the
Fund's total assets.

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

FUTURES. The Funds may purchase and sell stock index futures contracts and
interest rate futures contracts. The Funds may also purchase put and call
options, and write covered put and call options, on futures in which they are
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 strategies similar to those
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 the 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 the 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 the 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 the Fund has insufficient cash to meet daily variation
margin requirements, it might need to sell securities at a time when such sales
are disadvantageous.

13
<PAGE>

may be closed only on an exchange or board of trade that provides a secondary
market. Each Fund intends 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.

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. The Fund would continue to be subject to
market risk with respect to the position. In addition, except in the case of
purchased options, the 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.

LIMITATIONS ON THE USE OF FUTURES. A Fund's use of futures is governed by the
following guidelines, which can be changed by its Trust's board of trustees
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 the Fund's net assets.

(2) The aggregate premiums paid on all options (including options on
securities 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 the
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 the Fund's net
assets.

14
<PAGE>

TRUSTEES AND OFFICERS

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

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS* EACH TRUST OTHER DIRECTORSHIPS
----------------- -------------- --------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.**; 68 Trustee and Mr. Bewkes is a director of PaineWebber
Chairman of the Group Inc. ("PW Group") (holding company
Board of Trustees of PaineWebber and Mitchell Hutchins) and
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 di-
rector of Interstate Bakeries Corporation
NaPro Biotherapeutics, Inc. and a director
or trustee of 26 other investment compa-
nies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Meyer Feldberg; 53 Trustee Mr. Feldberg is Dean and Professor of Man-
Columbia University agement of the Graduate School of Busi-
101 Uris Hall ness, Columbia University. Prior to July
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.,
Inco Homes Corporation and New World Com-
munications Group Incorporated and a di-
rector or trustee of 18 other investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
George W. Gowen; 65 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 Invest-
ments, Inc. and a director or trustee of
16 other investment companies for which
Mitchell Hutchins or PaineWebber serves as
an investment adviser.
</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS* EACH TRUST OTHER DIRECTORSHIPS
----------------- -------------- --------------------
<S> <C> <C>
Frederic V. Malek; 58 Trustee Mr. Malek is chairman of Thayer Capital
901 15th Street, N.W. Partners (investment bank) and a co-chair-
Suite 300 man and director of CB Commercial Group
Washington, D.C. 20005 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 Northwest
Airlines Inc.) and Wings Holdings Inc.
(holding company of NWA Inc.). Prior to
1989, he was employed by the Marriott Cor-
poration (hotels, restaurants, airline ca-
tering and contract feeding), where he
most recently was an executive vice presi-
dent and president of Marriott Hotels and
Resorts. Mr. Malek is also a director of
American Management Systems, Inc., Auto-
matic Data Processing, Inc., Avis, Inc.,
FPL Group, Inc., ICF International, Manor
Care, Inc. and National Education Corpora-
tion and a director or trustee of 16 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as invest-
ment adviser.
Frank P. L. Minard**; 50 Trustee Mr. Minard is chairman and a director of
Mitchell Hutchins, chairman of the board
of Mitchell Hutchins Institutional Invest-
ors Inc. and a director of PaineWebber.
Prior to 1993, Mr. Minard was managing di-
rector of Oppenheimer Capital in New York
and Director of Oppenheimer Capital Ltd.
in London. Mr. Minard is also a director
or trustee of 27 other investment compa-
nies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Judith Davidson Moyers; 60 Trustee Mrs. Moyers is president of Public Affairs
Public Affairs Television Television, Inc., an educational consul-
356 W. 58th Street tant and a home economist. Mrs. Moyers is
New York, New York 10019 also a director of Columbia Real Estate
Investments, Inc. and Ogden Corporation
and a director or trustee of 16 other in-
vestment companies for which Mitchell
Hutchins or PaineWebber serves as invest-
ment adviser.
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS* EACH TRUST OTHER DIRECTORSHIPS
----------------- -------------- --------------------
<S> <C> <C>
Thomas F. Murray; 84 Trustee Mr. Murray is a real estate and financial
400 Park Avenue consultant. Mr. Murray is also a director
New York, New York 10022 and chairman of American Continental Prop-
erties, Inc., a trustee of Prudential Re-
alty Trust and a director or trustee of 16
other investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
Margo N. Alexander; 48 President Ms. Alexander is president, chief executive
officer and a director of Mitchell
Hutchins. Prior to January 1995, Ms. Alex-
ander was an executive vice president of
PaineWebber. Ms. Alexander is also presi-
dent of 38 other investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.
Teresa M. Boyle; 36 Vice President Ms. Boyle is a first vice president and
manager--advisory administration of Mitch-
ell 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 adminis-
tration of Mitchell Hutchins. Ms. Boyle is
also a vice president of 38 other invest-
ment companies for which Mitchell Hutchins
or PaineWebber serves as investment advis-
er.
Joan L. Cohen; 31 Vice President and Ms. Cohen is a vice president and attorney
Assistant Secretary of Mitchell Hutchins. Prior to December
1993, she was an associate at the law firm
of Seward & Kissel. Ms. Cohen is also a
vice president and assistant secretary of
26 other investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment
adviser.
Ellen R. Harris; 49 Vice President Ms. Harris is a managing director of Mitch-
ell Hutchins. Ms. Harris is also a vice
president of 19 other investment companies
for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS* EACH TRUST OTHER DIRECTORSHIPS
----------------- -------------- --------------------
<S> <C> <C>
C. William Maher; 34 Vice President and Mr. Maher is a first vice president and the
Assistant Treasurer senior manager of the Fund Administration
Division of Mitchell Hutchins. Mr. Maher
is also a vice president and assistant
treasurer of 39 other 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 also a vice presi-
dent and assistant treasurer of 38 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as invest-
ment
adviser.
Dianne E. O'Donnell; 43 Vice President and Ms. O'Donnell is a senior vice president
Secretary and deputy general counsel of Mitch-
ell Hutchins. Ms. O'Donnell is also a vice
president and secretary of 38 other in-
vestment companies for which Mitchell
Hutchins or PaineWebber serves as invest-
ment
adviser.
Victoria E. Schonfeld; Vice President Ms. Schonfeld is a managing director and
44 general counsel of Mitchell Hutchins. From
April 1990 to May 1994, she was a partner
in the law firm of Arnold & Porter. Prior
to April 1990, she was a partner in the
law firm of Shereff, Friedman, Hoffman &
Goodman. Ms. Schonfeld is also a vice
president of 38 other investment companies
for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
Paul H. Schubert; 32 Vice President and Mr. Schubert is a first vice president of
Assistant Treasurer Mitchell Hutchins. From August 1992 to Au-
gust 1994, he was a vice president at
BlackRock Financial Management, L.P. Prior
to August 1992, he was an audit manager
with Ernst & Young LLP. Mr. Schubert is
also a vice president and assistant trea-
surer of 38 other investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment
adviser.
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS* EACH 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 also a
vice president and treasurer of 38 other
investment companies for which Mitchell
Hutchins or PaineWebber serves as invest-
ment adviser.
Gregory K. Todd; 38 Vice President and Mr. Todd is a first vice president and as-
Assistant Secretary sociate general counsel of Mitchell
Hutchins. Prior to 1993, he was a partner
in the law firm of Shereff, Friedman,
Hoffman & Goodman. Mr. Todd is also a vice
president and assistant secretary of 38
other 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 Americas, New York, New York 10019.
** Messrs. Bewkes and Minard are "interested persons" of each Trust as defined
in the Investment Company Act of 1940 ("1940 Act") by virtue of their
positions with PW Group, PaineWebber and/or Mitchell Hutchins.

Each Trust pays trustees who are not "interested persons" of the Trust $250
per meeting of the board or any committee thereof; the Trusts also pay each
such trustee the following annual compensation; $3,000 for PaineWebber Atlas
Fund, $1,500 for PaineWebber America Fund and $2,000 for PaineWebber Olympus
Fund. Trustees also are reimbursed for any expenses incurred in attending
meetings. Trustees and officers of the Trusts own in the aggregate less than 1%
of the shares of each Fund. Because Mitchell Hutchins and PaineWebber perform
substantially all of the services necessary for the operation of the Trusts and
the Funds, 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.

19
<PAGE>

The table below includes certain information relating to the compensation of
each Trust's trustees who held office during the fiscal year ended August 31,
1995:

COMPENSATION TABLE

<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM THE
AGGREGATE AGGREGATE BENEFITS TRUSTS AND
COMPENSATION COMPENSATION ACCRUED AS ESTIMATED THE
FROM FROM PART OF A ANNUAL FUND COMPLEX
PAINEWEBBER PAINEWEBBER FUND'S BENEFITS UPON PAID TO
NAME OF PERSON, POSITION AMERICA FUND* OLYMPUS FUND EXPENSES RETIREMENT TRUSTEES**
------------------------ ------------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
E. Garrett Bewkes, Jr.
Trustee and chairman of
the board of trustees.. -- -- -- --
Meyer Feldberg,
Trustee................ $ -- -- $86,050
George W. Gowen,
Trustee................ -- -- 71,425
Frederic V. Malek,
Trustee................ -- -- 77,875
Frank P.L. Minard,
Trustee................ -- -- --
Judith Davidson Moyers,
Trustee................ -- -- 71,125
Thomas F. Murray,
Trustee................ -- -- 71,925
</TABLE>
--------

* Represents fees paid to each trustee during the fiscal year ended August 31,
1995.
** Represents total compensation paid to each trustee during the calendar year
ended December 31, 1994.

INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS

INVESTMENT ADVISORY ARRANGEMENTS. Mitchell Hutchins acts as the investment
adviser and administrator of each Fund pursuant to separate contracts dated
March 1, 1989 with the respective Trusts (each an "Advisory Contract"). Under
the Advisory Contracts, each Fund pays Mitchell Hutchins a fee, computed daily
and paid monthly at the annual rates set forth in the Prospectus.

For the fiscal years ended August 31, 1995, August 31, 1994 and August 31,
1993, the Funds paid (or accrued) to Mitchell Hutchins the following investment
advisory and administration fees: Growth and Income Fund--$ , $4,892,163 and
$6,413,944 and Growth Fund--$ , $2,069,033 and $1,402,141.

Between May 19, 1994 and February , 1995, Mitchell Hutchins Institutional
Investors Inc. ("MHII"), a wholly owned subsidiary of Mitchell Hutchins, served
as sub-adviser to Growth and Income Fund pursuant to a sub-advisory contract
between MHII and Mitchell Hutchins under which Mitchell Hutchins (not the Fund)
paid MHII a fee in the annual amount of 0.25% of the

20
<PAGE>

Fund's average daily net assets. During the periods from September 1, 1994 to
February , 1995 and May 19, 1994 to August 31, 1994, Mitchell Hutchins paid or
accrued to MHII sub-advisory fees of $ and $405,821, respectively.

Under a service agreement with each Trust pursuant to which PaineWebber
provides certain services not otherwise provided by the Fund's transfer agent,
which agreements are reviewed by each Trust's board of trustees annually,
during the fiscal years ended August 31, 1995, August 31, 1994 and August 31,
1993, the Funds paid (or accrued) the following respective fees: Growth and
Income Fund--$ , $303,496 and $355,724; Growth Fund--$ , $103,435 and
$75,713.

Under the terms of the applicable Advisory Contract, 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 Fund 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, uncollectable 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 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) fee, 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.

As required by state regulation, Mitchell Hutchins will reimburse a Fund if
and to the extent that the aggregate operating expenses of the Fund in any
fiscal year exceed applicable limits. Currently, the most restrictive such
limit applicable to a 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 fiscal years
ended August 31, 1995, August 31, 1994 and August 31, 1993, no reimbursements
were made pursuant to such limitation for either Fund.

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

21
<PAGE>

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

The following table shows the approximate net assets as of September 30,
1995, 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>
INVESTMENT NET
CATEGORY ASSETS
---------- ------
($ 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>

DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor of the
Class Y shares of each Fund under separate distribution contracts with each
Trust dated July 1, 1991 that require Mitchell Hutchins to use its best
efforts, consistent with its other business, to sell shares of the Funds. Class
C shares of the Funds are offered continuously. Under exclusive dealer
agreements between Mitchell Hutchins and PaineWebber dated July 1, 1991,
PaineWebber and its correspondent firms sell each Fund's Class Y shares.

PORTFOLIO TRANSACTIONS

Subject to policies established by the board of trustees of each Trust,
Mitchell Hutchins is responsible for the execution of each Fund's portfolio
transactions and the allocation of brokerage transactions. In executing
portfolio transactions, Mitchell Hutchins seeks to obtain the best net results
for a Fund, taking into account such factors as the price (including the
applicable brokerage

22
<PAGE>

commission or dealer spread), size of order, difficulty of execution and
operational facilities of the firm involved. 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. Each Fund 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. While Mitchell Hutchins generally seeks
reasonably competitive commission rates and dealer spreads, payment of the
lowest commission or spread is not necessarily consistent with obtaining the
best net results. During the fiscal years ended August 31, 1995, August 31,
1994 and August 31, 1993, respectively, the Funds paid approximately the
following amounts in brokerage commissions: Growth and Income Fund--$ ,
$1,901,499 and $1,131,909; and Growth Fund--$ , $222,490 and $150,432.

No Fund has any obligation to deal with any broker or group of brokers in the
execution of portfolio transactions. The Funds contemplate that, consistent
with the policy of obtaining the best net results, brokerage transactions may
be conducted through Mitchell Hutchins or its affiliates, including
PaineWebber. Each Trust'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 Mitchell Hutchins or its affiliates are reasonable and
fair. Specific provisions in each Advisory Contract authorize Mitchell Hutchins
and any of its affiliates that is a member of a national securities exchange to
effect portfolio transactions for the Fund 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 year ended August 31, 1995, Growth and Income
Fund paid $ and Growth Fund paid $ to PaineWebber in brokerage
commissions which represented % and %, respectively, of the total brokerage
commissions paid by the Funds and % and %, respectively, of all portfolio
transactions involving payment of commissions. For the fiscal years ended
August 31, 1994 and August 31, 1993, Growth and Income Fund paid $47,142 and
$108,080, respectively, and Growth Fund paid $9,326 and $3,500, respectively,
to PaineWebber in brokerage commissions.

Transactions in futures contracts are executed through futures commission
merchants ("FCMs"). Each Fund's procedures in selecting FCMs to execute the
Fund's transactions in futures contracts, including procedures permitting the
use of Mitchell Hutchins and its affiliates, are similar to those in effect
with respect to brokerage transactions in securities.

Consistent with the interests of each Fund and subject to the review of the
board of trustees of each Trust, Mitchell Hutchins may cause a Fund to purchase
and sell portfolio securities through brokers who provide the Fund with
research, analysis, advice and similar services. In return for such services,
the Fund may pay to those brokers a higher commission than may be charged by
other brokers, provided that Mitchell Hutchins determines in good faith that
such commission is reasonable in terms either of that particular transaction or
of the overall responsibility of Mitchell Hutchins to the 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 Growth and Income
Fund and Growth Fund, for the fiscal year ended August 31, 1995, Mitchell
Hutchins (and, for Growth and Income Fund, MHII) directed $ , $ and
$ , respectively, in portfolio

23
<PAGE>

transactions to brokers chosen because they provided research services, for
which the Funds paid $ , $ and $ , respectively, in commissions.

For purchases or sales with broker-dealer firms which act as principal,
Mitchell Hutchins seeks best execution. Although Mitchell Hutchins may receive
certain research or execution services in connection with these transactions,
Mitchell Hutchins 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 will not enter into any explicit soft dollar arrangements relating to
principal transactions and will not receive in principal transactions the types
of services which could be purchased for hard dollars. Mitchell Hutchins 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 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 a Fund effects securities transactions may be used by
Mitchell Hutchins in advising other funds or accounts and, conversely, research
services furnished to Mitchell Hutchins in advising other funds or accounts
and, conversely, research services furnished to Mitchell Hutchins in connection
with these other funds or accounts may be used in advising the Fund.
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.

Investment decisions for the Funds and for other investment accounts managed
by Mitchell Hutchins 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 the Fund involved 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 a Fund is concerned,
or upon its ability to complete its entire order, in other cases it is believed
that coordination and the ability to participate in volume transactions will be
beneficial to the Fund.

No Fund will purchase securities that are offered in underwritings in which
Mitchell Hutchins or any of its affiliates is a member of the underwriting or
selling group, except pursuant to procedures adopted by the board of trustees
of each Trust 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 Mitchell Hutchins or any affiliate thereof not
participate in or benefit from the sale to a Fund.

VALUATION OF SHARES

Each Fund determines the net asset value per share separately for each Class
of shares as of the close of regular trading (currently 4:00 p.m., Eastern
time) on the NYSE on each Business Day,

24
<PAGE>

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, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.

Securities that are listed on U.S. 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 as the primary market. Securities traded in
the OTC market and listed on 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 Trust's board of trustees. 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.

PERFORMANCE INFORMATION

Each Fund's 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 a Fund's Performance Advertisements are calculated according
to the following formula:

P(1 + T)n = ERV

where:

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

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over
the period. Each Fund 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"). A Fund calculates 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.

25
<PAGE>

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.

<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND GROWTH FUND
----------- -----------
CLASS A CLASS Y
----------- -----------
<S> <C> <C>
Fiscal year ended August 31, 1995:
Standardized Return*.................................... % %
Non-Standardized Return................................. % %
Five years ended August 31, 1995:
Standardized Return*................................... % NA
Non-Standardized Return................................ % NA
Inception** to August 31, 1995:
Standardized Return*................................... % %
Non-Standardized Return................................ % %
</TABLE>
--------

NOTE:

* Class Y shares do not impose an initial or contingent deferred sales charge;
therefore, Non-Standardized Return is identical to Standardized Return.

** The inception dates for the Class Y shares of the Funds are as follows:
Growth and Income Fund--February 12, 1992; Growth Fund--August 26, 1991.

Other Information. In Performance Advertisements, each Fund may compare its
Standardized Return and/or its Non-Standardized Return with data published by
Lipper Analytical Services, Inc. ("Lipper"), CDA Investment Technologies, Inc.
("CDA"), Wiesenberger Investment Companies Services ("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. Each Fund 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 a Fund
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.

Each Fund 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 the
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 the Fund investment would increase more quickly than if dividends
or other distributions had been paid in cash.

Each Fund may also compare its performance with the performance of bank
certificates of deposit (CDs) as measured by the CDA Investment Technologies,
Inc. Certificate of Deposit Index

26
<PAGE>

and the Bank Rate Monitor National Index and the averages of yields of CDs of
major banks published by Banxquote(R) Money Markets. In comparing a Fund's
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 a Fund
involves greater risks than an investment in either a money market fund or a
CD.

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

[CHART TO COME]

The chart shown is for illustrative purposes only and does not represent any
Fund's performance and should not be considered an indication or guarantee of
future results. Year-to-year fluctuations of the S&P 500 have been significant,
and total return for some periods has been negative. The S&P 500 includes
companies with larger market capitalizations than those in which the Funds
invest. 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.

27
<PAGE>

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 and net short-
term capital gain ("Distribution Requirement") and must meet several additional
requirements. Among these requirements are the following: (1) a 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 other income (including gains from options
or futures) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) a Fund must derive less than 30%
of its gross income each taxable year from the sale or other disposition of
securities, options or futures that were held for less than three months that
are not ("Short-Short Limitation"); (3) at the close of each quarter of a
Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities, with these other securities limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value of
the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities; and (4) at the close of each quarter of
a 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.

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.

Growth and Income Fund and Growth Fund may invest in the stock of "passive
foreign investment companies" ("PFICs") if such stock is denominated in U.S.
dollars and otherwise 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

28
<PAGE>

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).

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 and futures beyond the time when it otherwise would be advantageous to
do so, in order for the Fund to continue to qualify as a RIC.

OTHER INFORMATION

Effective July 1, 1991, the name of Growth Fund was changed from
"PaineWebber Classic Growth Fund" to its current name. Growth and Income
Fund's name was changed from "PaineWebber Classic Growth and Income Fund" to
PaineWebber Dividend Growth Fund effective May 17, 1991 and to its current
name effective April 3, 1995. Effective on May 17, 1991, the fund currently
referred to as PaineWebber Growth and Income Fund was combined in a tax-free
reorganization with PaineWebber Classic Dividend Growth Fund, which was at
that time another series of PaineWebber America Fund. As a result of the
reorganization, each shareholder of PaineWebber Classic Dividend Growth Fund
became a shareholder of PaineWebber Growth and Income Fund. Prior to ,
1995, each Fund's Class Y shares were known as "Class C" shares.

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 Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust or its Funds 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. Each Declaration of Trust provides for
indemnification

29
<PAGE>

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

COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 M Street, N.W.,
Washington, D.C., 20036-5891, counsel to each Fund, has passed upon the
legality of the shares offered by the Prospectus. Kirkpatrick & Lockhart LLP
also acts as counsel to PaineWebber and Mitchell Hutchins in connection with
other matters.

Auditors. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for each Fund.

FINANCIAL STATEMENTS

The Funds' Annual Report to Shareholders for the fiscal year ended August
31, 1995 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.

30
<PAGE>

APPENDIX

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S ("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
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues; Aa. Bonds which are
rated Aa are judged to be of high quality by all standards. Together with the
Aaa group they comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risks appear somewhat larger than in Aaa securities; A. Bonds which are
rated A possess many favorable investment attributes and are to be considered
as upper medium grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present which suggest a
susceptibility to impairment some time 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.

DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("S&P") CORPORATE DEBT RATINGS

31
<PAGE>

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.

32
<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THE PROSPECTUS OR IN THIS STATEMENT OF ADDITIONAL
INFORMATION IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY A FUND OR ITS DISTRIBUTOR. THE PROSPECTUS AND THIS
STATEMENT OF ADDITIONAL INFORMATION DO NOT CONSTITUTE AN OFFERING BY ANY FUND
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAW-
FULLY BE MADE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Restrictions....................................... 1
Hedging Strategies......................................................... 9
Trustees and Officers...................................................... 15
Investment Advisory and Distribution Arrangements.......................... 20
Portfolio Transactions..................................................... 22
Valuation of Shares........................................................ 24
Performance Information.................................................... 25
Taxes...................................................................... 28
Other Information.......................................................... 29
Financial Statements....................................................... 30
Appendix................................................................... 31
</TABLE>

[LOGO OF RECYCLED PAPER APPEARS HERE]

PAINEWEBBER

GROWTH AND INCOME FUND

PAINEWEBBER

GROWTH FUND

CLASS Y SHARES

-------------------------------------
STATEMENT OF ADDITIONAL INFORMATION

NOVEMBER , 1995

<PAGE>

PART C. OTHER INFORMATION
-------------------------

Item 24. Financial Statements and Exhibits
---------------------------------

(a) Financial Statements (to be filed)

PaineWebber Growth and Income Fund
-----------------------------------

Included in Part A of the Registration Statement:

Financial Highlights for one Class A share of the Fund for each of the
ten years in the period ended August 31, 1995.

Financial Highlights for one Class B share of the Fund for each of the
four years in the period ended August 31, 1995 and for the period July
1, 1991 (commencement of offering) to August 31, 1991.

Financial Highlights for one Class C share of the Fund for each of the
three years in the period ended August 31, 1995 and for the period
July 2, 1992 (commencement of offering) to August 31, 1992.

Financial Highlights for one Class Y share of the Fund for each of the
three years in the period ended August 31, 1995 and for the period
February 22, 1992 (commencement of offering) to August 31, 1992.

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 __________, 1995,
Accession No. ______________:

Portfolio of Investments at August 31, 1995

Statement of Assets and Liabilities at August 31, 1995

Statement of Operations for the year ended August 31, 1995

C-1
<PAGE>

Statement of Changes in Net Assets for the two years in the period
ended August 31, 1995

Notes to Financial Statements

Financial Highlights for one Class A share of the Fund for each of the
five years in the period ended August 31, 1995

Financial Highlights for one Class B share of the Fund for each of the
four years in the period ended August 31, 1995 and for the period July
1, 1991 (commencement of offering) through August 31, 1991

Financial Highlights for one Class C share of the Fund for each of the
three years in the period ended August 31, 1995 and for the period
July 2, 1992 (commencement of offering) through August 31, 1992

Financial Highlights for one Class Y share of the Fund for each of the
three years in the period ended August 31, 1995 and for the period
February 12, 1992 (commencement of offering) through August 31, 1992

Report of Ernst & Young LLP, Independent Auditors, dated October ___,
1995

(b) Exhibits:
(1) (a) Declaration of Trust 1/
-
(b) Amendment effective January 28, 1988 4/
-
(c) Amendment effective January 23, 1990 6/
-
(d) Amendment effective December 21, 1990 8/
-
(e) Amendment effective May 17, 1991 9/
-
(f) Amendment effective July 1, 1991 9/
-
(g) Amendment effective August 31, 1991 9/
-
(h) Amendment effective July 1, 1992 12/
--

(i) Amendment effective April 3, 1995
(filed herewith)

(2) (a) By-laws 1/
-
(b) Amendment to By-Laws dated March 19, 1991 8/
-
(c) Amendment to By-Laws
dated September 28, 1994 14/
--
(3) Voting trust agreement - none

C-2
<PAGE>

(4) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 15/
--

(5) Investment Advisory and Administration Contract 5/
-
(b) Sub-Advisory Contract 14/
--
(6) (a) Distribution Contract with respect to Class A shares 13/
--
(b) Distribution Contract with respect to Class B shares 13/
--

(d) Distribution Contract with respect to Class C shares 13/
--

(e) Exclusive Dealer Agreement with respect to Class A shares 13/
--
(f) Exclusive Dealer Agreement with respect to Class B shares 13/
--

(g) Exclusive Dealer Agreement with respect to Class Y shares 9/
-

----

(h) Exclusive Dealer Agreement with respect to Class C shares 13/
--

----
(7) Bonus, profit sharing or pension plans - none
(8) Custodian Agreement 2/
-
(9) (a) Transfer Agency and Service Contract 7/
-
(b) Service Contract 5/
-
(10)(a) Opinion and consent of Kirkpatrick & Lockhart LLP with respect
to Class A and Class B shares 8/
-

(b) Opinion and consent of Kirkpatrick & Lockhart LLP with respect to
Class Y shares 9/
-

(11) Other opinions, appraisals, rulings and consents:
Independent Auditor's Consent (to be filed)

(12) Financial statements omitted from prospectus-none
(13) Letter of investment intent 3/
-
(14) Prototype Retirement Plan 10/
--

C-3
<PAGE>

(15) (a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
A shares 9/
-
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
B shares 9/
-
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
C shares 12/
--
(16) (a) Schedule for Computation of Performance Quotations with respect
to Class A and Class B Shares 9/
-
(b) Schedule for Computation of Performance Quotations with respect
to Class Y and Class C Shares 12/
--

(17) and (27) Financial Data Schedule (to be filed)

(18) Plan pursuant to Rule 18f-3 (filed herewith)

_______________________________

1/ Incorporated by reference from Post-Effective Amendment No. 10 to the
-
registration statement, SEC File No. 2-78626, filed February 25, 1987.

2/ Incorporated by reference from Post-Effective Amendment No. 11 to the
-
registration statement, SEC File No. 2-78626, filed December 22, 1987.

3/ Incorporated by reference from Pre-Effective Amendment No. 2 to the
-
registration statement, SEC File No. 2-78626, filed September 26, 1983.

4/ Incorporated by reference from Post-Effective Amendment No. 12 to the
-
registration statement, SEC File No. 2-78626, filed November 3, 1988.

5/ Incorporated by reference from Post-Effective Amendment No. 16 to the
-
registration statement, SEC File No. 2-78626, filed December 29, 1989.

6/ Incorporated by reference from Post-Effective Amendment No. 18 to the
-
registration statement, SEC File No. 2-78626, filed August 30, 1990.

7/ Incorporated by reference from Post-Effective Amendment No. 19 to the
-
registration statement, SEC File No. 2-78626, filed November 2, 1990.

8/ Incorporated by reference from Post-Effective Amendment No. 21 to the
-
registration statement, SEC File No. 2-78626, filed May 3, 1991.

9/ Incorporated by reference from Post-Effective Amendment No. 23 to the
-
registration statement, SEC File No. 2-78626, filed December 24, 1991.

C-4
<PAGE>

10/ Incorporated by reference from Post-Effective Amendment No. 20 to the
--
registration statement of PaineWebber Managed Investments Trust, SEC File
No. 2-91362, filed April 1, 1992.

11/ Incorporated by reference from Post-Effective Amendment No. 25 to the
--
registration statement, SEC File No. 2-78626, filed June 23, 1992.

12/ Incorporated by reference from Post-Effective Amendment No. 27 to the
--
registration statement, SEC File No. 2-78626, filed December 21, 1992.

13/ Incorporated by reference from Post-Effective Amendment No. 28 to the
--
registration statement, SEC File No. 2-78626, filed December 29, 1993.

14/ Incorporated by reference from Post-Effective Amendment No. 31 to the
--
registration statement, SEC File No. 2-78626, filed December 28, 1994.

15/ Incorporated by reference from Articles III, VIII, IX, X and XI of
--
Registrant's Declaration of Trust, as amended effective January 28, 1988,
January 23, 1990, December 21, 1990, May 17, 1991, July 1, 1991, August
31, 1991, July 1, 1992 and April 3, 1995, and from Articles II, VII and X
of Registrant's By-Laws, as amended March 19, 1991 and September 28, 1994.

C-5
<PAGE>

Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------- ----------

None.

Item 26. Number of Holders of Securities

<TABLE>
<CAPTION>
Number of Record
Shareholders as of
Title of Class August 18, 1995
------------------------------------------- ------------------
<S> <C>
Shares of Beneficial Interest,
par value $0.001 per share
-------------------------------------------
PaineWebber Growth and Income
Fund (Formerly PaineWebber Dividend
Growth Fund)
Class A shares 18,906
Class B shares 25,660
Class C shares (to be named Class Y) 2
Class D shares (to be named Class C) 3,643
</TABLE>

Item 27. Indemnification
---------------

Section 2 of "Indemnification" in Article X of the Declaration of Trust
provides that the appropriate series of the Registrant will indemnify its
Trustees and officers to the fullest extent permitted by law against claims and
expenses asserted against or incurred by them by virtue of being or having been
a Trustee or officer; provided that no such person shall be indemnified where
there has been an adjudication or other determination, as described in Article
X, that such person is liable to the Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office or did not act in good faith
in the reasonable belief that his or her action was in the best interest of the
Registrant. Section 2 of "Indemnification" in Article X also provides that the
Registrant may maintain insurance policies covering such rights of
indemnification.

Additionally, "Limitation of Liability" in Article X of the Declaration of
Trust provides that the Trustees or officers of the

C-6
<PAGE>

Registrant shall not be personally liable to any person extending credit to,
contracting with or having a claim against the Trust or a particular series
thereof; and that, provided they have exercised reasonable care and have acted
under the reasonable belief that their actions are in the best interest of the
Registrant, the Trustees and officers shall not be liable for neglect or
wrongdoing by them or any officer, agent, employee or investment adviser of the
Registrant.

Section 2 of Article XI of the Declaration of Trust additionally provides
that, subject to the provisions of Section 1 of Article XI and to Article X,
Trustees shall not be liable for errors of judgment or mistakes of fact or law,
or for any act or omission in accordance with advice of counsel or other
experts, or failing to follow such advice, with respect to the meaning and
operation of the Declaration of Trust.

Article IX of the By-laws provides that the Registrant may purchase and
maintain insurance on behalf of any person who is or was a Trustee, officer or
employee of the Trust, or is or was serving at the request of the Trust as a
Trustee, officer or employee of a corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity or arising out of his or her status
as such, whether or not the Registrant would have the power to indemnify him or
her against such liability, provided that the Registrant may not acquire
insurance protecting any Trustee or officer against liability to the Registrant
or its shareholders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his or her office.

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 10 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 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

C-7
<PAGE>

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 9 of each Exclusive Dealer Agreement contains provisions similar to
Section 9 of the Distribution Contract, with respect to PaineWebber Incorporated
("PaineWebber").

Section 6 of the Service Contract provides that PaineWebber shall be
indemnified and held harmless by the Trust against all liabilities, except those
arising out of bad faith, gross negligence, willful misfeasance or reckless
disregard of its duties under the Contract.

Section 10 of each Distribution Contract and Section 7 of the Service
Contract contain provisions similar to Section 10 of the Investment Advisory and
Administration Contract, with respect to Mitchell Hutchins and PaineWebber, as
appropriate.

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.

Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------

I. 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

C-8
<PAGE>

primarily engaged in the investment advisory business. Information as to the
officers and directors of Mitchell Hutchins is included in its Form ADV filed on
February 22, 1995 with the Securities and Exchange Commission (registration
number 801-13219) and is incorporated herein by reference.

Item 29. Principal Underwriters
----------------------

a) Mitchell Hutchins serves as principal underwriter and/or investment
adviser for the following investment companies:

ALL-AMERICAN TERM TRUST INC.

MITCHELL HUTCHINS/KIDDER, PEABODY EQUITY INCOME FUND, INC.
MITCHELL HUTCHINS/KIDDER, PEABODY GOVERNMENT INCOME FUND, INC.

MITCHELL HUTCHINS/INSTITUTIONAL SERIES TRUST

MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST II
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST III
PAINEWEBBER AMERICA FUND

PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
PAINEWEBBER PREMIER INSURED MUNICIPAL INCOME FUND INC.
PAINEWEBBER PREMIER TAX-FREE INCOME FUND INC.
PAINEWEBBER REGIONAL FINANCIAL GROWTH FUND INC.
PAINEWEBBER SECURITIES TRUST
PAINEWEBBER SERIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.

TRIPLE A AND GOVERNMENT SERIES - 1997, INC.
2002 TARGET TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
GLOBAL SMALL CAP FUND 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 filed February
22, 1995 with the Securities and Exchange Commission (registration number 801-
13219). The directors and officers of PaineWebber, their principal business
addresses, and their

C-9
<PAGE>

positions and offices with PaineWebber are identified in its Form ADV filed
March 31, 1995 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>
Name and Position and
Principal Business Position With Offices With Underwriter or
Address Registrant Exclusive Dealer
----------------------------- ---------------------------- -------------------------------
<S> <C> <C>
Margo N. Alexander President Director,
1285 Avenue of the Americas President and Chief Executive
New York, New York 10019 Officer of Mitchell Hutchins

Frank P.L. Minard Trustee Chairman of the Board of
1285 Avenue of the Americas Mitchell Hutchins and a
New York, New York 10019 Director of Mitchell Hutchins
and PaineWebber

Teresa M. Boyle Vice President Vice President and Manager --
1285 Avenue of the Americas Advisory Administration of
New York, New York 10019 Mitchell Hutchins

Joan L. Cohen Vice President and Vice President and Attorney
1285 Avenue of the Americas Assistant of Mitchell Hutchins
New York, New York 10019 Secretary

Ellen R. Harris Vice President Managing Director of Mitchell
1285 Avenue of the Americas Hutchins
New York, New York 10019

Ann E. Moran Vice President and Vice President of Mitchell
1285 Avenue of the Americas Assistant Hutchins
New York, New York 10019 Treasurer

C. William Maher Vice President and First Vice President of
1285 Avenue of the Americas Assistant Mitchell Hutchins
New York, New York 10019 Treasurer

Dianne E. O'Donnell Vice President and Secretary Senior Vice President and
1285 Avenue of the Americas Deputy General Counsel of
New York, New York 10019 Mitchell Hutchins
</TABLE>

C-10
<PAGE>

<TABLE>
<S> <C> <C>
Victoria E. Schonfeld Vice President Managing Director and General
1285 Avenue of the Americas Counsel of Mitchell Hutchins
New York, New York 10019

Paul H. Schubert Vice President and First Vice President of
1285 Avenue of the Americas Assistant Mitchell Hutchins
New York, New York 10019 Treasurer

Julian F. Sluyters Vice President and Treasurer Senior Vice President and
1285 Avenue of the Americas Director of Mutual Fund
New York, New York 10019 Finance Division of Mitchell
Hutchins

Gregory K. Todd Vice President First Vice President and
1285 Avenue of the Americas and Assistant Secretary Associate General Counsel of
New York, New York 10019 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
------------

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-11
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, PaineWebber America Fund, has
duly caused this Post-Effective Amendment 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 31st day of August, 1995.

PAINEWEBBER AMERICA FUND

By: /s/ Gregory K. Todd
______________________________
Gregory K. Todd
Vice President and Assistant 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 (Chief Executive August 31, 1995
_____________________* Officer)
Margo N. Alexander

/s/ E. Garrett Bewkes, Jr. Trustee August 31, 1995
_____________________**
E. Garrett Bewkes, Jr.

/s/ Meyer Feldberg Trustee August 31, 1995
_____________________***
Meyer Feldberg

/s/ George W. Gowen Trustee August 31, 1995
_____________________****
George W. Gowen

Frederic V. Malek Trustee August 31, 1995
_____________________****
Frederic V. Malek

Frank P. L. Minard Trustee August 31, 1995
_____________________*****
Frank P. L. Minard

Judith Davidson Moyers Trustee August 31, 1995
_____________________****
Judith Davidson Moyers
</TABLE>
<PAGE>

Thomas P. Murray Trustee August 31, 1995
_____________________****
Thomas F. Murray

Julian F. Sluyters Vice President and August 31, 1995
_____________________ Treasurer
Julian F. Sluyters (Chief Financial and
Accounting Officer)

</TABLE>

* Signature affixed by Elinor W. Gammon pursuant to power of attorney
dated May 8, 1995 and incorporated by reference from Post-Effective
Amendment No. 34 to the registration statement of PaineWebber America
Fund, SEC File No. 2-78626, filed May 10, 1995.

** Signature affixed by Elinor W. Gammon pursuant to power of attorney
dated January 3, 1994 and incorporated by reference from Post-
Effective Amendment No. 25 to the registration statement of
PaineWebber Investment Series, SEC File No. 33-11025, filed March 1,
1994.

*** Signature affixed by Elinor W. Gammon pursuant to power of attorney
dated March 28, 1991 and incorporated by reference from Post-Effective
Amendment No. 16 to the registration statement of PaineWebber Fixed
Income Portfolios, SEC File No. 2-91362, filed March 28, 1991.

**** Signatures affixed by Elinor W. Gammon pursuant to powers of attorney
dated March 27, 1990 and incorporated by reference from Post-Effective
Amendment No. 7 to the registration statement of PaineWebber Municipal
Series, SEC File No. 33-11611, filed
June 29, 1990.

***** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
November 17, 1993 and incorporated by reference from Post-Effective
Amendment No. 28 to the registration statement of PaineWebber America
Fund, SEC File No. 2-78626, filed December 29, 1993.
<PAGE>

PAINEWEBBER AMERICA FUND
EXHIBIT INDEX

Exhibits
--------

(1) (a) Declaration of Trust 1/
-
(b) Amendment effective January 28, 1988 4/
-
(c) Amendment effective January 23, 1990 6/
-
(d) Amendment effective December 21, 1990 8/
-
(e) Amendment effective May 17, 1991 9/
-
(f) Amendment effective July 1, 1991 9/
-
(g) Amendment effective August 31, 1991 9/
-
(h) Amendment effective July 1, 1992 12/
--
(i) Amendment effective April 3, 1995 (filed herewith)
(2) (a) By-laws 1/
(b) Amendment to By-Laws dated March 19, 1991 8/
-
(c) Amendment to By-Laws dated September 28, 1994 14/
--
(3) Voting trust agreement - none
(4) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 15/
--
(5) Investment Advisory and Administration Contract 5/
-
(b) Sub-Advisory Contract 14/
(6) (a) Distribution Contract with respect to Class A shares 13/
(b) Distribution Contract with respect to Class B shares 13/
--
(c) Distribution Contract with respect to Class Y shares 9/
-
(d) Distribution Contract with respect to Class C shares 13/
--
(e) Exclusive Dealer Agreement with respect to Class A shares 13/
--
(f) Exclusive Dealer Agreement with respect to Class B shares 13/
--
(g) Exclusive Dealer Agreement with respect to Class Y shares 9/
-
(h) Exclusive Dealer Agreement with respect to Class C shares 13/
--- ------------------------------------------------------------
(7) Bonus, profit sharing or pension plans - none
(8) Custodian Agreement 2/
(10) (a) Opinion and Consent of Kirkpatrick & Lockhart LLP with
respect to Class A and Class B shares 8/
(b) Opinion and consent of Kirkpatrick & Lockhart LLP with respect to
Class Y shares 9/
-
(c) Opinion and consent of Kirkpatrick & Lockhart LLP with respect to
Class C shares 11/
--
(11) Other opinions, appraisals, rulings and consents:
Independent Auditor's Consent (to be filed)
(12) Financial statements omitted from prospectus-none
(13) Letter of investment intent 3/
(14) Prototype Retirement Plan 10/
(15) (a) Plan of Distribution pursuant to Rule 12b-1 with respect
to Class A shares 9/
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class B
shares 9/
-
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class C
shares 12/
--
<PAGE>

(16) (a) Schedule for Computation of Performance Quotations with
respect to Class A and Class B Shares 9/
(b) Schedule for Computation of Performance Quotations with respect to
Class Y and Class C Shares 12/
--
(17) and (27) Financial Data Schedule (to be filed)
(18) Plan pursuant to Rule 18f-3 (filed herewith)

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