PAINEWEBBER AMERICA FUND /NY/, 485APOS, 1996-04-26

PAINEWEBBER AMERICA FUND /NY/
485APOS, 1996-04-26

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<PAGE>

As filed with the Securities and Exchange Commission on April 26, 1996

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. 39 [ X ]
---- -----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
-----
Amendment No. 37

(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
1800 Massachusetts Avenue, N.W.; Second Floor
Washington, D.C. 20036-1800
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)
- ------ --------------------

Registrant has filed a declaration pursuant to Rule 24f-2 under the Investment
Company Act of 1940 and filed the notice required by such Rule for its most
recent fiscal year on October 27, 1995.
<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 America Fund
------------------------

Class A, B and C Shares

Form N-1A Cross Reference Sheet

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

2. Synopsis.......................... The Funds at a Glance;
Expense Table

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

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

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

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

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

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

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

<CAPTION>
Part B Item No. Statement of Additional
and Caption Information Caption
--------------- -----------------------
<C> <S> <C>
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
</TABLE>

<PAGE>

<TABLE>

14. Management of the Fund............ Trustees and Officers;
Principal Shareholders

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

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

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

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

22. Calculation of Performance Data... Performance Information

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

<PAGE>

PaineWebber America Fund
------------------------

Class Y Shares

Form N-1A Cross Reference Sheet

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

2. Synopsis............................. The Funds at a Glance;
Expense Table

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

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

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

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

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

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

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

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

</TABLE>

<PAGE>

<TABLE>
<C> <S> <C>
14. Management of the Fund............... Trustees and Officers;
Principal Shareholders

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

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 Being Offered............. Valuation of Shares

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

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

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

23. Financial Statements................. Financial Statements

</TABLE>

Part C
- ------

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

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

PaineWebber

Growth and Income Fund

Growth Fund

Small Cap Value Fund

1285 Avenue of the Americas, New York, NY 10019

Prospectus -- April 30, 1996

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

PaineWebber Equity Funds are designed for investors who generally seek
long-term capital appreciation by investing principally in equity
securities. PaineWebber Growth and Income Fund seeks to provide both
capital growth and current income by investing in dividend-paying equity
securities believed to have potential for rapid earnings growth.
PaineWebber Growth Fund seeks long-term capital appreciation by investing
in equity securities of companies with substantial potential for capital
growth. PaineWebber SmallCap Value Fund seeks long-term capital
appreciation by investingprimarily in equity securities of small-
capitalization companies.

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

A Statement of Additional Information dated April 30, 1996 has been filed
with the Securities and Exchange Commission and is legally part of this
Prospectus. The Statement of Additional Information can be obtained without
charge, and further inquiries can be made, by contacting an individual
Fund, your PaineWebber investment executive, PaineWebber's correspondent
firms or by calling toll-free 1-800-647-1568.

Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Funds at a Glance.................................................... 2
Expense Table............................................................ 5
Financial Highlights..................................................... 7
Investment Objective and Policies........................................ 12
Investment Philosophy & Process.......................................... 13
Performance.............................................................. 15
The Fund's Investments................................................... 18
Flexible Pricing SM...................................................... 20
How to Buy Shares........................................................ 23
How to Sell Shares....................................................... 24
Other Services........................................................... 24
Management............................................................... 25
Determining the Shares' Net Asset Value.................................. 27
Dividends & Taxes........................................................ 27
General Information...................................................... 28
</TABLE>

----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

-------------
Prospectus Page 1
<PAGE>

----------------------------------------------------------------------------
----------------------------------------------------------------------------
PAINEWEBBER GROWTH AND INCOME FUND GROWTH FUND SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------

The Funds at a Glance
----------------------------------------------------------------------------

GROWTH AND INCOME FUND

GOAL: To increase the value of your investment by investing primarily in
dividend-paying equity securities with the potential for rapid earnings growth.

INVESTMENT OBJECTIVE: Current income and capital growth.

RISKS: Equity securities historically have shown greater growth potential than
other types of securities; as such, they have also shown greater volatility.
Because the Fund invests primarily in equity securities, its price will rise
and fall. The Fund may invest in U.S. dollar denominated securities of foreign
companies, which involve more risk than investing in the securities of U.S.
companies. The Fund may also invest up to 10% of its assets in high yield, high
risk convertible bonds, which are considered predominantly speculative and may
involve major risk exposure to adverse conditions. The Fund may use
derivatives, such as options and futures, in its hedging activities, which may
involve special risks. Investors may lose money by investing in the Fund; your
investment is not guaranteed.

SIZE: On February 29, 1996, the Fund had over $599 million in assets.

GROWTH FUND

GOAL: To increase the value of your investment by investing primarily in equity
securities of companies with substantial potential for capital growth.

INVESTMENT OBJECTIVE: Long-term capital appreciation.

RISKS: Equity securities historically have shown greater growth potential than
other types of securities; as such, they have also shown greater volatility.
Because the Fund invests primarily in equity securities, its price will rise
and fall. The Fund may invest in U.S. dollar denominated securities of foreign
companies, which involve more risk than investing in the securities of U.S.
companies. The Fund may also invest up to 35% of its net assets in high yield,
high risk bonds, which may be subject to greater risks of default and price
fluctuation than investment grade securities and are considered predominantly
speculative. The Fund may use derivatives, such as options and futures, in its
hedging activities, which may involve special risks. Investors may lose money
by investing in the Fund; your investment is not guaranteed.

SIZE: On February 29, 1996, the Fund had over $403 million in assets.

SMALL CAP VALUE FUND

GOAL: To increase the value of your investment by investing primarily in the
equity securities of small-cap companies.

INVESTMENT OBJECTIVE: Long-term capital appreciation.

RISKS: Equity securities historically have shown greater growth potential than
other types of securities; as such, they have also shown greater volatility.
Because the Fund invests primarily in equity securities, its price will rise
and fall. The Fund may invest in U.S. dollar denominated securities of foreign
companies, which involve more risk than investing in the securities of U.S.
companies. Small-cap companies typically are subject to a greater degree of
change in earnings and business prospects than are larger, more established
companies. In addition, equity securities of small-cap companies may be less
liquid and more volatile than those of larger companies. The Fund may use
derivatives, such as options and futures, in its hedging activities, which may
involve special risks. Investors may lose money by investing in the Fund; your
investment is not guaranteed.

SIZE: On February 29, 1996, the Fund had over $71 million in assets.

MANAGEMENT: Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), an
asset management subsidiary of PaineWebber Incorporated ("PaineWebber"), is the
investment adviser and administrator of the Growth Fund, the Growth and

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

Income Fund, and the Small Cap Value Fund (each a "Fund" and, collectively, the
"Funds").

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

WHO SHOULD INVEST

The GROWTH AND INCOME FUND is designed for investors seeking capital growth and
current income through investment in growth-oriented, dividend-paying equity
securities of U.S. companies and foreign companies that are traded in the
United States. The Growth and Income Fund invests primarily in equity
securities of larger growth companies and smaller issuers with the potential
for rapid earnings growth that pay dividends. In addition, the Growth and
Income Fund can invest in high yield, high risk convertible bonds. These
investments offer the potential for greater returns but also entail a
substantial degree of volatility and risk. Accordingly, the Growth and Income
Fund is designed for investors who are able to bear the risks that come with
investments in the stocks and bonds of such companies.

The GROWTH FUND is for investors who want long-term capital appreciation
through investment primarily in growth-oriented equity securities of U.S.
companies and foreign companies that are traded in the United States. The
Growth Fund invests in equity securities of both larger growth companies and
smaller issuers with greater appreciation potential. In addition, the Growth
Fund can invest a significant portion of its assets in high yield, high risk
bonds. These investments offer the potential for greater returns but also
entail a substantial degree of volatility and risk. Accordingly, the Growth
Fund is designed for investors who are able to bear the risks that come with
investments in the stocks and bonds of such companies.

The SMALL CAP VALUE FUND invests primarily in equity securities of small cap
U.S. companies and foreign companies that are traded in the U.S., and is
designed for investors who are seeking long-term capital appreciation. Several
statistical studies have been published recently indicating that the historical
long-term returns of small-cap equity securities have been higher than those of
large-cap equity securities. Equity securities of small-cap companies generally
exhibit greater market volatility than is the case with equity securities of
larger companies, or equity securities in general. Accordingly, the Small Cap
Value Fund is designed for investors who are looking for long-term growth and
are able to bear the risks and fluctuations associated with investment in
smaller companies.

These Funds are not intended to provide a complete or balanced investment
program, but one or more of them may be appropriate as a component of an
investor's overall portfolio. Some common reasons to invest in these Funds are
to finance a child's college education, plan for retirement or diversify a
portfolio. When selling shares, investors should be aware that they may get
more or less for their shares than they originally paid for them.

HOW TO PURCHASE SHARES OF THE FUNDS

Investors may select among these classes of shares:

CLASS A SHARES

The price is the net asset value plus the initial sales charge (the maximum is
4.5% of the public offering price).

Although investors pay an initial sales charge when they buy Class A shares,
the ongoing expenses for this Class are lower than the ongoing expenses of
Class B and Class C shares.

CLASS B SHARES

The price is the net asset value.

Investors do not pay an initial sales charge when they buy Class B shares. 100%
of their purchase is immediately invested. Class B shares have higher ongoing
expenses than Class A shares.

Depending upon how long they own the shares, investors may have to pay a sales
charge when they sell Class B shares. This is called a "contingent deferred
sales charge" and applies when investors sell their Class B shares within six
years.

After six years, Class B shares convert to Class A shares, which have lower
ongoing expenses and no contingent deferred sales charge.

CLASS C SHARES

The price is the net asset value.

Investors do not pay an initial sales charge when they buy Class C shares, but
the ongoing expenses they pay for Class C shares are higher than for

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

Class A shares. A contingent deferred sales charge of 1% is charged on shares
sold within one year of the purchase date. Class C shares never convert to any
other Class of shares.

THE PAINEWEBBER FAMILY OF FUNDS

The PaineWebber Family of Funds consists of six broad categories, which are
presented here. Generally, investors seeking to maximize return must assume
greater risk. The Growth and Income Fund, Growth Fund and Small Cap Value Fund
are all in the Growth category.

. Money Market Funds for income and stability by investing in high-quality,
short-term investments.

. Bond Funds for income by investing mainly in bonds.

. Tax-Free Bond Funds for income exempt from federal income taxes and, in some
cases, state and local income taxes, by investing in municipal bonds.

. Asset Allocation Funds for long-term growth and income by investing in stocks
and bonds.

. Growth Funds for long-term growth by investing mainly in stocks.

. Global Funds for long-term growth by investing mainly in foreign stocks or
high current income by investing mainly in global debt instruments.

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

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

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

Expense Table
- --------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C
- -------------------------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge on Purchases of Shares (as a
percentage of offering price)........................ 4.50% None None
Sales Charge on Reinvested Dividends (as a percentage
of offering price)................................... None None None
Maximum Contingent Deferred Sales Charge (as a
percentage of net asset value at the time of purchase
or sale, whichever is lower)......................... None 5% 1%
Exchange Fee.......................................... $5.00 $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES (as a % of average net
assets)
GROWTH AND INCOME FUND
Management Fees....................................... 0.70% 0.70% 0.70%
12b-1 Fees............................................ 0.23 1.00 1.00
Other Expenses........................................ 0.26 0.27 0.28
----- ----- -----
Total Operating Expenses.............................. 1.19% 1.97% 1.98%
===== ===== =====
GROWTH FUND
Management Fees....................................... 0.75% 0.75% 0.75%
12b-1 Fees............................................ 0.23 1.00 1.00
Other Expenses(a)..................................... 0.24 0.25 0.24
----- ----- -----
Total Operating Expenses.............................. 1.22% 2.00% 1.99%
===== ===== =====
SMALL CAP VALUE FUND
Management Fees....................................... 1.00% 1.00% 1.00%
12b-1 Fees............................................ 0.25 1.00 1.00
Other Expenses........................................ 0.73 0.74 0.73
----- ----- -----
Total Operating Expenses.............................. 1.98% 2.74% 2.73%
===== ===== =====
</TABLE>
- -------
(a) Does not include 0.06% in non-recurring reorganization expenses which were
incurred during the fiscal year ended August 31, 1995. If those expenses
were included, "Other expenses" for the Class A, B and C shares would be
0.30%, 0.31% and 0.30%, respectively, and "Total operating expenses" would
be 1.28%, 2.06% and 2.05%, respectively.

CLASS A SHARES: Sales charge waivers and a reduced sales charge
purchase plan are available. Purchases of $1 million or more are not
subject to a sales charge. However, if such shares are sold within one
year after purchase, a contingent deferred sales charge of 1% is
imposed on the net asset value of the shares at the time of purchase
or sale, whichever is less.

CLASS B SHARES: Sales charge waivers are available. The maximum 5%
contingent deferred sales charge applies to sales of shares during the
first year after purchase. The charge generally declines by 1%
annually, reaching zero after six years.

CLASS C SHARES: A contingent deferred sales charge of 1% of the net
asset value or cost of the shares sold, whichever is less, will be
applied to sales of shares within one year of purchase.

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

For more information, see "Management" and "Purchases."

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Prospectus Page 5
<PAGE>

Expense Table

(Continued)

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

EXAMPLE OF EFFECT OF FUND EXPENSES

The following example should assist investors in understanding various costs
and expenses incurred as shareholders of a Fund. The assumed 5% annual return
shown in the example is required by regulations of the Securities and Exchange
Commission applicable to all mutual funds. The example should not be considered
to be a representation of past or future expenses. Actual expenses of a Fund
may be more or less than those shown.

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

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A........................................ $57 $ 81 $107 $183
Class B (Assuming sale of all shares at end of
period)....................................... $70 $ 92 $126 $191
Class B (Assuming no sale of shares)........... $20 $ 62 $106 $191
Class C (Assuming sale of all shares at end of
period)....................................... $30 $ 62 $107 $231
Class C (Assuming no sale of shares)........... $20 $ 62 $107 $231
<CAPTION>
GROWTH FUND
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A........................................ $57 $ 84 $112 $190
Class B (Assuming sale of all shares at end of
period)....................................... $71 $ 96 $133 $201
Class B (Assuming no sale of shares)........... $21 $ 65 $111 $201
Class C (Assuming sale of all shares at end of
period)....................................... $31 $ 64 $110 $238
Class C (Assuming no sale of shares)........... $21 $ 64 $110 $238
<CAPTION>
SMALL CAP VALUE FUND
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A........................................ $64 $104 $147 $265
Class B (Assuming sale of all shares at end of
period)....................................... $78 $115 $165 $272
Class B (Assuming no sale of shares)........... $28 $ 85 $145 $272
Class C (Assuming sale of all shares at end of
period)....................................... $38 $ 85 $144 $306
Class C (Assuming no sale of shares)........... $28 $ 85 $144 $306
</TABLE>

ASSUMPTIONS MADE IN THE EXAMPLE

. CLASS A SHARES: Deduction of the maximum 4.5% initial sales charge at
the time of purchase.
. CLASS B SHARES: Deduction of the maximum applicable contingent
deferred sales charge at the time of redemption, which declines over
a period of six years. Ten-year figures assume that Class B Shares
convert to Class A Shares at the end of the sixth year.
. CLASS C SHARES: Deduction of a 1% contingent deferred sales charge
for sales of shares within one year of purchase.

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Prospectus Page 6
<PAGE>

Financial Highlights

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

GROWTH AND INCOME FUND

The following tables provide investors with data and ratios for one Class A,
Class B and Class C share for each of the periods. This information is
supplemented by the financial statements and accompanying notes appearing in
the Growth and Income Fund's Annual Report to Shareholders for the fiscal year
ended August 31, 1995 and the report of Ernst & Young LLP, independent
auditors, appearing in the Fund's Annual Report to Shareholders. Both are
incorporated by reference into the Statement of Additional Information. The
financial statements and notes, as well as the information for each of the five
years in the period ended August 31, 1995 appearing below in the tables, have
been audited by Ernst & Young LLP. Further information about the Fund's
performance is also included in the Annual Report to Shareholders, which may be
obtained without charge. Information for periods prior to the year ended August
31, 1991, shown below, has also been audited by Ernst & Young LLP, whose
reports were unqualified.

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
-------------------------------------------------------------------------------------------------
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.... $ 20.43 $ 20.86 $ 20.48 $ 19.26 $ 15.87 $ 16.50 $ 13.32 $ 18.06 $ 17.41 $ 14.18
-------- -------- -------- -------- -------- ------- ------- ------- -------- -------
Net investment income... 0.24 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........... 3.18 (0.41) 0.37 1.25 3.50 (0.61) 3.17 (2.36) 1.79 3.36
-------- -------- -------- -------- -------- ------- ------- ------- -------- -------
Total increase/decrease
from investment
operations............. 3.42 (0.13) 0.65 1.49 3.69 (0.10) 3.66 (1.76) 2.47 4.21
-------- -------- -------- -------- -------- ------- ------- ------- -------- -------
Dividends from net
investment income...... (0.12) (0.27) (0.27) (0.27) (0.30) (0.53) (0.48) (0.88) (0.76) (0.61)
Distributions from
realized gains on
investments............ (1.21) (0.03) -- -- -- -- -- (2.10) (1.06) (0.37)
-------- -------- -------- -------- -------- ------- ------- ------- -------- -------
Total dividends and
distributions.......... (1.33) (0.30) (0.27) (0.27) (0.30) (0.53) (0.48) (2.98) (1.82) (0.98)
-------- -------- -------- -------- -------- ------- ------- ------- -------- -------
Net asset value, end of
period................. $ 22.52 $ 20.43 $ 20.86 $ 20.48 $ 19.26 $ 15.87 $ 16.50 $ 13.32 $ 18.06 $ 17.41
======== ======== ======== ======== ======== ======= ======= ======= ======== =======
Total investment
return(1).............. 18.30% (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)......... $187,057 $222,432 $359,073 $358,643 $232,555 $58,649 $61,617 $62,917 $107,778 $98,226
Expenses to average net
assets**............... 1.19% 1.20% 1.13% 1.22% 1.42% 1.41% 1.41% 1.26% 1.15% 1.15%
Net investment income to
average net assets**... 1.07% 1.29% 1.33% 1.26% 1.79% 3.11% 3.26% 4.24% 4.14% 5.32%
Portfolio turnover...... 111.27% 94.32% 36.52% 15.57% 52.00% 32.10% 79.08% 88.95% 131.70% 83.48%
</TABLE>
- -------
** During certain periods presented, PaineWebber/Mitchell Hutchins waived fees
or reimbursed the Fund for portions of its operating expenses. If such
waivers 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 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
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for Class A shares would be lower if sales
charges were included. Total return information for periods less than one
year are not annualized.

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Prospectus Page 7
<PAGE>

F i n a n c i a l H i g h l i g h t s

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

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
-------------------------------------------------------------------------------------------
CLASS B CLASS C(2)
--------------------------------------------------- --------------------------------------
FOR THE FOR THE
PERIOD PERIOD
FOR THE YEARS ENDED JULY 1, FOR THE YEARS ENDED JULY 2,
AUGUST 31, 1991+ TO AUGUST 31, 1992+ TO
--------------------------------------- AUGUST 31, -------------------------- AUGUST 31,
1995 1994 1993 1992 1991 1995 1994 1993 1992
-------- -------- -------- -------- ---------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 20.37 $ 20.78 $ 20.41 $ 19.23 $ 18.04 $ 20.42 $ 20.83 $ 20.47 $ 20.95
-------- -------- -------- -------- ------- ------- ------- ------- -------
Net investment income... 0.06 0.10 0.12 0.13 0.02 0.06 0.11 0.11 0.02
Net realized and
unrealized gains
(losses) from
investment
transactions........... 3.18 (0.37) 0.36 1.20 1.17 3.19 (0.38) 0.37 (0.44)
-------- -------- -------- -------- ------- ------- ------- ------- -------
Total increase/decrease
from investment
operations............. 3.24 (0.27) 0.48 1.33 1.19 3.25 (0.27) 0.48 (0.42)
-------- -------- -------- -------- ------- ------- ------- ------- -------
Dividends from net
investment income...... (0.03) (0.11) (0.11) (0.15) -- (0.03) (0.11) (0.12) (0.06)
Distributions from
realized gains on
investments............ (1.21) (0.03) -- -- -- (1.21) (0.03) -- --
-------- -------- -------- -------- ------- ------- ------- ------- -------
Total dividends and
distributions.......... (1.24) (0.14) (0.11) (0.15) -- (1.24) (0.14) (0.12) (0.06)
-------- -------- -------- -------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 22.37 $ 20.37 $ 20.78 $ 20.41 $ 19.23 $ 22.43 $ 20.42 $ 20.83 $ 20.47
======== ======== ======== ======== ======= ======= ======= ======= =======
Total investment
return(1).............. 17.38% (1.31)% 2.34% 6.99% 6.60% 17.37% (1.29)% 2.35% 2.85%
======== ======== ======== ======== ======= ======= ======= ======= =======
Ratios/Supplemental
data:
Net assets, end of
period (000's)......... $247,543 $289,290 $461,389 $386,275 $57,539 $30,468 $37,287 $61,869 $13,019
Expenses to average net
assets................. 1.97% 1.97% 1.90% 1.97% 2.10%* 1.98% 1.94% 1.87% 1.73%*
Net investment income to
average net assets..... 0.29% 0.51% 0.57% 4.90% 1.18%* 0.28% 0.54% 0.61% 0.94%*
Portfolio turnover...... 111.27% 94.32% 36.52% 15.57% 52.00% 111.27% 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>

F i n a n c i a l H i g h l i g h t s

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

GROWTH FUND

The following tables provide investors with data and ratios for one Class A,
Class B and Class C share for each of the periods. This information is
supplemented by the financial statements and accompanying notes appearing in
the Growth Fund's Annual Report to Shareholders for the fiscal year ended
August 31, 1995 and the report of Ernst & Young LLP, independent auditors,
appearing in the Fund's Annual Report to Shareholders. Both are incorporated by
reference into the Statement of Additional Information. The financial
statements and notes, as well as the information for each of the five years in
the period ended August 31, 1995 appearing below in the tables, have been
audited by Ernst & Young LLP. Further information about the Fund's performance
is also included in the Annual Report to Shareholders, which may be obtained
without charge. Information for periods prior to the year ended August 31,
1991, shown below, has also been audited by Ernst & Young LLP, whose reports
were unqualified.

<TABLE>
<CAPTION>
GROWTH FUND
----------------------------------------------------------------------------------------------------
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.... $ 20.04 $ 20.60 $ 16.78 $ 17.50 $ 13.43 $ 15.57 $ 11.21 $ 15.30 $ 12.52 $ 9.70
-------- -------- -------- -------- ------- ------- ------- ------- -------- --------
Net investment income
(loss)................. 0.01 -- 0.07 -- 0.02 0.17 0.06 0.13 0.03 0.16
Net realized and
unrealized gains
(losses) from
investment
transactions........... 2.25 0.51 4.37 (0.11) 4.68 (1.16) 4.40 (2.73) 3.26 2.79
-------- -------- -------- -------- ------- ------- ------- ------- -------- --------
Net increase/decrease
from investment
operations............. 2.26 0.51 4.44 (0.11) 4.70 (0.99) 4.46 (2.60) 3.29 2.95
-------- -------- -------- -------- ------- ------- ------- ------- -------- --------
Dividends from net
investment income...... -- -- -- (0.01) (0.17) -- (0.10) (0.08) (0.20) (0.13)
Distributions from
realized gains on
investments............ (0.03) (1.07) (0.62) (0.60) (0.46) (1.15) -- (1.41) (0.31) --
-------- -------- -------- -------- ------- ------- ------- ------- -------- --------
Total dividends and
other distributions.... (0.03) (1.07) (0.62) (0.61) (0.63) (1.15) (0.10) (1.49) (0.51) (0.13)
-------- -------- -------- -------- ------- ------- ------- ------- -------- --------
Net asset value, end of
period................. $ 22.27 $ 20.04 $ 20.60 $ 16.78 $ 17.50 $ 13.43 $ 15.57 $ 11.21 $ 15.30 $ 12.52
======== ======== ======== ======== ======= ======= ======= ======= ======== ========
Total investment
return(1).............. 11.28% 2.33% 26.97% (0.85)% 37.02% (7.05)% 40.10% (15.37)% 27.78% 30.83%
======== ======== ======== ======== ======= ======= ======= ======= ======== ========
Ratios/Supplemental
data:
Net assets, end of
period (000's)......... $183,958 $141,342 $130,353 $102,640 $96,796 $72,805 $71,681 $70,551 $140,523 $124,182
Expenses to average net
assets**............... 1.28%(2) 1.21% 1.22% 1.43% 1.56% 1.59% 1.37% 1.22% 1.13% 1.23%
Net investment income
(loss) to average net
assets**............... 0.19%(2) 0.06% 0.38% 0.00% 0.10% 2.96% 0.14% 0.82% 0.25% 1.31%
Portfolio turnover...... 36.10% 24.41% 35.81% 32.49% 28.59% 39.16% 43.68% 59.07% 66.15% 71.64%
</TABLE>
- -------
** 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 (loss) to average net assets would have been 1.76%
and (0.25)%, respectively, for the year ended August 31, 1989, 1.41% and
0.63%, respectively, for the year ended August 31, 1988 and 1.25% and 1.29%,
respectively, for the year ended August 31, 1986. For the year ended August
31, 1986, amounts reimbursed had no significant impact on the ratios pre-
sented above.
+ 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 A shares would be lower if sales charges
were included. Total return information for periods less than one year are
not annualized.
(2) This ratio includes non-recurring reorganization expenses of 0.06%.

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

F i n a n c i a l H i g h l i g h t s

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

<TABLE>
<CAPTION>
GROWTH FUND
----------------------------------------------------------------------------------------------------
CLASS B CLASS C(2)
------------------------------------------------------ ------------------------------
FOR THE FOR THE
PERIOD PERIOD
FOR THE YEARS ENDED JULY 1, FOR THE YEARS ENDED JULY 2,
AUGUST 31, 1991+ TO AUGUST 31, 1992+ TO
----------------------------------------- AUGUST 31, ------------------------------ AUGUST 31,
1995 1994 1993 1992 1991 1995 1994 1993 1992
-------- ------- ------- ------- ---------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 19.53 $ 20.25 $ 16.64 $ 17.48 $15.63 $ 19.67 $ 20.38 $ 16.75 $17.04
-------- ------- ------- ------- ------ ------- ------- ------- ------
Net investment income
(loss)................. (0.02) (0.06) (0.05) (0.06) (0.02) (0.10) (0.08) (0.06) (0.01)
Net realized and
unrealized gains
(losses) from
investment
transactions........... 2.05 0.41 4.28 (0.18) 1.87 2.14 0.44 4.31 (0.28)
-------- ------- ------- ------- ------ ------- ------- ------- ------
Net increase/decrease
from investment
operations............. 2.03 0.35 4.23 (0.24) 1.85 2.04 0.36 4.25 (0.29)
-------- ------- ------- ------- ------ ------- ------- ------- ------
Dividends from net
investment income...... -- -- -- -- -- -- -- -- --
Distributions from
realized gains on
investments............ (0.03) (1.07) (0.62) (0.60) -- (0.03) (1.07) (0.62) --
-------- ------- ------- ------- ------ ------- ------- ------- ------
Total dividends and
distributions ......... (0.03) (1.07) (0.62) (0.60) -- (0.03) (1.07) (0.62) --
-------- ------- ------- ------- ------ ------- ------- ------- ------
Net asset value, end of
period................. $ 21.53 $ 19.53 $ 20.25 $ 16.64 $17.48 $ 21.68 $ 19.67 $ 20.38 $16.75
======== ======= ======= ======= ====== ======= ======= ======= ======
Total investment
return(1).............. 10.40% 1.55% 25.91% (1.58)% 11.84% 10.37% 1.59% 25.86% (2.95)%
======== ======= ======= ======= ====== ======= ======= ======= ======
Ratios/Supplemental
data:
Net assets, end of
period (000's)......... $152,357 $97,272 $60,280 $35,867 $3,804 $30,608 $28,561 $16,474 $2,275
Expenses to average net
assets................. 2.06%(3) 2.00% 2.02% 2.20% 2.24%* 2.05%(3) 1.98% 2.06% 1.98%*
Net investment income
(loss) to average net
assets................. (0.60)%(3) (0.66)% (0.46)% (0.70)% (0.81)%* (0.57)%(3) (0.65)% (0.69)% (0.65)%*
Portfolio turnover...... 36.10% 24.41% 35.81% 32.49% 28.59% 36.10% 24.41% 35.81% 32.49%
</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.
(3) These ratios include non-recurring reorganization expenses of 0.06%.

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

Financial Highlights

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

SMALL CAP VALUE FUND

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

<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------- -----------------------------------------------
FOR THE FOR THE FOR THE
SIX MONTHS FOR THE PERIOD FOR THE SIX MONTHS FOR THE FOR THE
ENDED YEAR ENDED YEAR ENDED YEAR PERIOD FOR THE
JANUARY 31, ENDED JULY ENDED JANUARY 31, ENDED ENDED YEAR ENDED
1996 JULY 31, 31, JANUARY 31, 1996 JULY 31, JULY 31, JANUARY 31,
(UNAUDITED) 1995 1994 1994 (UNAUDITED) 1995 1994 1994
----------- -------- ------- ----------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period........... $11.30 $ 10.27 $10.61 $10.00 $11.15 $ 10.22 $10.60 $10.00
------ ------- ------ ------ ------ ------- ------ ------
Income from in-
vestment opera-
tions:
Net investment
income (loss).. 0.02 0.05 0.02 0.13 (0.02) (0.04) (0.02) 0.06
Net realized and
unrealized
gains (losses)
from investment
transactions... 0.23 1.50 (0.36) 0.62 0.23 1.49 (0.36) 0.62
---- ---- ----- ---- ---- ---- ----- ----
Total income
(loss) from
investment
operations....... 0.25 1.55 (0.34) 0.75 0.21 1.45 (0.38) 0.68
---- ---- ----- ---- ---- ---- ----- ----
Less dividends and
distributions to
shareholders
from:
Net investment
income........... -- -- -- (0.12) -- -- -- (0.06)
Net realized gains
on investment
transactions..... (0.83) (0.52) 0.00 (0.02) (0.83) (0.52) 0.00 (0.02)
----- ----- ---- ----- ----- ----- ---- -----
Total dividends
and distribu-
tions............ (0.83) (0.52) 0.00 (0.14) (0.83) (0.52) 0.00 (0.08)
----- ----- ---- ----- ----- ----- ---- -----
Net asset value,
end of period.... $10.72 $ 11.30 $10.27 $10.61 $10.53 $ 11.15 $10.22 $10.60
====== ======= ====== ====== ====== ======= ====== ======
Total investment
return (1)....... 2.20% 15.80% (3.20)% 7.58% 1.87% 14.86% (3.58)% 6.81%
==== ===== ===== ==== ==== ===== ===== ====
Ratios/Supplemental
Data:
Net assets, end of
period (000's) .. $19,640 $20,494 $22,848 $25,226 $40,876 $46,142 $52,624 $59,993
Ratio of expenses
to average net
assets........... 1.90%* 1.98% 1.91%* 1.75% 2.67%* 2.74% 2.69%* 2.50%
Ratio of net
investment income
(loss) to average
net assets....... 0.49%* 0.41% 0.41%* 1.41% (0.28)%* (0.35)% (0.37)%* 0.67%
Portfolio turnover
rate............. 7% 19% 20% 98% 7% 19% 20% 98%
<CAPTION>
CLASS C(2)
-----------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE
ENDED YEAR PERIOD FOR THE
JANUARY 31, ENDED ENDED YEAR ENDED
1996 JULY 31, JULY 31, JANUARY 31,
(UNAUDITED) 1995 1994 1994
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period........... $11.14 $ 10.22 $10.59 $10.00
------ ------- ------ ------
Income from in-
vestment opera-
tions:
Net investment
income (loss).. (0.02) (0.05) (0.02) 0.06
Net realized and
unrealized
gains (losses)
from investment
transactions... 0.23 1.49 (0.35) 0.62
---- ---- ----- ----
Total income
(loss) from
investment
operations....... 0.21 1.44 (0.37) 0.68
---- ---- ----- ----
Less dividends and
distributions to
shareholders
from:
Net investment
income........... -- -- 0.00 (0.07)
Net realized gains
on investment
transactions..... (0.83) (0.52) 0.00 (0.02)
----- ----- ---- -----
Total dividends
and distribu-
tions............ (0.83) (0.52) 0.00 (0.09)
----- ----- ---- -----
Net asset value,
end of period.... $10.52 $ 11.14 $10.22 $10.59
====== ======= ====== ======
Total investment
return (1)....... 1.87% 14.76 % (3.49)% 6.77%
==== ===== ===== ====
Ratios/Supplemental
Data:
Net assets, end of
period (000's) .. $11,603 $13,263 $16,285 $20,941
Ratio of expenses
to average net
assets........... 2.69%* 2.73% 2.69%* 2.50%
Ratio of net
investment income
(loss) to average
net assets....... (0.31)%* (0.34)% (0.36)%* 0.64%
Portfolio turnover
rate............. 7% 19% 20% 98%
</TABLE>
- -------
* Annualized
(1) Total return is calculated assuming a $1,000 investment on the first day
of each period reported, reinvestment of all dividends and other distributions
at net asset value on the payable date, and a sale at net asset value on the
last day of each period reported. The figures do not include sales charges;
results would be lower if sales charges were included. Total return information
for periods less than one year is not annualized.
(2) Formerly Class D shares.

Prospectus Page 11
<PAGE>

Investment Objective & Policies
----------------------------------------------------------------------------

GROWTH AND INCOME FUND

The investment objective of the Growth and Income Fund is capital growth and
current income. The Fund seeks to achieve this objective by investing primarily
in dividend-paying equity securities believed by Mitchell Hutchins to have the
potential for rapid earnings growth. Normally, the Growth and Income Fund
invests at least 65% of its total assets in such equity securities. The Fund
may invest up to 35% of its total assets in equity securities not meeting these
selection criteria, as well as in U.S. government bonds, corporate bonds and
money market instruments, including up to 10% in convertible bonds rated below
investment grade. Up to 25% of the Fund's assets may be invested in U.S.
dollar-denominated equity securities and bonds of foreign issuers that are
traded on recognized U.S. exchanges or in the U.S. over-the-counter ("OTC")
market.

GROWTH FUND

The investment objective of the Growth Fund is long-term capital appreciation.
The Growth Fund seeks to achieve this objective by investing primarily in
equity securities issued by companies that, in the judgment of Mitchell
Hutchins, have substantial potential for capital growth. Under normal
circumstances, at least 65% of the Fund's total assets are invested in equity
securities. The Fund may invest up to 35% of its net assets in U.S. government
bonds and in corporate bonds (including corporate bonds rated below investment
grade). Up to 25% of the Fund's assets may be invested in U.S. dollar-
denominated equity securities and bonds of foreign issuers that are traded on
recognized U.S. exchanges or in the U.S. OTC market.

SMALL CAP VALUE FUND

The investment objective of the Small Cap Value Fund is long-term capital
appreciation. Under normal circumstances, at least 65% of the Fund's total
assets are invested in equity securities of small-cap companies, which are
defined as companies having market capitalizations of less than $1 billion. The
Small Cap Value Fund may invest up to 35% of its total assets in equity
securities of companies that are larger than small-cap companies, as well as in
U.S. government and corporate bonds and money market instruments. Up to 25% of
the Fund's assets may be invested in U.S. dollar-denominated equity securities
of foreign issuers traded on recognized U.S. exchanges or in the U.S. OTC
market.

There can be no assurance that any of these Funds will achieve its investment
objective. Each Fund's net asset value fluctuates based upon changes in the
value of its portfolio securities.

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

Investment Philosophy & Process
----------------------------------------------------------------------------

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

GROWTH AND INCOME FUND

In seeking to balance capital growth with current income, Mitchell Hutchins
follows a disciplined investment process that relies on the Mitchell Hutchins
Equity Research Team and the Mitchell Hutchins Factor Valuation Model. In order
to fulfill the income component, the Fund invests 65% of its assets in
dividend-paying stocks.

The Model screens a universe of 2,500 small-to large-capitalization companies
from ten different business sectors to identify undervalued companies with
strong earnings momentum. The factors utilized are:

. four traditional value measures: cash flow, book value, price-earnings ratios
and dividend discount models;

. three momentum measures to identify companies that could surprise on the
upside (two earnings-related factors, one price momentum factor); and

. a model that forecasts how different equity securities and industries may
perform under various economic scenarios.

The equity securities ranking in the top 20% of the Model's universe are
screened twice a month. Then the Team takes a closer look at those equity
securities that rank higher based on value and momentum. The Equity Research
Team applies traditional analysis and speaks to the management of these
companies, as well as those of their competitors. Based on the Team's findings
in the context of Mitchell Hutchins' economic forecast, the Fund decides
whether to purchase or sell equity securities. In seeking capital appreciation,
the Fund would also invest in bonds when, for instance, Mitchell Hutchins
anticipates that market interest rates may decline or credit factors or ratings
affecting particular issuers may improve.

GROWTH FUND

In selecting equity securities with the potential for above-average growth in
earnings, cash flow and/or book value that are selling at a reasonable value
relative to that growth, Mitchell Hutchins follows a disciplined investment
process that relies on the Mitchell Hutchins Equity Research Team and the
Mitchell Hutchins Factor Valuation Model. The Fund can invest in companies with
large market capitalizations, medium-sized companies and smaller companies that
are aggressively expanding their businesses. This flexibility allows the Fund
to invest more of its assets in companies that have greater earnings growth
potential regardless of their market capitalizations. When investing in small-
cap companies the Team places more emphasis on the trading volume of the
company's stock.

. four traditional value measures: cash flow, book value, price-earnings ratios
and dividend discount models;

. three momentum measures to identify companies that could surprise on the
upside (two earnings-related factors, one price momentum factor); and

. a model that forecasts how different equity securities and industries may
perform under various economic scenarios.

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

Hutchins' economic forecast, the Fund decides whether to purchase or sell
equity securities. In seeking capital appreciation, the Fund would also invest
in bonds when, for instance, Mitchell Hutchins anticipates that market interest
rates may decline or credit factors or ratings affecting particular issuers may
improve.

SMALL CAP VALUE FUND

In selecting small-capitalization equity securities with the potential for
capital appreciation, Mitchell Hutchins follows a disciplined investment
process that relies on the Mitchell Hutchins Factor Valuation Model. The Model
screens a universe of 2,500 small- to large-capitalization companies from ten
different business sectors twice per month to identify undervalued companies
with strong earnings momentum. The factors utilized are:

. four traditional value measures: cash flow, book value, price-earnings ratios
and dividend discount models;

. three momentum measures to identify companies that could surprise on the
upside (two earnings-related factors, one price momentum factor); and

. a model that forecasts how different equity securities and industries may
perform under various economic scenarios.

Through this screening process, the Model identifies the equity securities of
small-capitalization companies ranking in the top 20% of the universe. Then the
Mitchell Hutchins Equity Research Team applies traditional analysis on the
equity securities of these small cap companies. The Team speaks to the
management of these companies, as well as to those of their competitors. Based
on the Team's findings in the context of Mitchell Hutchins' economic forecast,
the Fund decides whether to purchase or sell equity securities.

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

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

Performance
- --------------------------------------------------------------------------------

Here are the total returns for the Funds. Sales charges have not been deducted
from the results shown. Returns would be lower if sales charges were deducted.
Past results are not a guarantee of future results.

Total returns after deducting the maximum sales charges are shown below in the
tables that follow the performance charts.

GROWTH AND INCOME FUND

As Class A shares commenced operations
on December 20, 1983, the 1983 return
represents the period from December 20,
1983 through December 31, 1983. The
inception date of Class B shares is
July 1, 1991; thus, the 1991 return
represents the period from July 1, 1991
through December 31, 1991. The
inception date of Class C shares is
July 2, 1992; thus, the 1992 return
represents the period from July 2, 1992
through December 31, 1992.

LOGO

GROWTH FUND

As Class A shares commenced operations
on March 18, 1985, the 1985 return
represents the period from March 18,
1985 through December 31, 1985. The
inception date of Class B shares is
July 1, 1991; thus, the 1991 return
represents the period from July 1, 1991
through December 31, 1991. The
inception date of Class C shares is
July 2, 1992; thus, the 1992 return
represents the period from July 2, 1992
through December 31, 1992.

LOGO

SMALL CAP VALUE FUND

As Class A, Class B and Class C shares
commenced operations on February 1,
1993, the 1993 return represents the
period from February 1, 1993 through
December 31, 1993.

LOGO

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

GROWTH AND INCOME FUND

AVERAGE ANNUAL RETURNS
As of August 31, 1995
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
Inception Date.................... 12/20/83 7/1/91 7/2/92
ONE YEAR
Without deducting maximum sales
charges......................... 18.30% 17.38% 17.37%
After deducting maximum sales
charges......................... 12.99% 12.38% 16.37%
FIVE YEARS
Without deducting maximum sales
charges......................... 10.07% N/A N/A
After deducting maximum sales
charges......................... 9.06% N/A N/A
TEN YEARS
Without deducting maximum sales
charges......................... 10.82% N/A N/A
After deducting maximum sales
charges......................... 10.31% N/A N/A
</TABLE>

GROWTH FUND

AVERAGE ANNUAL RETURNS
As of August 31, 1995
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
Inception Date.................... 3/18/85 7/1/91 7/2/92
ONE YEAR
Without deducting maximum sales
charges......................... 11.28% 10.40% 10.37%
After deducting maximum sales
charges......................... 6.30% 5.40% 9.37%
FIVE YEARS
Without deducting maximum sales
charges......................... 14.45% N/A N/A
After deducting maximum sales
charges......................... 13.40% N/A N/A
TEN YEARS
Without deducting maximum sales
charges......................... 13.08% N/A N/A
After deducting maximum sales
charges......................... 12.56% N/A N/A
</TABLE>

SMALL CAP VALUE FUND

AVERAGE ANNUAL RETURNS
As of July 31, 1995
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
Inception Date.................... 2/1/93 2/1/93 2/1/93
ONE YEAR
Without deducting maximum sales
charges......................... 15.80% 14.86% 14.76%
After deducting maximum sales
charges......................... 10.63% 9.86% 13.60%
LIFE
Without deducting maximum sales
charges......................... 7.79% 6.96% 6.95%
After deducting maximum sales
charges......................... 5.82% 5.50% 6.95%
</TABLE>

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

PERFORMANCE INFORMATION

The Funds perform a standardized computation of annualized total return and may
show this return in advertisements or promotional materials. Standardized
return shows the change in value of an investment in the Funds as a steady
compound annual rate of return. Actual year-by-year returns fluctuate and may
be higher or lower than standardized return. Standardized return for Class A
shares of the Funds reflect deduction of the Funds' maximum initial sales
charge of 4.5% at the time of purchase, and standardized return for the Class B
and Class C shares of the Funds reflect deduction of the applicable contingent
deferred sales charge imposed on a redemption of shares held for the period.
One-, five- and ten-year periods will be shown, unless the Fund or Class has
been in existence for a shorter period. Total return calculations assume
reinvestment of dividends and other distributions.

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

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

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

The Funds' Investments

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

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

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

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

RISKS

Each Fund predominantly invests its assets in equity securities. Following is a
discussion of these risks and other risks that are common to each of the Funds:

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

FOREIGN SECURITIES. Each of the Funds may invest a portion of its assets in
U.S. dollar denominated securities of foreign companies that are traded on
recognized U.S. exchanges or in the U.S. OTC market. Investing in the
securities of foreign companies involves more risks than investing in
securities of U.S. companies. Their value is subject to economic and political
developments in the countries where the companies operate and to changes in
foreign currency values. Values may also be affected by foreign tax laws,
changes in foreign economic or monetary policies, exchange control regulations
and regulations involving prohibitions on the repatriation of foreign
currencies.

In general, less information may be available about foreign companies than
about U.S. companies, and foreign companies are generally not subject to the
same accounting, auditing and financial reporting standards as are U.S.
companies.

BOND RATINGS. The investment grade bonds in which the Funds may invest must be
rated within the four highest categories by Standard & Poor's, a division of
The McGraw Hill Companies ("S&P"), or Moody's Investors Service, Inc.
("Moody's"). The fourth highest category (Baa) by Moody's includes securities
which have speculative features in its opinion. Changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case for higher-rated debt
instruments. The Funds may also invest in securities that are comparably rated
by another ratings agency and in unrated securities if they are deemed to be of
comparable quality. Credit ratings attempt to evaluate the safety of principal
and interest payments and do not evaluate the volatility of the bond's value or
its liquidity. There is a risk that bonds will be downgraded by rating
agencies. The rating agencies may fail to make timely changes in credit ratings
in response to subsequent events, so that an issuer's current financial
condition may be better or worse than the rating indicates.

INTEREST RATE AND CREDIT RISKS. Interest rate risk is the risk that interest
rates will rise and bond prices will fall, lowering the value of the Fund's
bond investments. Long-term bonds are generally more sensitive to interest rate
changes than short-term bonds. Adverse changes in economic conditions can
affect an issuer's ability to pay principal and interest.

NON-INVESTMENT GRADE (LOWER-RATED) BOND RATINGS. Lower-rated bonds are deemed
by the ratings agencies to be predominantly speculative regarding the issuer's
ability to pay principal and

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

interest and may involve major risk exposure during adverse economic
conditions. They are also known as "junk bonds." During an economic downturn or
period of rising interest rates, such issuers may experience financial stress
that adversely affects their ability to pay interest and principal and may
increase the possibility of default. Lower-rated bonds are frequently unsecured
by collateral and will not receive payment until more senior claims are paid in
full. The market for lower-rated bonds is thinner and less active, which may
limit the Funds' ability to sell such bonds at a fair value in response to
changes in the economy or financial markets.

The Growth and Income Fund can invest up to 10% of total assets in convertible
securities rated as low as B by S&P or Moody's or comparably rated by another
ratings agency.

The Growth Fund can invest up to 35% of net assets in bonds and convertible
securities rated as low as B+ by S&P, B1 by Moody's or comparably rated by
another ratings agency.

The Small Cap Value Fund can invest up to 10% of its total assets in bonds
rated below investment grade, which may include bonds rated as low as B by S&P,
B by Moody's or comparably rated by another ratings agency.

In addition to these general risks, Small Cap Value Fund is also subject to the
following risk consideration:

SMALL CAP COMPANIES. Small cap companies may be more vulnerable than larger
companies to adverse business or economic developments. Small cap companies may
also have limited product lines, markets or financial resources, and may be
dependent on a relatively small management group. Securities of such companies
may be less liquid and more volatile than securities of larger companies or the
market averages in general and therefore may involve greater risk than
investing in larger companies. In addition, small cap companies may not be
well-known to the investing public, may not have institutional ownership and
may have only cyclical, static or moderate growth prospects.

INVESTMENT TECHNIQUES AND STRATEGIES

HEDGING STRATEGIES. Each of the Funds may use certain strategies designed to
adjust the overall risk of its portfolio of investments. These "hedging"
strategies involve derivative contracts, including options (on securities,
futures and stock indexes) and futures contracts (on stock indexes and interest
rates). In addition, new financial products and risk management techniques
continue to be developed and may be used if consistent with the Funds'
investment objectives and policies. The Statement of Additional Information for
the Funds contains further information on these strategies.

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

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

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

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

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

LENDING PORTFOLIO SECURITIES. Each of the Funds may lend its securities to
qualified broker-dealers or institutional investors in an amount up to 33 1/3%
of the value of that Fund's portfolio securities taken at market value. The
Funds' loans of securities will be collateralized in an amount at least equal
to the current market value of the loaned securities. Lending securities
enables a Fund to earn additional income, but could result in a loss or delay
in recovering these securities.

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

OTHER INFORMATION. The Growth and Income Fund and Growth Fund each may invest
up to 10% of its

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

net assets, and Small Cap Value Fund up to 15% of its net assets, in illiquid
securities. This includes certain cover for OTC options and securities whose
disposition is restricted under the federal securities laws. The Funds do not
consider securities that are eligible for resale pursuant to SEC Rule 144A to
be illiquid securities if Mitchell Hutchins has determined such securities to
be liquid based upon the trading markets for the securities under procedures
approved by the respective board of trustees.

Each Fund may also purchase bonds on a when-issued basis or may purchase or
sell securities for delayed delivery. A Fund generally would not pay for such
securities or start earning interest on them until they are delivered, but it
would immediately assume the risks of ownership, including the risk of price
fluctuation. Each Fund may invest up to 35% of its total assets in money market
instruments and/or cash for liquidity purposes or pending investment in other
securities.

Each Fund may borrow up to 10% of its total assets for temporary or emergency
purposes. Each Fund each may sell securities short "against the box" to defer
realization of gains or losses for tax or other purposes. When a security is
sold against the box, the seller owns the security. Each Fund may enter into
reverse repurchase agreements up to an aggregate value of 5% (10% for Small Cap
Value Fund) of its assets.

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

Flexible PricingSM

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

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

CLASS A SHARES

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

<TABLE>
<CAPTION>
DISCOUNT TO SELECTED
SALES CHARGE AS A PERCENTAGE OF: DEALERS AS PERCENTAGE
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED OF OFFERING PRICE
- -------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Less than $50,000....... 4.50% 4.71% 4.25%
$50,000 to $99,999...... 4.00 4.17 3.75
$100,000 to $249,999.... 3.50 3.63 3.25
$250,000 to $499,999.... 2.50 2.56 2.25
$500,000 to $999,999.... 1.75 1.78 1.50
$1,000,000 and
over(/1/).............. None None 1.00(/2/)
</TABLE>
- -------
(/1/A)contingent deferred sales charge of 1% of the shares' net asset value at
the time of their purchase or their sale, whichever is less, is charged on
sales of shares made within one year of the purchase date. However, Class A
shares representing reinvestment of any dividends or capital gains are not
subject to the 1% charge. Withdrawals under the Systematic Withdrawal Plan
are not be subject to this charge. However, investors may not withdraw more
than 12% of the value of the Fund account under the Plan in the first year
after purchase. This charge does not apply to Class A shares bought before
November 10, 1995.
(/2/Mitchell)Hutchins pays 1% to PaineWebber.

SALES CHARGE REDUCTIONS & WAIVERS

Investors who are purchasing Class A shares in more than one PaineWebber fund
may combine those purchases to get a reduced sales charge. Investors who
already own Class A shares in one or more

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

PaineWebber funds may combine the amount they are currently purchasing with the
value of such previously owned shares in determining the applicable reduced
sales charge. To determine the sales charge reduction, please refer to the
chart above.

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

. their spouses, parents or children under age 21;

. their Individual Retirement Accounts (IRAs);

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

. any company controlled by the investor;

. trusts created by the investor;

. Uniform Gift to Minors Act/Uniform Transfers to Minors Act accounts created
by the investor or group of investors for the benefit of the investors, their
spouses, parents or children; or

. accounts with the same adviser.

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

The sales charge will not apply when the investor:

. is an employee, director, trustee, or officer of PaineWebber or its
affiliates;

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

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

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

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

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

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

. acquires Class A shares in 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.

For more information on how to get any reduced sales charge, investors should
contact a PaineWebber investment executive or a correspondent firm or call 1-
800-647-1568.

CLASS B SHARES

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

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

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

-------------
Prospectus Page 21
<PAGE>

CONVERSION OF CLASS B SHARES

Class B shares automatically convert to the appropriate number of Class A
shares of equal dollar value after the investor has owned them for 6 years.
Dividends and other distributions paid to the investor by the Fund in the form
of additional Class B shares will also convert to Class A shares on a pro-rata
basis. This benefits shareholders because Class A shares have lower ongoing
expenses than Class B shares.

. If the investor has exchanged Class B shares between PaineWebber funds, the
Fund uses the purchase date at which the initial investment was made to
determine the conversion date.

. Investors who sell shares before owning them for six years do not have to pay
the sales charge if the shares sold represent reinvested dividends and/or
capital gain distributions.

MINIMIZING THE CONTINGENT DEFERRED SALES CHARGE

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

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

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

If the investor has exchanged Class B shares between PaineWebber funds, the
Fund uses the purchase date at which the initial investment was made to
calculate the six-year period.

WAIVERS OF THE CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge will not apply to:

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

. a distribution from a self-employed individual retirement plan ("Keogh
Plan");

. a custodial account under Section 403(b) of the Internal Revenue Code (after
the investor reaches age 59 1/2);

. an IRA distribution or a tax-free return of an excess IRA contribution;

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

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

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

CLASS C SHARES

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

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

-------------
Prospectus Page 22
<PAGE>

How to Buy Shares
----------------------------------------------------------------------------

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

When placing an order to buy shares, investors should specify which Class of
shares they want to buy. If investors fail to specify the Class, they will
automatically receive Class A shares, which include an initial sales charge.

PAINEWEBBER CLIENTS

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

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

OTHER INVESTORS

Investors who are not PaineWebber clients may purchase Fund shares and set up
an account through PFPC Inc., the Funds' Transfer Agent by completing and
signing the application at the end of this Prospectus. The application and
check must be mailed to PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box
8950, Wilmington, DE 19899.

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

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

. mail an application with a check; or

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

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

MINIMUM INVESTMENTS

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

The Fund may waive or reduce these minimums for:

. employees of PaineWebber or its affiliates; or

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

HOW TO EXCHANGE SHARES

As shareholders, investors have the privilege of exchanging Fund shares for the
same class of other PaineWebber mutual funds. In classes of shares where no
initial sales charge is imposed, a contingent deferred sales charge may apply
if the investor sells the shares acquired through the exchange. Exchanges may
be subject to minimum investment requirements of the fund into which exchanges
are made.

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

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

. name and address;

. the Fund's name;

. Fund account number;

-------------
Prospectus Page 23
<PAGE>

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

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

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

Fund shares may be exchanged only after the settlement date has passed and
payment for the shares has been made. The exchange privilege is available only
in those jurisdictions where the sale of the fund shares to be acquired is
authorized. This exchange privilege may be modified or terminated at any time
and, when required by Securities and Exchange Commission rules, upon 60-day
notice. See the back cover of this prospectus for a listing of other
PaineWebber mutual funds.

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

How To Sell Shares

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

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

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

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

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

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

REINSTATEMENT PRIVILEGE

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

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

Other Services

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

Consult a PaineWebber investment executive or correspondent firm to learn more
about the following services:

AUTOMATIC INVESTMENT PLAN

Investing on a regular basis helps investors meet their financial goals.
PaineWebber offers an Automatic Investment Plan Service through which the Fund
will deduct $50 or more each month from the investor's bank account to invest
directly in the Fund. In addition to providing a convenient and disciplined
manner of investing, participation in the Automatic Investment Plan enables the
investor to use the technique of "dollar cost averaging."

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

SYSTEMATIC WITHDRAWAL PLAN

The Systematic Withdrawal Plan allows investors to set up monthly, quarterly
(March, June, September and December) or semiannual (June and December)
withdrawals from their Fund account. Minimum balances and withdrawals vary
according to the Class of shares:

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

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

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

INDIVIDUAL RETIREMENT ACCOUNTS

PaineWebber mutual funds are available for purchase in an IRA account. In
addition, a Self-Directed IRA is available through PaineWebber in which
purchases of PaineWebber funds and other investments may be made. Investors
considering establishing an IRA should review applicable tax laws and should
consult their tax advisers.

TRANSFER OF ACCOUNTS

If shareholders holding shares of a Fund in a PaineWebber brokerage account
transfer their brokerage accounts to another firm, the Fund shares will be
moved to an account with the Transfer Agent.

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

Management

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

Each Fund is governed by a board of trustees, which oversees the Fund's
operations and has appointed Mitchell Hutchins as investment adviser and
administrator responsible for the Fund's operations (subject to the authority
of the board of trustees).

Mitchell Hutchins, located at 1285 Avenue of the Americas, New York, New York,
10019, is the asset management subsidiary of PaineWebber, which is wholly owned
by Paine Webber Group Inc., a publicly owned financial services holding
company. At February 29, 1996, Mitchell Hutchins was adviser or sub-adviser of
32 investment companies with 66 separate portfolios and aggregate assets of
approximately $31.2 billion.

The boards of trustees have determined that 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.

ABOUT THE INVESTMENT ADVISER

As investment adviser for the Growth and Income Fund, Growth Fund and Small Cap
Value Fund, Mitchell Hutchins makes and implements all investment decisions and
supervises all aspects of each Fund's operations.

Mark A. Tincher has been responsible for the day-to-day management of the
Growth and Income 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 equity investments. Upon his
arrival at Mitchell Hutchins, Mr. Tincher formed the Mitchell Hutchins Equity
Research Team, bringing together the expertise of the retail and institutional
equity research areas of Mitchell Hutchins. Each analyst specializes in
different industries, providing PaineWebber Equity Funds with more leverage.
The Equity Research Team is also assisted by other members of Mitchell
Hutchins' fixed income groups, which provide input on market outlook, interest
rate forecasts and other considerations pertaining to domestic equity and fixed
income investments.

From March 1988 to March 1995, Mr. Tincher worked for Chase Manhattan Private
Bank where he was vice president. Before joining Mitchell Hutchins, Mr. Tincher
directed the U.S. funds management and equity research area at Chase. He
oversaw the management of all Chase U.S. equity funds (the Vista Funds and
Trust Investment Funds).

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

Ellen R. Harris has been primarily responsible for the day-to-day portfolio
management of the Growth Fund since its inception. Ms. Harris is a managing
director 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).

Donald Jones is primarily responsible for day-to-day portfolio management of
Small Cap Value Fund. Mr. Jones has been a first vice president of Mitchell
Hutchins since February 1996. Prior to joining Mitchell Hutchins, Mr. Jones was
a vice president in the Asset Management Group of First Fidelity
Bancorporation.

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.

MANAGEMENT FEES & OTHER EXPENSES

The Funds pay Mitchell Hutchins a monthly fee for its services. For the most
recently ended fiscal year, the Funds paid advisory fees at the annual rate (as
a percentage of average daily net assets) of 0.75% for Growth Fund, 0.70% for
Growth and Income Fund, and 1.00% for Small Cap Value Fund. The management fees
paid by Growth Fund and Small Cap Value Fund are higher than those paid by most
other mutual funds. However, Mitchell Hutchins believes that these fees are
comparable to the management fees paid by other funds with similar investment
objectives and policies.

Each 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.

Among the other expenses incurred by the Funds are 12b-1 fees which have two
components:

GROWTH FUND/GROWTH AND INCOME FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
12b-1 service fees...................................... 0.23% 0.25% 0.25%
12b-1 distribution fees................................. 0.00 0.75 0.75
</TABLE>

SMALL CAP VALUE

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

The 12b-1 fees for Class A shares of the Growth and Income Fund and Growth Fund
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.

DISTRIBUTION ARRANGEMENTS

Mitchell Hutchins is the distributor of the Funds' shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under
distribution plans for Class A, Class B and Class C shares ("Class A Plan,"
"Class B Plan" and "Class C Plan," collectively, "Plans"), the Funds pay
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.

. Monthly distribution fees at the annual rate of 0.75% of the average daily
net assets of Class B and Class C shares.

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

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

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

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

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

The Plans and the related distribution contracts for each class of shares
("Distribution Contracts") specify that each Fund must pay service and

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

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

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

Determining the Shares' Net Asset Value

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

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

Each Fund values its assets based on their current market value when market
quotations are readily available. If that value is not readily available,
assets are valued at fair value as determined in good faith by or under the
direction of its board of trustees. The amortized cost method of valuation
generally is used to value debt obligations with 60 days or less remaining to
maturity, unless a Fund's board of trustees determines that this does not
represent fair value. It shall be recognized that judgment plays a greater role
in valuing lower rated corporate bonds because there is less reliable,
objective data available.

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

Dividends & Taxes

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

DIVIDENDS

Each Fund pays an annual dividend (or, in the case of the Growth and Income
Fund, a semi-annual dividend) from its net investment income and net short-term
capital gain, if any. Each Fund also distributes annually substantially all of
its net capital gain (the excess of net long-term capital gain over net short-
term capital loss), if any. Each 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 Funds are
calculated at the same time and in the same manner. Dividends on Class B and
Class C shares of the Funds are expected to be lower than those on its Class A
shares because Class B and Class C shares have higher expenses resulting from
their distribution fees. Dividends on each class might be affected differently
by the allocation of other Class-specific expenses. See "General Information."

The Funds' dividends and 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

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

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

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

YEAR-END TAX REPORTING

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

WITHHOLDING REQUIREMENTS

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

TAXES ON THE SALE OR EXCHANGE OF FUND SHARES

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

SPECIAL TAX RULES FOR CLASS A SHAREHOLDERS

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

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

General Information

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

ORGANIZATION

GROWTH AND INCOME FUND

The Growth and Income Fund is a diversified series of the PaineWebber America
Fund, which is an open-end management investment company and was formed on
October 31, 1986 as a business trust under the laws of the Commonwealth of
Massachusetts. The trustees have authority to issue an unlimited number of
shares of beneficial interest of separate series, par value $0.001 per share.

GROWTH FUND

The Growth Fund is a diversified series of the PaineWebber Olympus Fund, which
is an open-end management investment company and was formed on October 31, 1986
as a business trust under the laws of the Commonwealth of Massachusetts. The
trustees have authority to issue an unlimited number of shares of beneficial
interest of separate series, par value $0.001 per share.

SMALL CAP VALUE FUND

The Small Cap Value Fund is a diversified series of the PaineWebber Securities
Trust, which is an open-end management investment company and was formed on
December 3, 1992 as a business trust under the laws of the Commonwealth of
Massachusetts. The trustees have authority to issue an unlimited number of
shares of beneficial interest of separate series, par value $0.001 per share.
In addition to the Small Cap Value Fund, shares of one other series have been
authorized.

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

The shares 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 an identical interest in the respective Fund's investment portfolio
and has the same rights, privileges and preferences. However, each class may
differ with respect to sales charges, if any, distribution and/or service fees,
if any, the expenses allocable exclusively to each class, voting rights on
matters exclusively affecting that class, and its exchange privilege. The
trustees do not anticipate any conflicts among the interests of the holders of
the different classes. The different sales charges and other expenses
applicable to the different classes of shares of the Funds will affect the
performance of those classes.

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

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

Although each Fund is offering only its own shares, it is possible that a Fund
might become liable for a misstatement in the Prospectus about another Fund.

VOTING RIGHTS

Shareholders of each Fund are entitled to one vote for each full share held and
fractional votes for fractional shares held. Voting rights are not cumulative
and, as a result, the holders of more than 50% of all the shares of any Fund
may elect all of the trustees of that Fund. The shares of the Funds will be
voted separately except where an aggregate vote of all series in a Trust is
required by the Investment Company Act of 1940 and except that only the
shareholders of a particular Class of a Fund are required to vote on matters
affecting only that Class, such as the terms of a Plan as it relates to the
Class.

SHAREHOLDER MEETINGS

The Funds, each a series of separate Massachusetts business trusts, do not
intend to hold annual meetings.

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

REPORTS TO SHAREHOLDERS

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

CUSTODIAN & RECORDKEEPING AGENT; TRANSFER & DIVIDEND AGENT

State Street Bank and Trust Company, located at One Monarch Drive, North
Quincy, Massachusetts 02171, serves as the Funds' custodian and recordkeeping
agent. PFPC Inc., a subsidiary of PNC Bank, N.A., serves as the Funds' transfer
and dividend disbursing agent. It is located at 400 Bellevue Parkway,
Wilmington, DE 19809.

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

----------------------------------------------------------------------------
----------------------------------------------------------------------------
PAINEWEBBER OLYMPUS FUND
- --------------------------------------------------------------------------------

PaineWebber Family of Funds
----------------------------------------------------------------------------

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

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

PAINEWEBBER MONEY MARKET FUND

PAINEWEBBER BOND FUNDS
Investment Grade Income Fund
High Income Fund
Low Duration U.S. Government Income Fund
Strategic Income Fund
U.S. Government Income Fund

PAINEWEBBER TAX-FREE BOND FUNDS
National Tax-Free Income Fund
California Tax-Free Income Fund
New York Tax-Free Income Fund
Municipal High Income Fund

PAINEWEBBER ASSET ALLOCATION FUNDS
Balanced Fund
Tactical Allocation Fund

PAINEWEBBER GROWTH FUNDS
Capital Appreciation Fund
Growth Fund
Growth and Income Fund
Financial Services Growth Fund
Small Cap Value Fund
Utility Income Fund

PAINEWEBBER GLOBAL FUNDS
Global Equity Fund
Global Income Fund
Emerging Markets Equity 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. If given or made, such information or
representations must not be relied upon as having been authorized by the Funds
or their distributor. This Prospectus does not constitute an offering by the
Funds or their distributor in any jurisdiction in which such offering may not
lawfully be made.

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

PAINEWEBBER GROWTH AND INCOME FUND

PAINEWEBBER GROWTH FUND

PAINEWEBBER SMALL CAP VALUE FUND

1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019

STATEMENT OF ADDITIONAL INFORMATION

The three funds named above (each a "Fund" and, collectively, "Funds") are
professionally managed, open-end investment companies organized as diversified
series of Massachusetts business trusts (each a "Trust" and, collectively,
"Trusts"). PaineWebber Growth and Income Fund ("Growth and Income Fund"), a
series of PaineWebber America Fund ("America Fund"), seeks to provide current
income and capital growth; it invests primarily in dividend-paying equity
securities believed by its investment adviser to have the potential for rapid
earnings growth. PaineWebber Growth Fund ("Growth Fund"), a series of
PaineWebber Olympus Fund ("Olympus Fund"), seeks long-term capital
appreciation; it invests primarily in equity securities issued by companies
deemed by its investment adviser to have substantial potential for capital
growth. PaineWebber Small Cap Value Fund ("Small Cap Value Fund"), a series of
PaineWebber Securities Trust ("Securities Trust"), also seeks long-term
capital appreciation; it invests primarily in equity securities of small cap
companies.

The investment adviser, administrator and distributor for each of the Funds
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 April 30,
1996. A copy of the Prospectus may be obtained by calling any PaineWebber
investment executive or correspondent firm or by calling toll-free 1-800-647-
1568. This Statement of Additional Information is dated April 30, 1996.

INVESTMENT POLICIES AND RESTRICTIONS

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

YIELD FACTORS AND RATINGS. Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's, a division of The McGraw Hill Companies, Inc. ("S&P") and
other nationally recognized statistical rating organizations ("NRSROs") are
private services that provide ratings of the credit quality of debt
obligations. A description of the ratings assigned to corporate debt
obligations by Moody's and S&P is included in the Appendix to this Statement
of Additional Information. The Funds may use these ratings in determining
whether to purchase, sell or hold a security. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, securities with the same maturity, interest rate and rating may
have different market prices.
<PAGE>

Ratings of debt securities represent the NRSROs' opinions regarding their
quality, not a guarantee of quality, and may be reduced after a Fund has
acquired the security. Mitchell Hutchins will consider such an event in
determining whether a 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.

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

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

In the event that, due to a downgrade of one or more debt securities, an
amount in excess of the permitted percentage of a Fund's net assets is held in
securities rated below investment grade and comparable unrated securities, the
Fund will engage in an orderly disposition of such securities to the extent
necessary to ensure that its holdings of such securities does not exceed that
percentage.

RISK CONSIDERATIONS RELATING TO FOREIGN SECURITIES. To the extent that 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.

2
<PAGE>

securities markets. ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities. For purposes of
each 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. ADRs
are publicly traded on exchanges or over-the-counter in the United States and
are issued through "sponsored" or "unsponsored" arrangements. In a sponsored
ADR arrangement, the foreign issuer assumes the obligation to pay some or all
of the depositary's transaction fees, whereas under an unsponsored
arrangement, the foreign issuer assumes no obligations and the depositary's
transaction fees are paid directly by the ADR holders. In addition, less
information is available in the United States about an unsponsored ADR than
about a sponsored ADR.

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.

ILLIQUID SECURITIES. The Funds each may invest up to 10% of its net assets
(15% for Small Cap Value Fund) 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 each Trust's board of trustees. The assets used as cover for OTC options
written by each 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, a Fund might obtain a less favorable price
than prevailed when it decided to sell.

Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the 1933 Act, including private placements, repurchase
agreements, commercial paper, foreign securities and corporate bonds and
notes. These instruments are often restricted securities because the
securities are sold in transactions not requiring registration. Institutional
investors generally will not seek to sell these instruments to the general
public, but instead will often depend either on an efficient institutional
market in which such unregistered securities can be readily resold or on an
issuer's ability to honor a demand for repayment. Therefore, the fact that
there are contractual or legal restrictions on resale to the general public or
certain institutions is not dispositive of the liquidity of such investments.

3
<PAGE>

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 Funds, however, could
affect adversely the marketability of such portfolio securities and the Funds
might be unable to dispose of such securities promptly or at favorable prices.

Each 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 each Fund's
portfolio and reports periodically on such decisions to the boards.

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 corporations' 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 a Fund is called for redemption,
the Fund will be required to permit the issuer to redeem the security, convert
it into underlying common stock or sell it to a third party.

4
<PAGE>

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.

GOVERNMENT SECURITIES. Government securities in which the Funds may invest
include direct obligations of the United States Treasury and obligations
issued or guaranteed by the United States government or one of its agencies or
instrumentalities ("Government Securities"). Direct obligations of the United
States Treasury include a variety of securities that differ in their interest
rates, maturities and dates of issuance. Among the Government Securities that
may be held by the Funds are instruments that are supported by the full faith
and credit of the United States; instruments that are supported by the right
of the issuer to borrow from the United States Treasury; and instruments that
are supported solely by the credit of the instrumentality.

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

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

REVERSE REPURCHASE AGREEMENTS. The Funds 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 net assets (10% of total assets for Small Cap Value
Fund). Such agreements involve the sale of securities held by a Fund subject
to that 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 segregates
assets to cover the Fund's obligations under the reverse repurchase agreement.
See "Investment Policies and Restrictions--Segregated Accounts."

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

SHORT SALES "AGAINST THE BOX". Each Fund may engage in short sales of
securities it owns or has the right to acquire at no added cost through
conversion or exchange of other securities it owns (short sales "against the
box") to defer realization of gains or losses for tax or other purposes. To
make delivery to the purchaser in a short sale, the executing broker borrows
the securities being sold short on behalf of a Fund, and that Fund is
obligated to replace the securities borrowed at a date in the future. When a
Fund sells short, it will establish a margin account with the broker effecting
the short sale, and will deposit collateral with the broker. In addition, that
Fund will maintain with its custodian, in a segregated account, the securities
that could be used to cover the short sale. Each Fund will incur transaction
costs, including interest expense, in connection with opening, maintaining and
closing short sales against the box. The Funds currently do not intend to have
obligations under short sales that at any time during the coming year exceed
5% of a Fund's net assets.

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

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<PAGE>

commitments could cause its net asset value per share to be more volatile,
because such securities may increase the amount by which the Fund's total
assets, including the value of when-issued and delayed delivery securities
held by the Fund, exceeds its net assets. The Funds do not enter into when-
issued or delayed delivery transactions in excess of 5% of a Fund's net
assets.

A security purchased on a when-issued or delayed delivery basis is recorded
as an asset on the commitment date and is subject to changes in market value.
Thus, fluctuation in the value of the security from the time of the commitment
date will affect a Fund's net asset value. When a Fund agrees to purchase
securities on a when-issued basis, its custodian segregates assets to cover
the amount of the commitment. See "Investment Policies and Restrictions--
Segregated Accounts." The Funds purchase when-issued securities only with the
intention of taking delivery, but may sell the right to acquire the security
prior to delivery if Mitchell Hutchins deems it advantageous to do so, which
may result in capital gain or loss to a Fund.

SEGREGATED ACCOUNTS. When a Fund enters into certain transactions to make
future payments to third parties, such as reverse repurchase agreements or the
purchase of securities on a when-issued or delayed delivery basis, it will
maintain with an approved custodian in a segregated account cash, 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

Each Fund will not:

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

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

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

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

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<PAGE>

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

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

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

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

The foregoing fundamental investment limitations for each Fund cannot be
changed without the affirmative vote of the lesser of (a) more than 50% of the
outstanding shares of that 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 are not fundamental and may be changed
by each Trust's Board of Trustees without shareholder approval.

Each Fund will not:

(1) purchase or retain the securities of any issuer if the officers and
trustees of its 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 (15% of net assets for Small Cap
Value Fund) in illiquid securities, a term which means securities that cannot
be disposed of within seven days in the ordinary course of business at
approximately the amount at which 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 of 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.

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<PAGE>

(5) invest more than 35% of its total assets in debt securities rated Ba or
lower by Moody's BB or lower by S&P, comparably rated by another NRSRO or
determined by Mitchell Hutchins to be of comparable quality. This policy can
be changed only upon 30 days' advance notice to shareholders.

(6) invest in real estate limited partnerships.

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

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

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

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

HEDGING STRATEGIES

HEDGING INSTRUMENTS. 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 each Fund's portfolio. In particular, each 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.

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<PAGE>

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

GENERAL DESCRIPTION OF HEDGING STRATEGIES. Hedging strategies can be broadly
categorized as "short hedges" and "long hedges." A short hedge is a purchase
or sale of a Hedging Instrument intended to partially or fully offset
potential declines in the value of one or more investments held in a Fund's
portfolio. Thus, in a short hedge, a Fund takes a position in a Hedging
Instrument whose price is expected to move in the opposite direction of the
price of the investment being hedged. For example, a Fund might purchase a put
option on a security to hedge against a potential decline in the value of that
security. If the price of the security declined below the exercise price of
the put, a Fund could exercise the put and thus limit its loss below the
exercise price to the premium paid plus transactions costs. In the
alternative, because the value of the put option can be expected to increase
as the value of the underlying security declines, a Fund might be able to
close out the put option and realize a gain to offset the decline in the value
of the security.

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

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

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Because the Funds intend to use options and futures for hedging purposes,
each Fund may enter into any futures contracts or options on futures contracts
as long as the aggregate of the market value of the Fund's outstanding futures
contracts and market value of the futures contracts subject to outstanding
options written by that Fund does not exceed 50% of the market value of the
total assets of that Fund. Under normal circumstances, however, the value of a
Fund's portfolio assets so hedged generally will be a much smaller amount.

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

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

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

(1) Successful use of most Hedging Instruments depends upon the ability of
Mitchell Hutchins 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 Funds invest 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 a Fund.

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<PAGE>

in the price of a security in that Fund's portfolio, and the price of that
security increased instead, the gain from that might be wholly or partially
offset by a decline in the price of the Hedging Instrument. Moreover, if the
price of the Hedging Instrument declined by more than the increase in the
price of the security, that Fund could suffer a loss. In either such case, the
Fund would have been in a better position had it not hedged at all.

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

COVER FOR HEDGING STRATEGIES. The Funds will not use Hedging Instruments for
speculative purposes or for purposes of leverage. Transactions using Hedging
Instruments, other than purchased options, expose the Funds to an obligation
to another party. The Funds 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 Funds 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
and foreign currencies. The purchase of call options serves as a long hedge,
and the purchase of put options serves as a short hedge. Writing covered call
options serves as a limited short hedge, because declines in the value of the
hedged investment would be offset to the extent of the premium received for
writing the option. However, if the security appreciates to a price higher
than the exercise price of the call option, it can be expected that the option
will be exercised and the affected Fund will be obligated to sell the security
at less than its market value. Writing covered put options serves as a limited
long hedge because increases in the value of the hedged investment would be
offset to the extent of the premium received for writing the option. However,
if the security depreciates to a price lower than the exercise price of the
put option, it can be expected that the put option will be exercised and the
Fund will be obligated to purchase the security at more than its market value.
The securities or other assets used as cover for OTC options written by a Fund
would be considered illiquid to the extent described under "Investment
Policies and Restrictions--Illiquid Securities."

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<PAGE>

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

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

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

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

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

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

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

(1) Each 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 that Fund, does not exceed 5% of its total
assets.

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<PAGE>

(2) The aggregate value of underlying securities on which covered calls are
written will not exceed 50% of each Fund's total assets.

(3) To the extent cash or cash equivalents, including Government Securities,
are maintained in a segregated account to collateralize options written on
currencies, securities or stock indexes, each Fund will limit
collateralization to 20% of its net assets.

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

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

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

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

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

14
<PAGE>

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

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

LIMITATIONS ON THE USE OF FUTURES. The Funds' use of futures and related
options is governed by the following guidelines, which can be changed by each
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 that 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 that
Fund's net assets.

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

15
<PAGE>

TRUSTEES AND OFFICERS; PRINCIPAL SHAREHOLDERS

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

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
---------------------- ----------------------- --------------------
<S> <C> <C>
E. Garrett Bewkes, Trustee and Mr. Bewkes is a director of Paine
Jr.**; 69 Chairman of the Webber Group Inc. ("PW Group")
Board of Trustees (holding company 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 director of Inter-
state Bakeries Corporation and
NaPro Bio-Therapeutics, Inc. and a
director or trustee of 27 other in-
vestment companies for which Mitch-
ell Hutchins or PaineWebber serves
as investment adviser.
Margo N. Alexander**; 49 Trustee and Mrs. Alexander is president, chief
President executive officer and a director of
Mitchell Hutchins (since January
1995) and also is an executive vice
president and director of
PaineWebber. Mrs. Alexander is also
a director or trustee of 27 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
---------------------- ----------------------- --------------------
<S> <C> <C>
Richard Q. Armstrong; 60 Trustee Mr. Armstrong is chairman and prin-
78 West Brother Drive cipal of RQA Enterprises (manage-
Greenwich, CT 06830 ment consulting firm) (since April
1991 and principal occupation since
March 1995). Mr. Armstrong is also
a director of Hi Lo Automotive,
Inc. He was chairman of the board,
chief executive officer and co-
owner of Adirondack Beverages (pro-
ducer and distributor of soft
drinks and sparkling/still waters)
(October 1993-March 1995). He was a
partner of the New England Consult-
ing Group (management consulting
firm) (December 1992-September
1993). He was managing director of
LVMH U.S. Corporation (U.S. subsid-
iary of the French luxury goods
conglomerate, Luis Vuitton Moet
Hennessey Corporation) (1987-1991)
and chairman of its wine and spir-
its subsidiary, Schieffelin & Som-
erset Company (1987-1991). Mr. Arm-
strong is also a director or
trustee of 26 other investment com-
panies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
Richard R. Burt; 49 Trustee Mr. Burt is chairman of Interna-
1101 Connecticut Avenue, tional Equity Partners (interna-
N.W. tional investments and consulting
Washington, D.C. 20036 firm) (since March 1994) and a
partner of McKinsey & Company (man-
agement consulting firm) (since
1991). He is also a director of
American Publishing Company. He was
the chief negotiator in the Strate-
gic Arms Reduction Talks with the
former Soviet Union (1989-1991) and
the U.S. Ambassador to the Federal
Republic of Germany (1985-1989).
Mr. Burt is also a director or
trustee of 26 other investment com-
panies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
---------------------- ----------------------- --------------------
<S> <C> <C>
Mary C. Farrell**; 46 Trustee Ms. Farrell is a managing director,
senior investment strategist, and
member of the Investment Policy
Committee of PaineWebber. Ms.
Farrell joined PaineWebber in 1982.
She is a member of the Financial
Women's Association and Women's
Economic Roundtable and is employed
as a regular panelist on Wall
Street Week with Louis Rukeyser.
She also serves on the Board of
Overseers of New York University's
Stern School of Business. Ms.
Farrell is also a director or
trustee of 26 other investment com-
panies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
Meyer Feldberg; 54 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 Institute
of Technology. Dean Feldberg is
also a director of AMSCO Interna-
tional Inc., Federated Department
Stores, Inc., and New World Commu-
nications Group Incorporated and a
director or trustee of 26 other in-
vestment companies for which Mitch-
ell Hutchins or PaineWebber serves
as investment adviser.
George W. Gowen; 66 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 Fryer,
Ross & Gowen. Mr. Gowen is also a
director of Columbia Real Estate
Investments, Inc. and a director or
trustee of 26 other investment com-
panies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ---------------------- ----------------------- --------------------
<S> <C> <C>
Frederic V. Malek; 59 Trustee Mr. Malek is chairman of Thayer Cap-
901 15th Street, N.W. ital Partners (investment bank) and
Suite 300 a co-chairman and director of CB
Washington, D.C. 20005 Commercial Group Inc. (real es-
tate). From January 1992 to Novem-
ber 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 Corporation (hotels,
restaurants, airline catering and
contract feeding), where he most
recently was an executive vice
president and president of Marriott
Hotels and Resorts. Mr. Malek is
also a director of American Manage-
ment Systems, Inc., Automatic Data
Processing, Inc., Avis, Inc., FPL
Group, Inc., National Education
Corporation, and Northwest Air-
lines, Inc. and a director or
trustee of 26 other investment com-
panies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
Carl W. Schafer; 60 Mr. Schafer is president of the At-
P.O. Box 1164 lantic Foundation (charitable foun-
Princeton, N.J. 08542 dation supporting mainly oceano-
graphic exploration and research).
He also is a director of Roadway
Express, Inc. (trucking), The
Guardian Group of Mutual Funds, Ev-
ans Systems, Inc. (a motor fuels,
convenience store and diversified
company), Hidden Lake Gold Mines
Ltd. (gold mining), Electronic
Clearing House, Inc. (financial
transactions processing), Wainoco
Oil Corporation and Nutraceutix
Inc. (biotechnology). Prior to Jan-
uary 1993, Mr. Schafer was chairman
of the Investment Advisory Commit-
tee of the Howard Hughes Medical
Institute. Mr. Schafer also is a
director or trustee of 26 invest-
ment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ---------------------- ----------------------- --------------------
<S> <C> <C>
John R. Torell III; 56 Trustee Mr. Torell is chairman of Torell
767 Fifth Avenue Management, Inc. (financial advi-
Suite 4605 sory firm) (since 1989), chairman
New York, NY 10153 of Telesphere Corporation (elec-
tronic provider of financial infor-
mation) and a partner of Zilkha &
Company (merchant banking and pri-
vate investment company). He is the
former chairman, president and
chief executive officer of CalFed,
Inc. (savings association) (1988 to
1989) and former president of Manu-
facturers Hanover Corp. (bank)
(prior to 1988). Mr. Torell is also
a director of American Home Prod-
ucts Corp., New Colt Inc. (armament
manufacturer) and Volt Information
Sciences Inc. He is the former
chairman and chief executive offi-
cer of Fortune Bancorp (1990-1991,
and 1990-1994, respectively). Mr.
Torell is a director or trustee of
26 other investment companies for
which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Teresa M. Boyle; 37 Vice President Ms. Boyle is a first vice president
and manager--advisory administra-
tion of Mitchell Hutchins. Prior to
November 1993, she was compliance
manager of Hyperion Capital Manage-
ment, Inc., an investment advisory
firm. Prior to April 1993, Ms.
Boyle was a vice president and man-
ager--legal administration of
Mitchell Hutchins. Ms. Boyle is
also a vice president of 27 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
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 assistant secretary
of 22 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
NAME, ADDRESS* AND BUSINESS EXPERIENCE;
AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
------------------ ----------------------- --------------------
<S> <C> <C>
Ellen R. Harris; 49 Vice President Ms. Harris is a managing director
(Olympus Fund) and portfolio manager of Mitchell
Hutchins. Ms. Harris is also a vice
president of 2 other investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Thomas J. Libassi; 37 Vice President Mr. Libassi is a senior vice presi-
(Securities Trust) dent and portfolio manager of
Mitchell Hutchins. Prior to May
1994, he was a vice president of
Keystone Custodian Funds Inc. with
portfolio management responsibili-
ty. Mr. Libassi is also a vice
president of three other investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
C. William Maher; 34 Vice President and Mr. Maher is a first vice president
Assistant Treasurer and a senior manager of the mutual
fund finance division of Mitchell
Hutchins. Mr. Maher is also a vice
president and assistant treasurer
of 27 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Dennis McCauley; 49 Vice President Mr. McCauley is a managing director
(Securities Trust) and chief investment officer--fixed
income of Mitchell Hutchins. Prior
to December 1994, he was director
of fixed income
investments of IBM Corporation.
Mr. McCauley is also a vice presi-
dent of 17 other investment compa-
nies 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 assistant
treasurer of 27 other investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
</TABLE>

21
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
---------------------- ----------------------- --------------------
<S> <C> <C>
Dianne E. O'Donnell; 43 Vice President and Ms. O'Donnell is a senior vice pres-
Secretary ident and deputy general counsel of
Mitchell Hutchins. Ms. O'Donnell is
also a vice president and secretary
of 27 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Victoria E. Schonfeld; Vice President Ms. Schonfeld is a managing director
45 and general counsel of Mitchell
Hutchins. From April 1990 to May
1994, she was a partner in the law
firm of Arnold & Porter. Ms. Schon-
feld is also a vice president of 27
other investment companies for
which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Paul H. Schubert; 33 Vice President and Mr. Schubert is a first vice presi-
Assistant Treasurer dent and a senior manager of the
mutual fund finance division of
Mitchell Hutchins. From August 1992
to August 1994, he was a vice pres-
ident at BlackRock Financial Man-
agement, Inc. Prior to August 1992,
he was an audit manager with Ernst
& Young LLP. Mr. Schubert is also a
vice president and assistant
treasurer of 27 other investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Nirmal Singh; 39 Vice President Mr. Singh is a first vice president
(Securities Trust) of Mitchell Hutchins. Prior to Sep-
tember 1993, he was a member of the
portfolio management team at Mer-
rill Lynch Asset Management, Inc.
Mr. Singh is also vice president of
four other investment companies for
which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

22
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ---------------------- ----------------------- --------------------
<S> <C> <C>
Julian F. Sluyters; 35 Vice President and Mr. Sluyters is a senior vice presi-
Treasurer dent 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 27
other investment companies for
which Mitchell Hutchins or Paine-
Webber serves as investment advis-
er.
Mark A. Tincher; 40 Vice President Mr. Tincher is a managing director
and chief investment officer--U.S.
equity investments of Mitchell
Hutchins. Prior to March 1995, he
was a vice president and directed
the U.S. funds management and eq-
uity research areas of Chase Man-
hattan Private Bank. Mr. Tincher is
also vice president of ten other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Gregory K. Todd; 39 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 27 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Craig M. Varrelman; 37 Vice President Mr. Varrelman is a first vice presi-
(Securities Trust) dent and a portfolio manager of
Mitchell Hutchins. Mr. Varrelman is
also vice president of three other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Stuart Waugh; 40 Vice President Mr. Waugh is a first vice president
(Securities Trust) and a portfolio manager of Mitchell
Hutchins responsible for global
fixed income investments and cur-
rency trading. Mr. Waugh is also a
vice president of 4 other invest-
ment companies for which Mitchell
Hutchins serves as investment ad-
viser.
</TABLE>

23
<PAGE>

<TABLE>
<CAPTION>
NAME, ADDRESS* AND BUSINESS EXPERIENCE;
AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
------------------ ----------------------- --------------------
<S> <C> <C>
Keith A. Weller; 34 Vice President and Mr. Weller is a first vice president
Assistant Secretary and associate general counsel of
Mitchell Hutchins. From September
1987 to March 1995, he was an at-
torney in private practice. Mr.
Weller is also a vice president and
assistant secretary of 21 other in-
vestment companies for which Mitch-
ell Hutchins or PaineWebber serves
as investment adviser.
</TABLE>
- --------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.
** Ms. Alexander, Mr. Bewkes and Ms. Farrell 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.

Trustees who are not "interested persons" receive $1,500 annually and $250
per meeting from PaineWebber America Fund (Growth and Income Fund), $2,000
annually and $250 per meeting of the board or any committee thereof from
PaineWebber Olympus Fund (Growth Fund), and $1,500 annually and $250 per
meeting from PaineWebber Securities Trust (Small Cap Value 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, the Trusts require
no employees. No officer, director or employee of Mitchell Hutchins or
PaineWebber presently receives any compensation from any Trust for acting as a
trustee or officer.

24
<PAGE>

The table below includes certain information relating to the compensation of
each Trust's current trustees who held office during the last fiscal year and
by all investment companies in the same complex during the calendar year ended
December 31, 1995.

COMPENSATION TABLE

<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL
COMPENSATION AGGREGATE COMPENSATION COMPENSATION
FROM THE PW COMPENSATION FROM THE PW FROM THE
AMERICA FUND FROM THE PW SECURITIES TRUST AND
(GROWTH AND OLYMPUS FUND TRUST (SMALL THE FUND
INCOME (GROWTH CAP VALUE COMPLEX PAID
NAME OF PERSON, POSITION FUND)(1) FUND)(1) FUND)(2) TO TRUSTEES(3)(4)
- ------------------------ ------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Richard Q. Armstrong,
Trustee................ N/A N/A $1,000 $ 9,000
Richard R. Burt,
Trustee................ N/A N/A 563 7,750
Meyer Feldberg,
Trustee................ $3,750 $2,125 N/A 106,375
George W. Gowen,
Trustee................ 3,750 2,125 N/A 99,750
Frederic V. Malek,
Trustee................ 3,750 2,125 N/A 99,750
Judith Davidson Moyers,
Trustee................ 3,750 2,125 N/A 98,500
John R. Torell III,
Trustee................ N/A N/A 1,563 28,125
William D. White,
Trustee................ N/A N/A 1,563 33,125
</TABLE>
- --------
N/A in the first three columns indicates the individual did not serve on the
board of trustees for a particular Trust. Only independent members of the
board are compensated by the Trusts and identified above; trustees who are
"interested persons," as defined by the 1940 Act, do not receive compensation.
(1) Represents fees paid to each trustee during the fiscal year ended August
31, 1995.
(2) Represents fees paid to each trustee during the fiscal year ended July 31,
1995.
(3) Represents total compensation paid to each trustee during the calendar
year ended December 31, 1995.
(4) No trust has a pension or retirement plan.

25
<PAGE>

INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS

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

Under the terms of the Advisory Contracts, each Fund bears all expenses
incurred in its operation that are not specifically assumed by Mitchell
Hutchins. Expenses borne by each Fund include the following: (1) the cost
(including brokerage commissions) of securities purchased or sold by the Fund
and any losses incurred in connection therewith; (2) fees payable to and
expenses incurred on behalf of the Fund by Mitchell Hutchins; (3)
organizational expenses; (4) filing fees and expenses relating to the
registration and qualification of the Fund's shares under federal and state
securities laws and maintenance of such registrations and qualifications; (5)
fees and salaries payable to trustees and officers who are not interested
persons (as defined in the 1940 Act) of the 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, uncollectible items of deposit and other
insurance or fidelity bonds; (9) any costs, expenses or losses arising out of
a liability of or claim for damages or other relief asserted against the Trust
or Fund for violation of any law; (10) legal, accounting and auditing
expenses, including legal fees of special 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 boards 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 the Funds is 2.5% of the first $30 million of a 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 last
three fiscal years, no reimbursements were required pursuant to such
limitation for any 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 contracts, 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 are 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.

26
<PAGE>

GROWTH AND INCOME FUND. Pursuant to the Advisory Contract dated March 1,
1989, between America Fund and Mitchell Hutchins, Growth and Income Fund pays
Mitchell Hutchins a fee at the annual rate of 0.70% of the Fund's average
daily net assets, computed daily and paid monthly. For the fiscal years ended
August 31, 1995, August 31, 1994 and August 31, 1993, Growth and Income Fund
paid (or accrued) to Mitchell Hutchins investment advisory and administration
fees of $3,378,079, $4,892,163 and $6,413,944, respectively. Pursuant to the
applicable service agreement, during the fiscal years ended August 31, 1995,
August 31, 1994 and August 31, 1993, Growth and Income Fund paid (or accrued)
to PaineWebber service fees of $219,613, $303,496 and $355,724.

Mitchell Hutchins Institutional Investors Inc. ("MHII"), a wholly owned
subsidiary of Mitchell Hutchins, served as sub-adviser to Growth and Income
Fund from May 19, 1994 to April 25, 1995 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 April 25, 1995
and May 19, 1994 to August 31, 1994, Mitchell Hutchins paid or accrued to MHII
sub-advisory fees of $998,353 and $405,821, respectively.

GROWTH FUND. Pursuant to the Advisory Contract dated March 1, 1989, between
Olympus Fund and Mitchell Hutchins, Growth Fund pays Mitchell Hutchins a fee
at the annual rate of 0.75% of the Fund's average daily net assets, computed
daily and paid monthly. For the fiscal years ended August 31, 1995, August 31,
1994 and August 31, 1993, the Growth Fund paid (or accrued) to Mitchell
Hutchins investment advisory and administration fees of $1,993,930, $2,069,033
and $1,402,141, respectively. Pursuant to the applicable service agreement,
during the fiscal years ended August 31, 1995, August 31, 1994 and August 31,
1993, Growth Fund paid (or accrued) to PaineWebber service fees of $114,163,
$103,435 and $75,713.

SMALL CAP VALUE FUND. Pursuant to the Advisory Contract dated January 28,
1993, between Securities Trust and Mitchell Hutchins, Small Cap Value Fund
pays Mitchell Hutchins a fee at the annual rate of 1.00% of the Fund's average
daily net assets, computed daily and paid monthly. For the fiscal year ended
July 31, 1995, the six months ended July 31, 1994, and the fiscal year ended
January 31, 1994, Small Cap Value Fund paid (or accrued) to Mitchell Hutchins
investment advisory and administrative fees of $829,906, $491,757, and
$939,774, respectively. Pursuant to the applicable service agreement during
the fiscal year ended July 31, 1995, the six months ended July 31, 1994 and
the fiscal year ended January 31, 1993, Small Cap Value Fund paid (or accrued)
to PaineWebber service fees of $72,929, $26,353 and $47,661.

Quest Advisory Corp. ("Quest") served as a sub-adviser to Small Cap Value
Fund from February 1, 1993 through March 31, 1996, pursuant to a sub-advisory
contract between Quest and Mitchell Hutchins dated January 28, 1993, under
which Mitchell Hutchins (not the Fund) paid or accrued to Quest Advisory
during the fiscal year ended July 31, 1995, the six months ended July 31, 1994
and the fiscal year ended January 31, 1994, $414,953, $245,878 and $469,887,
respectively, in sub-advisory fees.

27
<PAGE>

NET ASSETS. The following table shows the approximate net assets as of
February 29, 1996, sorted by category of investment objective, of the
investment companies as to which Mitchell Hutchins serves as adviser or sub-
adviser. An investment company may fall into more than one of the categories
below.

<TABLE>
<CAPTION>
NET ASSETS
INVESTMENT CATEGORY ($ MIL)
------------------- ----------
<S> <C>
Domestic (excluding Money Market).............................. $5,653.6
Global......................................................... 2,836.8
Equity/Balanced................................................ 2,922.3
Fixed Income (excluding Money Market).......................... 5,568.1
Taxable Fixed Income......................................... 3,854.2
Tax-Free Fixed Income........................................ 1,713.9
Money Market Funds............................................. 22,732.0
</TABLE>

PERSONNEL TRADING POLICIES. 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 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 of each Fund under separate distribution
contracts with each Trust dated July 7, 1993 or November 10, 1995
(collectively, "Distribution Contracts") that require Mitchell Hutchins to use
its best efforts, consistent with its other businesses, to sell shares of each
Fund. Shares of each of the Funds are offered continuously. Under separate
exclusive dealer agreements between Mitchell Hutchins and PaineWebber dated
July 7, 1993 or November 10, 1995 relating to the Class A, Class B and Class C
shares (collectively, "Exclusive Dealer Agreements"), PaineWebber and its
correspondent firms sell the Funds' shares.

Under separate plans of distribution pertaining to the Class A, Class B and
Class C shares adopted by each Trust in the manner prescribed under Rule 12b-1
under the 1940 Act ("Class A Plan," "Class B Plan" and "Class C Plan,"
collectively, "Plans"), each Fund pays Mitchell Hutchins a service fee,
accrued daily and payable monthly, at the annual rate of 0.25% of the average
daily net assets for each Class, except that the Class A Plans for Growth and
Income Fund and Growth Fund provide 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 and/or after December 2, 1988 and not considered
"Old Shares" for this purpose. Under the Class B Plan and the Class C Plan,
those Funds pay 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 each 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 each board of trustees,

28
<PAGE>

including those trustees who are not "interested persons" of their respective
Trust and who have no direct or indirect financial interest in the operation
of the Plan or any agreement related to the Plan, acting in person at a
meeting called for that purpose, (3) payments by a Fund under the Plan shall
not be materially increased without the affirmative vote of the holders of a
majority of the outstanding shares of the relevant class of the Fund and (4)
while the Plan remains in effect, the selection and nomination of trustees who
are not "interested persons" of the Trusts shall be committed to the
discretion of the trustees who are not "interested persons" of their
respective Trusts.

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

For the fiscal year ended August 31, 1995, (for Growth and Income Fund and
Growth Fund) and July 31, 1995 (for Small Cap Value Fund), the Funds paid (or
accrued) the following respective fees to Mitchell Hutchins under the Plans:

<TABLE>
<CAPTION>
GROWTH AND
GROWTH INCOME SMALL CAP
FUND FUND VALUE FUND
-------- ---------- ----------
<S> <C> <C> <C>
Class A.......................................... $291,331 $ 433,166 $ 52,327
Class B.......................................... 879,165 2,488,140 477,586
Class C.......................................... 235,905 310,960 143,010
</TABLE>

Mitchell Hutchins estimates that it and its parent corporation, PaineWebber,
incurred the following shareholder service-related and distribution-related
expenses with respect to each Fund during the fiscal year ended August 31,
1995 (For Growth and Income Fund and Growth Fund) and July 31, 1995 (for Small
Cap Value Fund):

CLASS A

<TABLE>
<CAPTION>
GROWTH GROWTH AND SMALL CAP
FUND INCOME FUND VALUE FUND
-------- ----------- ----------
<S> <C> <C> <C>
Marketing and advertising..................... $ 37,629 $ 111,953 $ 14,837
Printing of prospectuses and statements of
additional information....................... 1,835 2,720 752
Branch network costs allocated and interest
expense...................................... 384,173 1,157,455 73,877
Service fees paid to PaineWebber Investment
Executives................................... 129,035 194,925 23,548

CLASS B

Marketing and advertising..................... $ 58,340 $ 227,025 $ 30,560
Amortization of commissions................... 517,550 1,363,224 275,572
Printing of prospectuses and statements of ad-
ditional information......................... 2,446 3,626 1,534
Branch network costs allocated and interest
expense...................................... 717,791 2,597,092 182,972
Service fees paid to PaineWebber investment
executives................................... 98,906 279,915 53,729
</TABLE>

29
<PAGE>

CLASS C

<TABLE>
<CAPTION>
GROWTH GROWTH AND SMALL CAP
FUND INCOME FUND VALUE FUND
-------- ----------- ----------
<S> <C> <C> <C>
Marketing and advertising..................... $ 14,032 $ 42,022 $16,471
Amortization of commissions................... 20,049 60,694 19,563
Printing of prospectuses and statements of ad-
ditional information......................... 282 418 846
Branch network costs allocated and interest
expense...................................... 159,796 467,338 82,384
Service fees paid to PaineWebber investment
executives................................... 79,618 104,949 16,089
</TABLE>

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

In approving the Funds' overall Flexible PricingSM system of distribution,
each 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 each
respective Fund and attracting new investors and assets to the Fund to the
benefit of the Fund and its shareholders, (2) facilitate distribution of the
Funds' shares and (3) maintain the competitive position of the Funds in
relation to other funds that have implemented or are seeking to implement
similar distribution arrangements.

In approving the Class A Plan, the trustees of each Trust 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 Funds than might
otherwise be the case, (3) the advantages to the shareholders of economies of
scale resulting from growth in the Funds' assets and potential continued
growth, (4) the services provided to the Funds and their shareholders by
Mitchell Hutchins, (5) the services provided by PaineWebber pursuant to its
Exclusive Dealer Agreement with Mitchell Hutchins and (6) Mitchell Hutchins'
shareholder service-related expenses and costs.

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

30
<PAGE>

compensate PaineWebber and its investment executives, without the concomitant
receipt by Mitchell Hutchins of initial sales charges, was conditioned upon
its expectation of being compensated under the Class B Plan.

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

With respect to each Plan, the trustees considered all compensation that
Mitchell Hutchins would receive under the Plan and the Distribution Contract,
including service fees and, as applicable, initial sales charges, distribution
fees and contingent deferred sales charges. The trustees also considered the
benefits that would accrue to Mitchell Hutchins under each Plan in that
Mitchell Hutchins would receive service, distribution and advisory fees which
are calculated based upon a percentage of the average net assets of each Fund,
which fees would increase if the Plan were successful and the Funds 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
---------------------------
1995 1994 1993
------- -------- ----------
<S> <C> <C> <C>
GROWTH FUND
Earned.............................................. $62,298 $367,454 $ 246,569
Retained............................................ 35,996 26,176 15,757
GROWTH AND INCOME FUND
Earned.............................................. 68,358 186,333 1,794,698
Retained............................................ 39,225 11,944 108,359
SMALL CAP VALUE FUND
Earned.............................................. 41,750 32,208 815,987
Retained............................................ 23,505 1,845 49,325
</TABLE>

For the last fiscal year ended, Mitchell Hutchins earned and retained
$628,261 from Growth Fund, $1,632,389 from Growth and Income Fund, and
$344,638 from Small Cap Value Fund in contingent deferred sales charges paid
upon certain redemptions of Class B shares.

31
<PAGE>

PORTFOLIO TRANSACTIONS

Subject to policies established by each Trust's board of trustees, 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 the Funds, 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 Funds may invest in securities
traded in the OTC market and will engage primarily in transactions directly
with the dealers who make markets in such securities, unless a better price or
execution could be obtained by using a broker. 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, Growth and Income Fund paid $1,241,906,
$1,901,499 and $1,131,909, respectively, in brokerage commissions. For the
fiscal years ended August 31, 1995, August 31, 1994 and August 31, 1993,
Growth Fund paid $273,991, $222,490 and $150,432, respectively, in brokerage
commissions. For the fiscal year ended July 31, 1995, the six months ended
July 31, 1994, and the fiscal year ended January 31, 1994, Small Cap Value
Fund paid $120,717, $113,315 and $349,051, respectively, in brokerage
commissions.

The Funds have no obligation to deal with any broker or group of brokers in
the execution of portfolio transactions. The Funds contemplate that,
consistent with the policy of obtaining the best net results, brokerage
transactions may be conducted through PaineWebber. The Trusts' boards of
trustees have adopted procedures in conformity with Rule 17e-1 under the 1940
Act to ensure that all brokerage commissions paid to PaineWebber are
reasonable and fair. Specific provisions in the Advisory Contracts authorize
PaineWebber to effect portfolio transactions for the Funds on such exchange
and to retain compensation in connection with such transactions. Any such
transactions will be effected and related compensation paid only in accordance
with applicable SEC regulations. For the fiscal year ended August 31, 1995,
Growth and Income Fund paid $65,991 in brokerage commissions to PaineWebber,
which represented 5.31% of the total brokerage commissions paid by the Fund
and 5.20% of the total dollar amount of transactions involving payment of
commissions. For the fiscal years ended August 31, 1994 and August 31, 1993,
the Fund paid $47,142 and $108,080, respectively, in brokerage commissions to
PaineWebber. For the fiscal year ended August 31, 1995, Growth Fund paid
$4,200 in brokerage commissions to PaineWebber, which represented 1.53% of the
total brokerage commissions paid by the Fund and 2.13% of the total dollar
amount of transactions involving payment of commissions. For the fiscal years
ended August 31, 1994 and August 31, 1993, the Fund paid $9,326 and $3,500,
respectively, in brokerage commissions to PaineWebber. For the fiscal year
ended July 31, 1995, Small Cap Value Fund paid $665 in commissions to
PaineWebber, which represented 0.5% of the total brokerage commissions paid by
the Fund and 0.4% of the total dollar amount of transactions involving the
payment of commissions. For the six months ended July 31, 1994, and the fixed
year ended January 31, 1994, the Fund paid no brokerage commissions to
PaineWebber or any other affiliate of Mitchell Hutchins.

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

32
<PAGE>

Consistent with the interests of each Fund and subject to the review of each
Trust's board of trustees, Mitchell Hutchins may cause the Fund to purchase
and sell portfolio securities from and to dealers or 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 particular 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 (or, for
Growth and Income Fund, MHII) directed $125,000,872 and $6,914,330,
respectively, in portfolio transactions to brokers chosen because they
provided research services, for which the Funds paid $168,587 and $9,720,
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 the Funds effect securities transactions may be used by
Mitchell Hutchins in advising other funds or accounts and, conversely,
information and research services furnished to Mitchell Hutchins by brokers or
dealers in connection with other funds or accounts that either of them advises
may be used in advising the Funds. Information and research received from
brokers or dealers will be in addition to, and not in lieu of, the services
required to be performed by Mitchell Hutchins under the Advisory Contract.

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 that
Fund and such other account(s) as to amount according to a formula deemed
equitable to the Fund and such account(s). While in some cases this practice
could have a detrimental effect upon the price or value of the security as far
as the Funds are concerned, or upon their ability to complete their entire
order, in other cases it is believed that coordination and the ability to
participate in volume transactions will be beneficial to the Funds.

The Funds will not purchase securities that are offered in underwritings in
which PaineWebber is a member of the underwriting or selling group, except
pursuant to procedures adopted by each 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 PaineWebber or any affiliate thereof not participate in or
benefit from the sale to the Funds.

33
<PAGE>

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

<TABLE>
<CAPTION>
PORTFOLIO
TURNOVER RATE
-------------
<S> <C>
GROWTH AND INCOME FUND
Fiscal Year Ended August 31, 1995................................. 111%
Fiscal Year Ended August 31, 1994................................. 94%
GROWTH FUND
Fiscal Year Ended August 31, 1995................................. 36%
Fiscal Year Ended August 31, 1994................................. 24%
SMALL CAP VALUE FUND
Fiscal Year Ended July 31, 1995................................... 19%
Six Months Ended July 31, 1994.................................... 20%
Fiscal Year Ended January 31, 1994................................ 98%
</TABLE>

REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND REDEMPTION
INFORMATION AND OTHER SERVICES

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

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

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

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

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

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

34
<PAGE>

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

(h) an individual's accounts with the same investment adviser.

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

WAIVERS OF SALES CHARGES--CLASS B SHARES. Among other circumstances, the
contingent deferred sales charge on Class B shares is waived where a total or
partial redemption is made within one year following the death of the
shareholder. The contingent deferred sales charge waiver is available where
the decedent is either the individual shareholder or owns the shares with his
or her spouse as a joint tenant with right of survivorship. This waiver
applies only to redemption of shares held at the time of death.

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

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

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

35
<PAGE>

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

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

Instructions to participate in the plan, change the withdrawal amount or
terminate participation in the plan will not be effective until five days
after written instructions with signatures guaranteed are received by the
Transfer Agent. Shareholders may request the forms needed to establish a
systematic withdrawal plan from their PaineWebber investment executives,
correspondent firms or the Transfer Agent at 1-800-647-1568.

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

PAINEWEBBER RMA RESOURCE ACCUMULATION PLANSM;
PAINEWEBBER RESOURCE MANAGEMENT ACCOUNT(R)(RMA)(R)

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

36
<PAGE>

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;

. 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;

37
<PAGE>

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

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

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<PAGE>

VALUATION OF SHARES

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

Securities that are listed on U.S. 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

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

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

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

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over
the period. In calculating the ending redeemable value, for Class A shares,
the maximum 4.5% sales charge is deducted from the initial $1,000 payment and,
for Class B and Class C shares, the applicable contingent deferred sales
charge imposed on a redemption of Class B or Class C shares held for the
period is deducted. All dividends and other distributions are assumed to have
been reinvested at net asset value.

The Funds also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The Funds calculate Non-

39
<PAGE>

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 (formerly Class D) shares of the Funds for the periods indicated.
All returns for periods of more than one year are expressed as an average
return.

GROWTH AND INCOME FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Fiscal year ended August 31, 1995:
Standardized Return*.................................. 12.99% 12.38% 16.37%
Non-Standardized Return............................... 18.30% 17.38% 17.37%
Five years ended August 31, 1995:
Standardized Return*.................................. 9.06% NA NA
Non-Standardized Return............................... 10.07% NA NA
Ten years ended August 31, 1995
Standardized Return*.................................. 10.31% NA NA
Non-Standardized Return............................... 10.82% NA NA
Inception** to August 31, 1995:
Standardized Return*.................................. 10.92% 7.11% 6.47%
Non-Standardized Return............................... 11.36% 7.49% 6.47%
</TABLE>
- --------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5%. All Standardized Return figures for
Class B and Class C shares reflect deduction of the applicable contingent
deferred sales charges imposed on a redemption of shares held for the
period.
** The inception date for each Class of shares is as follows: Class A--
December 20, 1983, Class B--July 1, 1991, and Class C--July 2, 1992.

40
<PAGE>

GROWTH FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Fiscal year ended August 31, 1995:
Standardized Return*.................................. 6.30% 5.40% 9.37%
Non-Standardized Return............................... 11.28% 10.40% 10.37%
Five years ended August 31, 1995:
Standardized Return*.................................. 13.40% NA NA
Non-Standardized Return............................... 14.45% NA NA
Ten years ended August 31, 1995:
Standardized Return*.................................. 12.56% NA NA
Non-Standardized Return*.............................. 13.08% NA NA
Inception** to August 31, 1995:
Standardized Return*.................................. 13.22% 10.80% 10.89%
Non-Standardized Return............................... 13.72% 11.14% 10.89%
</TABLE>
- --------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5%. All Standardized Return figures for
Class B and Class C shares reflect deduction of the applicable contingent
deferred sales charges imposed on a redemption of shares held for the
period.
** The inception date for each Class of shares is as follows: Class A--March
18, 1985, Class B--July 1, 1991, and Class C--July 2, 1992.

SMALL CAP VALUE FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
One year ended July 31, 1995:
Standardized Return*.................................. 10.63% 9.86% 13.60%
Non-Standardized Return............................... 15.80% 14.86% 14.76%
Inception** to July 31, 1995:
Standardized Return*.................................. 5.82% 5.50% 6.95%
Non-Standardized Return............................... 7.79% 6.96% 6.95%
</TABLE>
- --------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5%. All Standardized Return figures for
Class B and Class C shares reflect deduction of the applicable contingent
deferred sales charges imposed on a redemption of shares held for the
period.
** The inception date for all Classes of shares is February 1, 1993.

41
<PAGE>

levels, published by Lipper, CDA, Wiesenberger, ICD or Morningstar.
Performance Advertisements also may refer to discussions of the Funds and
comparative mutual fund data and ratings reported in independent periodicals,
including (but not limited to) THE WALL STREET JOURNAL, MONEY Magazine,
FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES,
THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE KIPLINGER LETTERS.
Comparisons in Performance Advertisements may be in graphic form.

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

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

The Funds 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.

[GRAPHICS]

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<PAGE>

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
Funds' 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.

TAXES

In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code, each Fund must distribute to
its shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income net short-term
capital gain and net gains from certain foreign currency transactions)
("Distribution Requirement") and must meet several additional requirements.
Among these requirements are the following: (1) each Fund must derive at least
90% of its gross income each taxable year from dividends, interest, payments
with respect to securities loans and gains from the sale or other disposition
of securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); (2) each
Fund must derive less than 30% of its gross income each taxable year from the
sale or other disposition of securities, or any of the following, that were
held for less than three months--options, futures or forward contracts (other
than those on foreign currencies), or foreign currencies (or options, futures
or forward contracts thereon) that are not directly related to the Fund's
principal business of investing in securities (or options and futures with
respect to securities) ("Short-Short Limitation"); (3) at the close of each
quarter of each Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. government securities,
securities of other RICs and other securities, with these other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of that Fund's total assets and that does not represent more than
10% of the issuer's outstanding voting securities; and (4) at the close of
each quarter of each 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 Funds 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 Funds and received by
the shareholders on December 31 of that year if the distributions are paid by
the Funds during the following January. Accordingly, those distributions will
be taxed to shareholders for the year in which that December 31 falls.

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

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<PAGE>

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

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

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

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

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

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

44
<PAGE>

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 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

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, 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 Growth and
Income Fund. Prior to November 10, 1995, each Fund's Class Y shares were known
as "Class C" shares.

PaineWebber America Fund, PaineWebber Olympus Fund, and PaineWebber
Securities Trust are entities of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of the Funds could,
under certain circumstances, be held personally liable for the obligations of
the Trusts or Funds. However, each Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trusts or the 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 any Trust or Fund, the trustees or any of them
in connection with a Trust. Each Declaration of Trust provides for
indemnification from a Fund's property for all losses and expenses of any
shareholder held personally liable for the obligations of that 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 that 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 Funds.

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

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<PAGE>

COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800 counsel to the Funds, has passed
upon the legality of the shares offered by the Funds' 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 Growth Fund and Growth and Income Fund.
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, N.Y. 10036,
serves as independent auditors for Small Cap Value Fund.

FINANCIAL STATEMENTS

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

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<PAGE>

APPENDIX

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

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

Note: Moody's apply numerical modifiers, 1, 2 and 3 in each generic rating
classification from "AA" through "B" in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category, the modifier 2 indicates a mid-range ranking, and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.

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

AAA. Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong; AA. Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the
higher rated issues only in small degree; A. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories; BBB. Debt rated BBB is
regarded as having an adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher rated categories; BB, B, CCC, CC, C. Debt rated BB, B, CCC, CC and C is
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the

47
<PAGE>

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.

48
<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.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THE PROSPECTUS OR IN THIS STATEMENT OF
ADDITIONAL INFORMATION IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE 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 LAWFULLY BE MADE.

----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Restrictions..................................... 1
Hedging Strategies....................................................... 9
Trustees and Officers; Principal Shareholders............................ 16
Investment Advisory and Distribution Arrangements........................ 25
Portfolio Transactions................................................... 31
Reduced Sales Charges, Additional Exchange and Redemption Information and
Other Services.......................................................... 33
Conversion of Class B Shares............................................. 37
Valuation of Shares...................................................... 38
Performance Information.................................................. 38
Taxes.................................................................... 42
Other Information........................................................ 44
Financial Statements..................................................... 45
Appendix................................................................. 46
</TABLE>

PaineWebber
Growth and Income Fund

PaineWebber
Growth Fund

PaineWebber
Small Cap Value Fund

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

April 30, 1996

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

[PAINEWEBBER LOGO APPEARS HERE]
<PAGE>

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

PaineWebber

Growth and Income Fund

Growth Fund

Class Y Shares

1285 Avenue of the Americas, New York, NY 10019

Prospectus -- April 30, 1996

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

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

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
PaineWebber Savings Investment Plan ("PW SIP") on behalf of the PW SIP. See
"How to Buy Shares."

Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Funds at a Glance.................................................... 2
Expense Table............................................................ 4
Financial Highlights..................................................... 5
Investment Objective and Policies........................................ 6
Investment Philosophy & Process.......................................... 6
Performance.............................................................. 8
The Fund's Investments................................................... 10
How to Buy Shares........................................................ 12
How to Sell Shares....................................................... 13
Management............................................................... 14
Determining the Shares' Net Asset Value.................................. 15
Dividends & Taxes........................................................ 15
General Information...................................................... 16
</TABLE>

-------------
Prospectus Page 1
<PAGE>

The Funds at a Glance

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

GROWTH AND INCOME FUND

GOAL: To increase the value of your investment by investing primarily in
dividend-paying equity securities with the potential for rapid earnings growth.

INVESTMENT OBJECTIVE: Current income and capital growth.

RISKS: Equity securities historically have shown greater growth potential than
other types of securities; as such, they have also shown greater volatility.
Because the Fund invests primarily in equity securities, its price will rise
and fall. The Fund may invest in the U.S. dollar denominated securities of
foreign companies, which involve more risk than investing in the securities of
U.S. companies. The Fund may also invest up to 10% of its assets in high yield,
high risk convertible bonds, which are considered predominantly speculative and
may involve major risk exposure to adverse conditions. The Fund may use
derivatives, such as options and futures, in its hedging activities, which may
involve special risks. Investors may lose money by investing in the Fund; your
investment is not guaranteed.

SIZE: On February 29, 1996, the Fund had over $599 million in assets.

GROWTH FUND

GOAL: To increase the value of your investment by investing primarily in equity
securities of companies with substantial potential for capital growth.

INVESTMENT OBJECTIVE: Long-term capital appreciation.

RISKS: Equity securities historically have shown greater growth potential than
other types of securities; as such, they have also shown greater volatility.
Because the Fund invests primarily in equity securities, its price will rise
and fall. The Fund may invest in the U.S. dollar denominated securities of
foreign companies, which involve more risk than investing in the securities of
U.S. companies. The Fund may also invest up to 35% of its net assets in high
yield, high risk bonds, which may be subject to greater risks of default and
price fluctuation than investment grade securities and are considered
predominantly speculative. The Fund may use derivatives, such as options and
futures, in its hedging activities, which may involve special risks. Investors
may lose money by investing in the Fund; your investment is not guaranteed.

SIZE: On February 29, 1996, the Fund had over $403 million in assets.

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

WHO SHOULD INVEST

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

invests in equity securities of both larger growth companies and smaller
issuers with greater appreciation potential. In addition, the Growth Fund can
invest a significant portion of its assets in high yield, high risk bonds.
These investments offer the potential for greater returns but also entail a
substantial degree of volatility and risk. Accordingly, the Growth Fund is
designed for investors who are able to bear the risks that come with
investments in the stocks and bonds of such companies.

HOW TO PURCHASE CLASS Y SHARES

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

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

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

THE PAINEWEBBER FAMILY OF FUNDS

. Money Market Funds for income and stability by investing in high-quality,
short-term investments.

. Bond Funds for income by investing mainly in bonds.

. Tax-Free Bond Funds for income exempt from federal income taxes and, in some
cases, state and local income taxes, by investing in municipal bonds.

. Asset Allocation Funds for long-term growth and income by investing in stocks
and bonds.

. Growth Funds for long-term growth by investing mainly in stocks.

. Global Funds for long-term growth by investing mainly in foreign stocks or
high current income by investing mainly in global debt instruments.

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

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

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

Expense Table

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

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

ANNUAL FUND OPERATING EXPENSES* (as a % of average net assets)
GROWTH AND INCOME FUND
Management Fees........................................................ 0.70%
12b-1 Fees............................................................. 0.00
Other Expenses......................................................... 0.19
----
Total Operating Expenses............................................... 0.89%
====
GROWTH FUND
Management Fees........................................................ 0.75%
12b-1 Fees............................................................. 0.00
Other Expenses(a)...................................................... 0.17
----
Total Operating Expenses............................................... 0.92%
====
</TABLE>
- -------
* See "Management" for additional information. The fees and expenses are those
actually incurred for the fiscal year ended August 31, 1995. Participation
in INSIGHT is subject to payment of an advisory fee at the maximum annual
rate of 1.50% of assets held through INSIGHT. This account charge is not
included in the table because non-INSIGHT participants are permitted to
purchase Class Y shares of the Fund.
(a) Does not include 0.05% in non-recurring reorganization expenses which were
incurred during the fiscal year ended August 31, 1995. If those expenses
were included, "Other expenses" for Class Y shares would be 0.22% and
"Total operating expenses" would be 0.97%.

EXAMPLE OF EFFECT OF FUND EXPENSES

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

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class Y......................................... $9 $28 $49 $110
<CAPTION>

GROWTH FUND
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class Y......................................... $9 $29 $51 $113
</TABLE>

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

Financial Highlights

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

The following tables provide investors with data and ratios for one Class Y
share of each Fund for each of the periods. This information is supplemented by
the financial statements and accompanying notes appearing in each Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 1995 and the report
of Ernst & Young LLP, independent auditors, appearing in each Fund's Annual
Report to Shareholders. Both are incorporated by reference into the Statement
of Additional Information. The financial statements and notes, as well as the
information in the table appearing below, have been audited by Ernst & Young
LLP. Further information about each Fund's performance is also 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.... $ 20.42 $ 20.86 $ 20.48 $ 20.95 $ 20.22 $ 20.71 $ 16.83 $ 17.50
------- ------- ------- ------- ------- ------- ------- -------
Net investment income... 0.30 0.33 0.33 0.16 0.24 0.03 0.08 0.05
Net realized and
unrealized gains
(losses) from
investment
transactions........... 3.18 (0.40) 0.37 (0.49) 2.10 0.55 4.42 (0.11)
------- ------- ------- ------- ------- ------- ------- -------
Total increase/decrease
from investment
operations............. 3.48 (0.07) 0.70 (0.33) 2.34 0.58 4.50 (0.06)
------- ------- ------- ------- ------- ------- ------- -------
Dividends from net
investment income...... (0.15) (0.34) (0.32) (0.14) -- -- -- (0.01)
Distributions from net
realized gains on
investment
transactions........... (1.21) (0.03) -- -- (0.03) (1.07) (0.62) (0.60)
------- ------- ------- ------- ------- ------- ------- -------
Total dividends and
distributions.......... (1.36) (0.37) (0.32) (0.14) (0.03) (1.07) (0.62) (0.61)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 22.54 $ 20.42 $ 20.86 $ 20.48 $ 22.53 $ 20.22 $ 20.71 $ 16.83
======= ======= ======= ======= ======= ======= ======= =======
Total investment
return(1).............. 18.66% (0.31)% 3.44% (1.15)% 11.58% 2.67% 27.26% (0.52)%
======= ======= ======= ======= ======= ======= ======= =======
Ratios/Supplemental
data:
Net assets, end of
period (000's)......... $14,680 $14,690 $17,005 $10,560 $20,948 $30,521 $20,706 $11,581
Expenses to average net
assets................. 0.89% 0.90% 0.86% 0.93%* 0.97%(3) 0.94% 0.95% 1.12%
Net investment income to
average net assets..... 1.39% 1.60% 1.62% 1.56%* 0.53%(3) 0.40% 0.60% 0.38%
Portfolio turnover...... 111.27% 94.32% 36.52% 15.57% 36.10% 24.41% 35.81% 32.49%
</TABLE>
- -------
* Annualized.
+ Commencement of offering of shares.
++ A per share breakdown for Class Y 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 investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
capital gain distributions at net asset value on the payable date, and a
sale at net asset value on the last day of each period reported. Total
return information for periods less than one year are not annualized.
(2) Formerly Class C shares.
(3) These ratios include non-recurring reorganization expenses of 0.05%.

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

Investment Objective & Policies

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

GROWTH AND INCOME FUND

GROWTH FUND

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

Investment Philosophy & Process

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

GROWTH AND INCOME FUND

. four traditional value measures: cash flow, book value, price-earnings ratios
and dividend discount models;

. three momentum measures to identify companies that could surprise on the
upside (two earnings-related factors, one price momentum factor); and

. a model that forecasts how different equity securities and industries may
perform under various economic scenarios.

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

equity securities. In seeking capital appreciation, the Fund would also invest
in bonds when, for instance, Mitchell Hutchins anticipates that market interest
rates may decline or credit factors or ratings affecting particular issuers may
improve.

GROWTH FUND

. four traditional value measures: cash flow, book value, price-earnings ratios
and dividend discount models;

. three momentum measures to identify companies that could surprise on the
upside (two earnings-related factors, one price momentum factor); and

. a model that forecasts how different equity securities and industries may
perform under various economic scenarios.

The equity securities ranking in the top 20% of the Model's universe are
screened on a monthly basis. Then the Team takes a closer look at those equity
securities that rank higher based on earnings growth and applies traditional
analysis. The Team speaks to the management of these companies, as well as
those of their competitors. Based on the Team's findings in the context of
Mitchell Hutchins' economic forecast, the Fund decides whether to purchase or
sell equity securities. In seeking capital appreciation, the Fund would also
invest in bonds when, for instance, Mitchell Hutchins anticipates that market
interest rates may decline or credit factors or ratings affecting particular
issuers may improve.

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

Performance

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

Here are the total returns for the Funds. Past results are not a guarantee of
future results.

GROWTH AND INCOME FUND

[CHART APPEARS HERE] As Class Y shares commenced operations
on February 12, 1992, the 1992 return
represents the period from February 12,
1992 through December 31, 1992.

GROWTH FUND

[CHART APPEARS HERE] As Class Y shares commenced operations
on August 25, 1991, the 1991 return
represents the period from August 25,
1991 through December 31, 1991.

-------------
Prospectus Page 8

<PAGE>

GROWTH AND INCOME FUND

AVERAGE ANNUAL RETURNS
As of August 31, 1995
<TABLE>
<CAPTION>
CLASS Y SHARES
--------------
<S> <C>
Inception Date................................................... 2/12/92
One Year......................................................... 6.58%
Life............................................................. 5.37%
</TABLE>

GROWTH FUND

AVERAGE ANNUAL RETURNS
As of August 31, 1995
<TABLE>
<CAPTION>
CLASS Y SHARES
--------------
<S> <C>
Inception Date................................................... 8/25/91
One Year......................................................... 13.39%
Life............................................................. 10.33%
</TABLE>

PERFORMANCE INFORMATION

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

The Funds' Investments

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

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

RISKS

Each Fund predominantly invests its assets in equity securities. Following is a
discussion of these risks and other risks that are common to each of the Funds:

FOREIGN SECURITIES. Each of the Funds may invest a portion of its assets in the
U.S. dollar denominated securities of foreign companies that are traded on
recognized U.S. exchanges or in the U.S. OTC market. Investing in the
securities of foreign companies involves more risks than investing in
securities of U.S. companies. Their value is subject to economic and political
developments in the countries where the companies operate and to changes in
foreign currency values. Values may also be affected by foreign tax laws,
changes in foreign economic or monetary policies, exchange control regulations
and regulations involving prohibitions on the repatriation of foreign
currencies.

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

NON-INVESTMENT GRADE (LOWER-RATED) BOND RATINGS. Lower-rated bonds are deemed
by the ratings agencies to be predominantly speculative regarding the issuer's
ability to pay principal and interest and may involve major risk exposure
during adverse economic conditions. They are also known as "junk bonds." During
an economic downturn or period of rising interest rates, such issuers may
experience financial stress that adversely affects their ability to pay
interest and principal and may increase the possibility of default. Lower-rated
bonds are frequently unsecured by collateral and will not receive payment until
more senior claims are paid in full. The market for lower-rated bonds is
thinner and less active, which may limit the Funds' ability to sell such bonds
at a fair value in response to changes in the economy or financial markets.

The Growth and Income Fund can invest up to 10% of total assets in convertible
securities rated as low as B by S&P or Moody's or comparably rated by another
ratings agency.

The Growth Fund can invest up to 35% of net assets in bonds and convertible
securities rated as low as B+ by S&P, B1 by Moody's or comparably rated by
another ratings agency.

INVESTMENT TECHNIQUES AND STRATEGIES

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

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

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

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

OTHER INFORMATION. The Growth and Income Fund and Growth Fund each may invest
up to 10% of its net assets in illiquid securities. This includes certain cover
for OTC options and securities whose disposition is restricted under the
federal securities laws. The Funds do not consider securities that are eligible
for resale pursuant to SEC Rule 144A to be illiquid securities if Mitchell
Hutchins has determined such securities to be liquid based upon the trading
markets for the securities under procedures approved by the respective board of
trustees.

-------------
Prospectus Page 11
<PAGE>

of its total assets in money market instruments and/or cash for liquidity
purposes or pending investment in other securities.

Each Fund may borrow up to 10% of its total assets for temporary or emergency
purposes. Each Fund may sell securities short "against the box" to defer
realization of gains or losses for tax or other purposes. When a security is
sold against the box, the seller owns the security. Each Fund may enter into
reverse repurchase agreements up to an aggregate value of 5% of its assets.

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

How to Buy Shares

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

Class Y shares are sold to eligible investors at the net asset value next
determined after the purchase order is received at PaineWebber's New York City
headquarters or, for purchases by the trustee of the PW SIP, by the Funds'
transfer agent ("Transfer Agent"). No initial or contingent deferred sales
charge is imposed, nor are Class Y shares subject to rule 12b-1 distribution or
service fees. The Funds and Mitchell Hutchins reserve the right to reject any
purchase order and to suspend the offering of the Class Y shares for a period
of time. Mitchell Hutchins, the distributor for each Fund's Class Y shares, has
appointed PaineWebber to serve as the exclusive dealer for each Fund's Class Y
shares.

INSIGHT

An investor who purchases $50,000 or more of shares of the mutual funds that
are available to INSIGHT participants (which include the PaineWebber mutual
funds in the Flexible Pricing SystemSM and certain other specified mutual
funds) may take part in INSIGHT, a total portfolio asset allocation program
sponsored by PaineWebber, and thus become eligible to purchase Class Y shares.
INSIGHT offers comprehensive investment services, including a personalized
asset allocation investment strategy using an appropriate combination of funds,
monitoring of investment performance and comprehensive quarterly reports that
cover market trends, portfolio summaries and personalized account information.

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

Please contact your PaineWebber investment executive or PaineWebber
correspondent firm or call 1-800-697-1568 for more information concerning
mutual funds that are available to INSIGHT participants or for other INSIGHT
program information.

PURCHASES BY THE TRUSTEE OF THE PW SIP

The Class Y shares also are offered for sale to the trustee of the PW SIP, a
defined contribution plan sponsored by PaineWebber 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 participants should consult the Plan Information
Statement and Summary Plan Description of the PW SIP (collectively the "Plan
Documents") for a description of the procedures and limitations applicable to
making and changing investment choices.

Copies of the Plan Documents are available from the PaineWebber Incorporated
Benefits Department, 1000 Harbor Boulevard, 10th Floor, Weehawken, NJ 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.

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

ACQUISITION OF CLASS Y SHARES BY OTHERS

Present holders of Class Y shares of a former Mitchell Hutchins/Kidder, Peabody
("MH/KP") mutual fund who are not current INSIGHT participants may acquire
Class Y shares of a Fund only when those shares are issued in connection with
the reorganization of the MH/KP mutual fund into that Fund. This category
includes former employees of Kidder, Peabody & Co., Incorporated ("Kidder,
Peabody"), their associated accounts, present and former directors and trustees
of the MH/KP mutual funds.

Dividends and other distributions on Class Y shares of a Fund issued in
connection with the reorganization will be paid in additional Class Y shares at
net asset value, unless the shareholder has requested cash payments. These
holders may not otherwise purchase additional Class Y shares.

Each Fund is authorized to offer Class Y shares to 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.

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

How to Sell Shares

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

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 agent for the Funds, 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 headquarters. Within three Business Days after
receipt of the request, repurchase proceeds will be paid by check or credited
to the shareholder's brokerage account at the election of the shareholder.
PaineWebber investment executives and correspondent firms are responsible for
promptly forwarding redemption requests to PaineWebber's New York City
headquarters. A "Business Day" is any day, Monday through Friday, on which the
New York Stock Exchange is open for business.

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

REDEMPTIONS 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 redemption proceeds will be
paid within seven days of the receipt of the request.

"Good order" means that the request must be accompanied by the following: (1) a
letter of instruction or a stock assignment specifying the number of shares or
amount of investment to be redeemed (or that all shares credited to 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."

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

REDEMPTIONS FOR PARTICIPANTS IN PW SIP

The trustee of the PW SIP redeems Class Y shares to implement the investment
choices of individual plan participants with respect to their PW SIP
contributions, as described in the Plan Documents 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 participant 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 requirements generally, should be referred to
the shareholder's investment executive at PaineWebber or one of its
correspondent firms. 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
accounts, each Fund reserves the right to redeem all Fund shares in any
shareholder account having a net asset value below $500. If a Fund elects to do
so, it will notify the shareholder and provide the shareholder the opportunity
to increase the amount invested to $500 or more within 60 days of the notice. 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.

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

Management

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

ABOUT THE INVESTMENT ADVISER

As investment adviser for the Growth and Income Fund and Growth Fund, Mitchell
Hutchins makes and implements all investment decisions and supervises all
aspects of each Fund's operations.

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

<PAGE>

MANAGEMENT FEES & OTHER EXPENSES

The Funds pay Mitchell Hutchins a monthly fee for its services. For the most
recently ended fiscal year, the Funds paid advisory fees at the annual rate (as
a percentage of average daily net assets) of 0.70% for Growth and Income Fund
and 0.75% for Growth Fund. The management fees paid by Growth Fund are higher
than those paid by most other mutual funds. However, Mitchell Hutchins believes
that these fees are comparable to the management fees paid by other funds with
similar investment objectives and policies.

Each 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.

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

Determining the Shares' Net Asset Value

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

Dividends & Taxes

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

DIVIDENDS

Growth Fund pays an annual dividend and Growth and Income Fund pays a semi-
annual dividend from net investment income and net short-term capital gain, if
any. Each Fund also distributes annually substantially all of its net capital
gain (the excess of net long-term capital gain over net short-term capital
loss), if any. Each 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 Class Y shares of the Funds are
calculated at the same time and in the same manner as dividends and
distributions of other classes of shares.

The Funds' dividends and capital gain distributions are paid in additional Fund
shares of the same

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

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. 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

YEAR-END TAX REPORTING

WITHHOLDING REQUIREMENTS

TAXES ON THE SALE OR EXCHANGE OF FUND SHARES

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

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

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

General Information

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

ORGANIZATION

GROWTH AND INCOME FUND

GROWTH FUND

The Growth Fund is a diversified series of the PaineWebber Olympus Fund, which
is an open-end management investment company and was formed

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

on October 31, 1986 as a business trust under the laws of the Commonwealth of
Massachusetts. The trustees have authority to issue an unlimited number of
shares of beneficial interest of separate series, par value $0.001 per share.

More information concerning Class A, Class B and Class C shares of the Funds
may be obtained from a PaineWebber investment executive or correspondent firm
or by calling 1-800-647-1568.

Although each Fund is offering only its own shares, it is possible that a Fund
might become liable for a misstatement in the Prospectus about another Fund.

VOTING RIGHTS

SHAREHOLDER MEETINGS

The Funds, each a series of separate Massachusetts business trusts, do not
intend to hold annual meetings.

REPORTS TO SHAREHOLDERS

CUSTODIAN & RECORDKEEPING AGENT; TRANSFER & DIVIDEND AGENT

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

----------------------------------------------------------------------------
----------------------------------------------------------------------------
PAINEWEBBER OLYMPUS FUND
- ------------------------------------------------------------------------------

PaineWebber Family of Funds

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

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

PAINEWEBBER MONEY MARKET FUND

PAINEWEBBER BOND FUNDS
Investment Grade Income Fund
High Income Fund
Low Duration U.S. Government Income Fund
Strategic Income Fund
U.S. Government Income Fund

PAINEWEBBER TAX-FREE BOND FUNDS
National Tax-Free Income Fund
California Tax-Free Income Fund
New York Tax-Free Income Fund
Municipal High Income Fund

PAINEWEBBER ASSET ALLOCATION FUNDS
Balanced Fund
Tactical Allocation Fund

PAINEWEBBER GROWTH FUNDS
Capital Appreciation Fund
Growth Fund
Growth and Income Fund
Financial Services Growth Fund
Small Cap Value Fund
Utility Income Fund

PAINEWEBBER GLOBAL FUNDS
Global Equity Fund
Global Income Fund
Emerging Markets Equity Fund

-------------
<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" and, collectively, "Funds") are
professionally managed, open-end investment companies organized as diversified
series of Massachusetts business trusts (each a "Trust" and, collectively,
"Trusts"). PaineWebber Growth and Income Fund ("Growth and Income Fund"), a
series of PaineWebber America Fund ("America Fund"), seeks to provide current
income and capital growth; it invests primarily in dividend-paying equity
securities believed by its investment adviser to have the potential for rapid
earnings growth. PaineWebber Growth Fund ("Growth Fund"), a series of
PaineWebber Olympus Fund ("Olympus Fund"), seeks long-term capital
appreciation; it invests primarily in equity securities issued by companies
deemed by its investment adviser to have substantial potential for capital
growth.

This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Funds' current Prospectus, dated April 30,
1996. A copy of the Prospectus may be obtained by calling any PaineWebber
investment executive or correspondent firm or by calling toll-free
1-800-647-1568. This Statement of Additional Information is dated
April 30, 1996.

INVESTMENT POLICIES AND RESTRICTIONS

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

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.

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 each Fund's investment policies,
ADRs are deemed to have the

2
<PAGE>

same classification as the underlying securities they represent. Thus, an ADR
representing ownership of common stock will be treated as common stock. ADRs
are publicly traded on exchanges or over-the-counter in the United States and
are issued through "sponsored" or "unsponsored" arrangements. In a sponsored
ADR arrangement, the foreign issuer assumes the obligation to pay some or all
of the depositary's transaction fees, whereas under an unsponsored
arrangement, the foreign issuer assumes no obligations and the depositary's
transaction fees are paid directly by the ADR holders. In addition, less
information is available in the United States about an unsponsored ADR than
about a sponsored ADR.

ILLIQUID SECURITIES. The Funds each 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 each Trust's board of trustees.
The assets used as cover for OTC options written by each 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.

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

3
<PAGE>

insufficient number of qualified institutional buyers interested in purchasing
Rule 144A-eligible restricted securities held by the Funds, however, could
affect adversely the marketability of such portfolio securities and the Funds
might be unable to dispose of such securities promptly or at favorable prices.

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 corporations' capital structure but are usually subordinated
to comparable non-convertible securities.

4
<PAGE>

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.

REVERSE REPURCHASE AGREEMENTS. The Funds 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 net assets. Such agreements involve the sale of
securities held by a Fund subject to that 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 segregates assets to cover the Fund's
obligations under the reverse repurchase agreement. See "Investment Policies
and Restrictions--Segregated Accounts."

5
<PAGE>

Acceptable collateral is limited to cash, U.S. government securities and
irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. In determining whether to lend securities to a particular
broker-dealer or institutional investor, Mitchell Hutchins will consider, and
during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. Each Fund will
retain authority to terminate any loans at any time. Each Fund may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or money market
instruments held as collateral to the borrower or placing broker. Each Fund
will receive reasonable interest on the loan or a flat fee from the borrower
and amounts equivalent to any dividends, interest or other distributions on
the securities loaned. Each Fund will regain record ownership of loaned
securities to exercise beneficial rights, such as voting and subscription
rights and rights to dividends, interest or other distributions, when
regaining such rights is considered to be in the Fund's interest.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. Each Fund may purchase
securities on a "when-issued" basis or may purchase or sell securities for
"delayed delivery." In when-issued or delayed delivery transactions, delivery
of the securities occurs beyond normal settlement periods, but a Fund
generally would not pay for such securities or start earning interest or
dividends on them until they are delivered. However, when a Fund purchases
securities on a when-issued or delayed delivery basis, it immediately assumes
the risks of ownership, including the risk of price fluctuation. Failure by a
counter party to deliver a security purchased on a when-issued or delayed
delivery basis may result in a loss or missed opportunity to make an
alternative investment. Depending on market conditions, a Fund's when-issued
and delayed delivery purchase commitments could cause its net asset value per
share to be more volatile, because such securities may increase the amount by
which the Fund's total assets, including the value of when-issued and delayed
delivery securities held by the Fund, exceeds its net assets. The Funds do not
enter into when-issued or delayed delivery transactions in excess of 5% of a
Fund's net assets.

6
<PAGE>

INVESTMENT LIMITATIONS OF THE FUNDS

Each Fund will not:

7
<PAGE>

The following investment restrictions are not fundamental and may be changed
by each Trust's Board of Trustees without shareholder approval.

Each Fund will not:

(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.

(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 policy can
be changed only upon 30 days' advance notice to shareholders.

8
<PAGE>

(6) invest in real estate limited partnerships.

HEDGING STRATEGIES

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.

9
<PAGE>

10
<PAGE>

(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 that Fund's portfolio, and the price of that security increased
instead, the gain from that might be wholly or partially offset by a decline
in the price of the Hedging Instrument. Moreover, if the price of the Hedging
Instrument declined by more than the increase in the price of the security,
that Fund could suffer a loss. In either such case, the Fund would have been
in a better position had it not hedged at all.

11
<PAGE>

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

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.

12
<PAGE>

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.

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

(2) The aggregate value of underlying securities on which covered calls are
written will not exceed 50% of each Fund's total assets.

13
<PAGE>

14
<PAGE>

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

15
<PAGE>

TRUSTEES AND OFFICERS; PRINCIPAL SHAREHOLDERS

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

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
---------------------- ----------------------- --------------------
<S> <C> <C>
E. Garrett Bewkes, Trustee and Mr. Bewkes is a director of Paine
Jr.**; 69 Chairman of the Webber Group Inc. ("PW Group")
Board of Trustees (holding company 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 director of Inter-
state Bakeries Corporation and
NaPro Bio-Therapeutics, Inc. and a
director or trustee of 27 other in-
vestment companies for which Mitch-
ell Hutchins or PaineWebber serves
as investment adviser.
Margo N. Alexander**; 49 Trustee and President Mrs. Alexander is president, chief
executive officer and a director of
Mitchell Hutchins (since January
1995) and also is an executive vice
president and director of
PaineWebber. Mrs. Alexander is also
a director or trustee of 27 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
---------------------- ----------------------- --------------------
<S> <C> <C>
Richard Q. Armstrong; 60 Trustee Mr. Armstrong is chairman and prin-
78 West Brother Drive cipal RQA Enterprises (management
Greenwich, CT 068309 consulting firm) (since April 1991
and principal occupation since
March 1995). Mr. Armstrong is also
a director of Hi Lo Automotive,
Inc. He was chairman of the board,
chief executive officer and co-
owner of Adirondack Beverages (pro-
ducer and distributor of soft
drinks and sparkling/still waters)
(October 1993-March 1995). He was a
partner of the New England Consult-
ing Group (management consulting
firm) (December 1992-September
1993). He was managing director of
LVMH U.S. Corporation (U.S. subsid-
iary of the French luxury goods
conglomerate, Louis Vuitton
Moet Hennessey Corporation) (1987-
1991) and chairman of its wine and
spirits subsidiary, Schieffelin &
Somerset Company (1987-1991). Mr.
Armstrong also is a director or
trustee of 26 investment com-
panies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
Richard Burt; 49 Trustee Mr. Burt is chairman of Interna-
1101 Connecticut Avenue, tional Equity Partners (interna-
N.W. tional investments and consulting
Washington, D.C. 20036 firm) (since March 1994) and a
partner of McKinsey & Company (man-
agement consulting firm) (since
1991). He is also a director of
American Publishing Company. He was
the chief negotiator in the Strate-
gic Arms Reduction Talks with the
former Soviet Union (1989-1991) and
the U.S. Ambassador to the Federal
Republic of Germany (1985-1989).
Mr. Burt is a director or trustee
of 26 investment companies for
which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
---------------------- ----------------------- --------------------
<S> <C> <C>
Mary C. Farrell**; 46 Trustee Ms. Farrell is a managing director,
senior investment strategist, and
member of the Investment Policy
Committee of PaineWebber. Ms.
Farrell joined PaineWebber in 1982.
She is a member of Financial
Women's Association and Women's
Economic Roundtable and is employed
as a regular panelist on Wall
Street Week with Louis Rukeyser.
She also serves on the Board of
Overseers of New York University's
Stern School of Business. Ms.
Farrell is also a director or
trustee of 26 other investment com-
panies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
Meyer Feldberg; 54 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 Institute
of Technology. Dean Feldberg is
also a director of AMSCO Interna-
tional Inc., Federated Department
Stores, Inc., and New World Commu-
nications Group Incorporated and a
director or trustee of 26 other in-
vestment companies for which Mitch-
ell Hutchins or PaineWebber serves
as investment adviser.
George W. Gowen; 66 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 Fryer,
Ross & Gowen. Mr. Gowen is also a
director of Columbia Real Estate
Investments, Inc. and a director or
trustee of 26 other investment com-
panies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
</TABLE>
18
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ---------------------- ----------------------- --------------------
<S> <C> <C>
Frederic V. Malek; 59 Trustee Mr. Malek is chairman of Thayer Cap-
901 15th Street, N.W. ital Partners (investment bank) and
Suite 300 a co-chairman and director of CB
Washington, D.C. 20005 Commercial Group Inc. (real es-
tate). From January 1992 to Novem-
ber 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 Corporation (hotels,
restaurants, airline catering and
contract feeding), where he most
recently was an executive vice
president and president of Marriott
Hotels and Resorts. Mr. Malek is
also a director of American Manage-
ment Systems, Inc., Automatic Data
Processing, Inc., Avis, Inc., FPL
Group, Inc., National Education
Corporation, and Northwest Air-
lines, Inc. and a director or
trustee of 26 other investment com-
panies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
Carl W. Schafer; 60 Trustee Mr. Schafer is president of the At-
P.O. Box 1164 lantic Foundation (charitable foun-
Princeton, N.J. 08542 dation supporting mainly oceano-
graphic exploration and research).
He also is a director of Roadway
Express, Inc. (trucking), The
Guardian Group of Mutual Funds, Ev-
ans Systems, Inc. (a motor fuels,
convenience store and diversified
company), Hidden Lake Gold Mines
Ltd. (gold mining), Electronic
Clearing House, Inc. (financial
transactions processing), Wainoco
Oil Corporation and Nutraceutix
Inc. (biotechnology). Prior to Jan-
uary 1993, Mr. Schafer was chairman
of the Investment Advisory Commit-
tee of the Howard Hughes Medical
Institute. Mr Schafer also is a di-
rector or trustee of 26 other in-
vestment companies for which Mitch-
ell Hutchins or PaineWebber serves
as investment adviser.
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
---------------------- ----------------------- --------------------
<S> <C> <C>
John R. Torell III; 56 Trustee Mr. Torell is chairman of Torell
767 Fifth Avenue Management, Inc. (financial advi-
Suite 4605 sory firm), partner of Zilkha &
New York, New York 10153 Company (merchant banking and pri-
vate investment company) and chair-
man of Telesphere Corporation
(electronic provider of financial
information). He is the former
chairman and chief executive offi-
cer of Fortune Bancorp (1990-1991
and 1990-1994, respectively). He is
the former chairman, president and
chief executive officer of CalFed,
Inc. (savings association) (1988 to
1989) and former president of Manu-
facturers Hanover Corp. (bank)
(prior to 1988). Mr. Torell is also
a director of American Home Prod-
ucts Corp., Volt Information Sci-
ences Inc., and New Colt Inc. (ar-
mament manufacturer). Mr. Torell
also is a director or trustee of 26
other investment companies for
which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Teresa M. Boyle; 37 Vice President Ms. Boyle is a first vice president
and manager--advisory administra-
tion of Mitchell Hutchins. Prior to
November 1993, she was compliance
manager of Hyperion Capital Manage-
ment, Inc., an investment advisory
firm. Prior to April 1993, Ms.
Boyle was a vice president and man-
ager--legal administration of
Mitchell Hutchins. Ms. Boyle is
also a vice president of 27 other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
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 assistant secretary
of 22 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
NAME, ADDRESS* AND BUSINESS EXPERIENCE;
AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
------------------ ----------------------- --------------------
<S> <C> <C>
Ellen R. Harris; 49 Vice President Ms. Harris is a managing director
(Olympus Fund) and portfolio manager of Mitchell
Hutchins. Ms. Harris is also a vice
president of 2 other investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Thomas J. Libassi; 37 Vice President Mr. Libassi is a senior vice presi-
(Securities Fund) dent and portfolio manager of
Mitchell Hutchins. Prior to May
1994, he was a vice president of
Keystone Custodian Funds Inc. with
portfolio management responsibili-
ty. Mr. Libassi is also a vice
president of three other investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
C. William Maher; 34 Vice President and Mr. Maher is a first vice president
Assistant Treasurer and a senior manager of the mutual
fund finance division of Mitchell
Hutchins. Mr. Maher is also a vice
president and assistant treasurer
of 27 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Dennis McCauley; 49 Vice President Mr. McCauley is a managing director
(Securities Trust) and chief investment officer--fixed
income of Mitchell Hutchins. Prior
to December 1994, he was director
of fixed income investments of IBM
Corporation. Mr. McCauley is also a
vice president of 17 other invest-
ment 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 assistant
treasurer of 27 other investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
</TABLE>

21
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
---------------------- ----------------------- --------------------
<S> <C> <C>
Dianne E. O'Donnell; 43 Vice President and Ms. O'Donnell is a senior vice pres-
Secretary ident and deputy general counsel of
Mitchell Hutchins. Ms. O'Donnell is
also a vice president and secretary
of 27 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Victoria E. Schonfeld; Vice President Ms. Schonfeld is a managing director
45 and general counsel of Mitchell
Hutchins. From April 1990 to May
1994, she was a partner in the law
firm of Arnold & Porter. Ms. Schon-
feld is also a vice president of 27
other investment companies for
which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Paul H. Schubert; 33 Vice President and Mr. Schubert is a first vice presi-
Assistant Treasurer dent and a senior manager of the
mutual fund finance division of
Mitchell Hutchins. From August 1992
to August 1994, he was a vice pres-
ident at BlackRock Financial Man-
agement, Inc. Prior to August 1992,
he was an audit manager with Ernst
& Young LLP. Mr. Schubert is also a
vice president and assistant
treasurer of 29 other investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Nirmal Singh; 39 Vice President Mr. Singh is a first vice president
(Securities Trust) of Mitchell Hutchins. Prior to Sep-
tember 1993, he was a member of the
portfolio management team at Mer-
rill Lynch Asset Management, Inc.
Mr. Singh is also vice president of
four other investment companies for
which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

22
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
- ---------------------- ----------------------- --------------------
<S> <C> <C>
Julian F. Sluyters; 35 Vice President and Mr. Sluyters is a senior vice presi-
Treasurer dent 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 27
other investment companies for
which Mitchell Hutchins or Paine-
Webber serves as investment advis-
er.
Mark A. Tincher; 40 Vice President Mr. Tincher is a managing director
and chief investment officer--U.S.
equity investments of Mitchell
Hutchins. Prior to March 1995, he
was a vice president and directed
the U.S. funds management and eq-
uity research areas of Chase Man-
hattan Private Bank. Mr. Tincher is
also vice president of ten other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Gregory K. Todd; 39 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 27 other investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Craig M. Varrelman; 37 Vice President Mr. Varrelman is a first vice presi-
(Securities Trust) dent and a portfolio manager of
Mitchell Hutchins. Mr. Varrelman is
also vice president of three other
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Stuart Waugh; 40 Vice President Mr. Waugh is a first vice president
(Securities Trust) and a portfolio manager of Mitchell
Hutchins responsible for global
fixed income investments and cur-
rent trading. Mr. Waugh is also a
vice president of 4 other invest-
ment companies for which Mitchell
Hutchins serves as investment ad-
viser.
</TABLE>

23
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME, ADDRESS* AND AGE POSITION WITH THE TRUST OTHER DIRECTORSHIPS
----------------------- ----------------------- --------------------
<S> <C> <C>
Keith A. Weller; 34 Vice President and Mr. Weller is a first vice president
Assistant Secretary and associate general counsel of
Mitchell Hutchins. From September
1987 to March 1995, he was an at-
torney in private practice. Mr.
Weller is also a vice president and
assistant secretary of 21 other in-
vestment companies for which Mitch-
ell Hutchins or PaineWebber serves
as investment adviser.
</TABLE>
- --------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.

** Ms. Alexander, Mr. Bewkes and Ms. Farrell 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.

Trustees who are not "interested persons" receive $1,500 annually and $250
per meeting from PaineWebber America Fund (Growth and Income Fund) and $2,000
annually and $250 per meeting of the board or any committee thereof from
PaineWebber Olympus Fund (Growth 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, the Trusts require no employees. No officer,
director or employee of Mitchell Hutchins or PaineWebber presently receives
any compensation from any Trust for acting as a trustee or officer.

24
<PAGE>

COMPENSATION TABLE

<TABLE>
<CAPTION>
AGGREGATE TOTAL
COMPENSATION AGGREGATE COMPENSATION
FROM THE PW COMPENSATION FROM THE
AMERICA FUND FROM THE PW TRUST AND
(GROWTH AND OLYMPUS FUND THE FUND
INCOME (GROWTH COMPLEX PAID
NAME OF PERSON, POSITION FUND)(1) FUND)(1) TO TRUSTEES(2)(3)
- ------------------------ ------------ ------------ -----------------
<S> <C> <C> <C>
Meyer Feldberg,
Trustee............................ $3,750 $2,125 106,375
George W. Gowen,
Trustee............................ 3,750 2,125 99,750
Frederic V. Malek,
Trustee............................ 3,750 2,125 99,750
Judith Davidson Moyers,
Trustee............................ 3,750 2,125 98,500
</TABLE>
- --------
Only independent members of the board are compensated by the Trusts and
identified above; trustees who are "interested persons," as defined by the
1940 Act, do not receive compensation.

(1) Represents fees paid to each trustee during the fiscal year ended August
31, 1995.
(2) Represents total compensation paid to each trustee during the calendar
year ended December 31, 1995.
(3) No trust has a pension or retirement plan.

25
<PAGE>

INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS

26
<PAGE>

GROWTH AND INCOME FUND. Pursuant to the Advisory Contract dated March 1,
1989 between America Fund and Mitchell Hutchins, Growth and Income Fund pays
Mitchell Hutchins a fee at the annual rate of 0.70% of the Fund's average
daily net assets, computed daily and paid monthly. For the fiscal years ended
August 31, 1995, August 31, 1994 and August 31, 1993, Growth and Income Fund
paid (or accrued) to Mitchell Hutchins investment advisory and administration
fees of $3,378,079, $4,892,163 and $6,413,944, respectively. Pursuant to the
applicable service agreement, during the fiscal years ended August 31, 1995,
August 31, 1994 and August 31, 1993, Growth and Income Fund paid (or accrued)
to PaineWebber service fees of $219,613, $303,496 and $355,724.

27
<PAGE>

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 Y 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

28
<PAGE>

29
<PAGE>

VALUATION OF SHARES

PERFORMANCE INFORMATION

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

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

30
<PAGE>

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.

The following table shows performance information for the Class Y (formerly
Class C) shares of the Funds for the periods indicated. All returns for
periods of more than one year are expressed as an average return.

<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND GROWTH FUND
----------- -----------
CLASS Y CLASS Y
----------- -----------
<S> <C> <C>
Fiscal year ended August 31, 1995
Standardized Return*.................................. 18.66% 11.58%
Non-Standardized Return............................... 18.66% 11.58%
Five years ended August 31, 1995:
Standardized Return*.................................. NA NA
Non-Standardized Return............................... NA NA
Inception** to August 31, 1995:
Standardized Return*.................................. 5.37% 10.33%
Non-Standardized Return............................... 5.37% 10.33%
</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, the Funds may compare
their Standardized Return and/or their Non-Standardized Return with data
published by Lipper Analytical Services, Inc. ("Lipper"), CDA Investment
Technologies, Inc. ("CDA"), Wiesenberger Investment Companies Service
("Wiesenberger"), Investment Company Data, Inc. ("ICD") or Morningstar Mutual
Funds ("Morningstar"), with the performance of recognized stock and other
indices, including (but not limited to) the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"), the Dow Jones Industrial Average, the Nasdaq
Composite Index, the Russell 2000 Index, the Wilshire 5000 Index, the Lehman
Bond Index, 30-year and 10-year U.S. Treasury bonds, the Morgan Stanley
Capital International World Index and changes in the Consumer Price Index as
published by the U.S. Department of Commerce. The Funds also may refer in such
materials to mutual fund performance rankings and other data, such as
comparative asset, expense and fee levels, published by Lipper, CDA,
Wiesenberger, ICD or Morningstar. Performance Advertisements also may refer to
discussions of the Funds and comparative mutual fund data and ratings reported
in independent periodicals, including (but not limited to) THE WALL STREET
JOURNAL, MONEY Magazine, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S,
FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE
KIPLINGER LETTERS. Comparisons in Performance Advertisements may be in graphic
form.

31
<PAGE>

The Funds 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.

[GRAPHICS APPEAR HERE]

32
<PAGE>

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

33
<PAGE>

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 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.

34
<PAGE>

OTHER INFORMATION

PaineWebber America Fund and PaineWebber Olympus Fund are entities of the
type commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of the Funds could, under certain circumstances, be held
personally liable for the obligations of the Trusts or Funds. However, each
Declaration of Trust disclaims shareholder liability for acts or obligations
of the Trusts or the 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 any Trust or Fund, the trustees or any of them in connection with a Trust.
Each Declaration of Trust provides for indemnification from a Fund's property
for all losses and expenses of any shareholder held personally liable for the
obligations of that 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 that 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 Funds.

FINANCIAL STATEMENTS

35
<PAGE>

APPENDIX

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

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

36
<PAGE>

37
<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.

----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Restrictions....................................... 1
Hedging Strategies......................................................... 9
Trustees and Officers; Principal Shareholders.............................. 16
Investment Advisory and Distribution Arrangements.......................... 26
Portfolio Transactions..................................................... 28
Valuation of Shares........................................................ 30
Performance Information.................................................... 30
Taxes...................................................................... 33
Other Information.......................................................... 35
Financial Statements....................................................... 35
Appendix................................................................... 36
</TABLE>

PaineWebber
Growth Fund

Class Y Shares

- --------------------------------------------------------------------------------
Statement of Additional Information
April 30, 1996

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

[LOGO OF PAINEWEBBER APPEARS HERE]
<PAGE>

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

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

(a) Financial Statements (filed herewith)

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 November 7, 1995,
Accession No. 0000950130-95-002314:

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

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

C-1
<PAGE>

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 23,
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 16/

(j) Amendment effective November 10, 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 C shares 17/
--
(d) Distribution Contract with respect to Class Y shares 17/
--
(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 C shares 17/
--
(h) Exclusive Dealer Agreement with respect to Class Y shares 17/
--

(7) Bonus, profit sharing or pension plans - none

C-2
<PAGE>

(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/
-
(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 (filed herewith)

(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/
--
(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 (filed herewith)
(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.

C-3
<PAGE>

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.

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 November 10, 1995, and from
Articles II, VII and X of Registrant's By-Laws, as amended March 19, 1991
and September 28, 1994.

16/ Incorporated by reference from Post-Effective Amendment
- -- No. 35 to the registration statement, SEC File No. 2-78626,
filed September 8, 1995.

17/ Incorporated by reference from Post-Effective Amendment No. 38 to the
- -- registration statement, SEC File No. 2-78626, filed November 15, 1995.

C-4
<PAGE>

Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
None.

Item 26. Number of Holders of Securities
-------------------------------

Number of Record
Shareholders as of
Title of Class February 9, 1996
- -------------- ------------------
<S> <C>
Shares of Beneficial Interest,
par value $0.001 per share
- -----------------------------
PaineWebber Growth and Income
Fund

Class A shares 22,777
Class B shares 25,100
Class C shares 3,784
Class Y shares 200

</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 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

C-5
<PAGE>

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

C-6
<PAGE>

made in reliance upon and in conformity with information furnished by Mitchell
Hutchins to the Trust for use in the Registration Statement; and provided that
this indemnity agreement shall not protect any such persons against liabilities
arising by reason of their bad faith, gross negligence or willful misfeasance;
and shall not inure to the benefit of any such persons unless a court of
competent jurisdiction or controlling precedent determines that such result is
not against public policy as expressed in the Securities Act of 1933. Section 9
of each Distribution Contract also provides that Mitchell Hutchins agrees to
indemnify, defend and hold the Trust, its officers and Trustees free and
harmless of any claims arising out of any alleged untrue statement or any
alleged omission of material fact contained in information furnished by Mitchell
Hutchins for use in the Registration Statement or arising out of an agreement
between Mitchell Hutchins and any retail dealer, or arising out of supplementary
literature or advertising used by Mitchell Hutchins in connection with the
Contract.

Section 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

C-7
<PAGE>

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

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

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

ALL-AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
GLOBAL SMALL CAP FUND INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
MANAGED HIGH YIELD FUND INC.
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER INVESTMENT TRUST III
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
PAINEWEBBER SERIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
TRIPLE A AND GOVERNMENT SERIES - 1997, INC.
2002 TARGET TERM TRUST INC.

b) Mitchell Hutchins is the Registrant's principal underwriter.
PaineWebber acts as exclusive dealer of the Registrant's shares. The directors
and officers of Mitchell Hutchins, their principal business addresses, and their
positions and offices with Mitchell Hutchins are identified in its Form ADV,
as filed with the Securities and Exchange Commission (registration number
801-13219). The directors and officers of PaineWebber, their principal business
addresses, and their positions and offices with PaineWebber are identified in
its Form ADV, as filed with the

C-8
<PAGE>

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:

Position and
Name and Offices With
Principal Business Position With Underwriter or
Address Registrant Exclusive Dealer
- ------------------ ------------- ----------------
<S> <C> <C>
Margo N. Alexander President President, Chief
1285 Avenue of the Americas Executive Officer
New York, New York 10019 and Director of
Mitchell Hutchins;
Executive Vice
President and
Director of
PaineWebber

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

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

Mary C. Farrell Trustee Managing Director,
1285 Avenue of the Americas Senior Investment
New York, New York 10019 Strategist and Member
of the Investment
Policy Committee of
PaineWebber

C. William Maher Vice President and First Vice
1285 Avenue of the Americas Assistant President and
New York, New York 10019 Treasurer Senior Manager of
the Mutual Fund
Finance Division
of Mitchell
Hutchins

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

</TABLE>

C-9
<PAGE>

<TABLE>

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

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

Paul H. Schubert Vice President First Vice
1285 Avenue of the Americas and Assistant President and
New York, New York 10019 Treasurer Senior Manager of
the Mutual Fund
Finance Division
of Mitchell
Hutchins

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

Mark A. Tincher Vice President Managing Director
1285 Avenue of the Americas and Chief
New York, New York 10019 Investment
Officer--U.S.
Equity Investments
of Mitchell
Hutchins

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

Keith A. Weller Vice President First Vice
1285 Avenue of the Americas and Assistant President and
New York, New York 10019 Secretary Associate General
Counsel of
Mitchell Hutchins

</TABLE>

C-10
<PAGE>

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 has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and State of
New York, on the 25th day of April, 1996.

PaineWebber America Fund

By: /s/ Dianne E. O'Donnell
------------------------------------
Dianne E. O'Donnell
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated:

Signature Title Date
- --------- ----- ----
<S> <C> <C>

/s/ Margo N. Alexander President and Trustee April 25, 1996
- -------------------------- (Chief Executive Officer)
Margo N. Alexander*, **

/s/ E. Garrett Bewkes, Jr. Trustee and Chairman April 25, 1996
- -------------------------- of the Board of Trustees
E. Garrett Bewkes, Jr.***

/s/ Richard Q. Armstrong Trustee April 25, 1996
- --------------------------
Richard Q. Armstrong**

/s/ Richard Burt Trustee April 25, 1996
- --------------------------
Richard Burt**

/s/ Mary C. Farrell Trustee April 25, 1996
- --------------------------
Mary C. Farrell**

/s/ Meyer Feldberg Trustee April 25, 1996
- --------------------------
Meyer Feldberg**

/s/ George W. Gowen Trustee April 25, 1996
- --------------------------
George W. Gowen****

/s/ Frederic V. Malek Trustee April 25, 1996
- --------------------------
Frederic V. Malek**

/s/ Carl W. Schafer Trustee April 25, 1996
- --------------------------
Carl W. Schafer**

/s/ John R. Torell III Trustee April 25, 1996
- --------------------------
John R. Torell III**

/s/ Julian F. Sluyters Vice President and Treasurer April 25, 1996
- -------------------------- (Chief Financial and
Julian F. Sluyters Accounting Officer)

</TABLE>

<PAGE>

* 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
April 18, 1996 and incorporated by reference from Post-Effective Amendment
No. 17 to the registration statement of PaineWebber Municipal Series, SEC
File No. 33-11611, filed April 25, 1996.

*** 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 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.

<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 16/
--
(j) Amendment effective November 10, 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 C shares 17/
--
(d) Distribution Contract with respect to Class Y shares 17/
--
(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 C shares 17/
--
(h) Exclusive Dealer Agreement with respect to Class Y shares 17/
--
(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 C shares 11/
--
(c) 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 (filed herewith)
(12) Financial statements omitted from prospectus-none

(13) Letter of investment intent 3/
-
(14) Prototype Retirement Plan 10/
--

<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 (filed herewith)
(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.

<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, April 3, 1995, and November 10, 1995, from Articles II,
VII and X of Registrant's By-Laws, as amended March 19, 1991 and
September 28, 1994.

16/ Incorporated by reference from Post-Effective Amendment No. 35 to the
- --
registration statement, SEC File No. 2-78626, filed September 8, 1995.

17/ Incorporated by reference from Post-Effective Amendment No. 31 to the
- --
registration statement, SEC File No. 2-78626, filed November 15, 1995.

<PAGE>
Exhibit 1(j)

PAINEWEBBER AMERICA FUND

CERTIFICATE OF VICE PRESIDENT AND SECRETARY

I, Dianne E. O'Donnell, Vice President and Secretary of PaineWebber America
Fund ("Trust"), hereby certify that the board of trustees of the Trust adopted
the following resolutions which became effective on November 10, 1995;

RESOLVED, that the unlimited number of shares of beneficial interest
previously known as the "Class D shares" of PaineWebber Growth and Income Fund
be renamed the "Class C" shares of that Fund; and be it further

RESOLVED, that the unlimited number of shares of beneficial interest
previously known as the "Class C shares" of PaineWebber Growth and Income Fund
be renamed the "Class Y" shares of that Fund.

Dated: December 15, 1995 By: /s/ Dianne E. O'Donnell
---------------------------
Dianne E. O'Donnell
Vice President and Secretary
PaineWebber America Fund

New York, New York (ss)

Subscribed and sworn to before me this 15th day of December, 1995.

/s/ Karyn Freeman
- -----------------------
Notary Public

<PAGE>

Exhibit 11

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information and to the incorporation by reference of our report for the
PaineWebber Growth and Income Fund dated October 23, 1995, in this Registration
Statement (Form N-1A No. 2-78626) of PaineWebber America Fund.

/s/ Ernst & Young LLP

ERNST & YOUNG LLP

New York, New York
April 25, 1996

<PAGE>
Exhibit 18

PAINEWEBBER AMERICA FUND
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3

PaineWebber America Fund hereby adopts this amended and restated Multiple
Class Plan pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended ("1940 Act") on behalf of its current operating series, PaineWebber
Growth and Income Fund, and any series that may be established in the future
(referred to hereinafter collectively as the "Funds" and individually as a
"Fund").

A. GENERAL DESCRIPTION OF CLASSES THAT ARE OFFERED:
-----------------------------------------------

1. Class A Shares. Class A shares of each Fund are sold to the general
public subject to an initial sales charge. The initial sales charge for each
Fund is waived for certain eligible purchasers and reduced or waived for certain
large volume purchases.

The maximum sales charge is 4% of the public offering price for Class A
shares of a Fund that invests primarily in debt securities.

The maximum sales charge is 4.5% of the public offering price for Class A
shares of a Fund that invests primarily in equity securities or a combination of
equity and debt securities.

Class A shares of each Fund are subject to an annual service fee of .25% of
the average daily net assets of the Class A shares of each Fund paid pursuant to
a plan of distribution adopted pursuant to Rule 12b-1 under the 1940 Act.

Class A shares of each Fund will be subject to a contingent deferred sales
charge ("CDSC") on redemptions of shares (i) purchased without an initial sales
charge due to a sales charge waiver for purchases of $1 million or more and (ii)
held less than one year. The Class A CDSC is equal to 1% of the lower of: (i)
the net asset value of the shares at the time of purchase or (ii) the net asset
value of the shares at the time of redemption. Class A shares of each Fund held
one year or longer and Class A shares of each Fund acquired through reinvestment
of dividends or capital gains distributions on shares otherwise subject to a
Class A CDSC are not subject to the CDSC. The CDSC for Class A shares of each
Fund shall not apply to shares purchased prior to November 10, 1995 and will be
waived under certain circumstances.
<PAGE>

PaineWebber America Fund
Multiple Class Plan
Page 2

2. Class B Shares. Class B shares of each Fund are sold to the general
public subject to a CDSC, but without imposition of an initial sales charge.

The maximum CDSC for Class B shares of each Fund is equal to 5% of the
lower of: (i) the net asset value of the shares at the time of purchase or (ii)
the net asset value of the shares at the time of redemption.

Class B shares of each Fund held six years or longer and Class B shares of
each Fund acquired through reinvestment of dividends or capital gains
distributions are not subject to the CDSC.

Class B shares of each Fund are subject to an annual service fee of .25% of
average daily net assets and a distribution fee of .75% of average daily net
assets of the Class B shares of each Fund, each paid pursuant to a plan of
distribution adopted pursuant to Rule 12b-1 under the 1940 Act.

Class B shares of each Fund convert to Class A shares approximately six
years after issuance at relative net asset value.

3. Class C Shares. Class C shares of each Fund are sold to the general
public without imposition of a sales charge.

Class C shares of a Fund that invests primarily in equity securities or a
combination of equity and debt securities are subject to an annual service fee
of .25% of average daily net assets and a distribution fee of .75% of average
daily net assets of Class C shares of such Fund, each pursuant to a plan of
distribution adopted pursuant to Rule 12b-1 under the 1940 Act.

Class C shares of a Fund that invests primarily in debt securities are
subject to an annual service fee of .25% of average daily net assets and a
distribution fee of .50% of average daily net assets of Class C shares of such
Fund, each pursuant to a plan of distribution adopted pursuant to Rule 12b-1
under the 1940 Act.

Class C shares of a Fund that invests primarily in debt securities will be
subject to a CDSC on redemptions of Class C shares held less than one year equal
to .75% of the lower of: (i) the net asset value of the shares at the time of
purchase or (ii) the net asset value of the shares at the time of redemption;
provided that such CDSC shall not apply to Class C shares purchased prior to
November 10, 1995.
<PAGE>

PaineWebber America Fund
Multiple Class Plan
Page 3

Class C shares of a Fund that invests primarily in equity securities or in
a combination of equity and debt securities will be subject to a CDSC on
redemptions of Class C shares held less than one year equal to 1% of the lower
of: (i) the net asset value of the shares at the time of purchase or (ii) the
net asset value of the shares at the time of redemption; provided that such CDSC
shall not apply to Class C shares purchased prior to November 10, 1995.

Class C shares of each Fund held one year or longer and Class C shares of
each Fund acquired through reinvestment of dividends or capital gains
distributions are not subject to the CDSC. The CDSC for Class C shares of each
Fund will be waived under certain circumstances.

4. Class Y Shares. Class Y shares are sold without imposition of an
initial sales charge or CDSC and are not subject to any service or distribution
fees.

Class Y shares of each Fund are available for purchase only by: (i)
employee benefit and retirement plans, other than individual retirement accounts
and self-employed retirement plans, of Paine Webber Group Inc. and its
affiliates; (ii) certain unit investment trusts sponsored by PaineWebber
Incorporated; (iii) participants in certain wrap fee investment programs that
are currently or in the future sponsored by PaineWebber Incorporated and that
may invest in PaineWebber proprietary funds, provided that shares are purchased
through or in connection with those programs; and (iv) the holders of Class Y
shares of any Mitchell Hutchins/Kidder Peabody ("MH/KP") mutual fund provided
that such shares are issued in connection with the reorganization of a MH/KP
mutual fund into that Fund.

B. EXPENSE ALLOCATIONS OF EACH CLASS:
---------------------------------

Certain expenses may be attributable to a particular Class of shares of
each Fund ("Class Expenses"). Class Expenses are charged directly to the net
assets of the particular Class and, thus, are borne on a pro rata basis by the
outstanding shares of that Class.

In addition to the distribution and service fees described above, each
Class may also pay a different amount of the following other expenses:

(1) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses,
and proxies to current shareholders of a specific Class;

(2) Blue Sky registration fees incurred by a specific Class of
shares;

(3) SEC registration fees incurred by a specific Class of shares;
<PAGE>

PaineWebber America Fund
Multiple Class Plan
Page 4

(4) expenses of administrative personnel and services required to
support the shareholders of a specific Class of shares;

(5) Trustees' fees incurred as a result of issues relating to a
specific Class of shares;

(6) litigation expenses or other legal expenses relating to a
specific Class of shares; and

(7) transfer agent fees identified as being attributable to a
specific Class.

C. EXCHANGE PRIVILEGES:
-------------------

Class A, Class B and Class C shares of each Fund may be exchanged for
shares of the corresponding Class of other PaineWebber mutual funds and MH/KP
mutual funds, or may be acquired through an exchange of shares of the
corresponding Class of those funds. Class Y shares of the Funds are not
exchangeable.

These exchange privileges may be modified or terminated by a Fund, and
exchanges may only be made into funds that are legally registered for sale in
the investor's state of residence.

D. CLASS DESIGNATION:
-----------------

Subject to approval by the Board of Trustees of PaineWebber America Fund, a
Fund may alter the nomenclature for the designations of one or more of its
classes of shares.

E. ADDITIONAL INFORMATION:
----------------------

This Multiple Class Plan is qualified by and subject to the terms of the
then current prospectus for the applicable Classes; provided, however, that none
of the terms set forth in any such prospectus shall be inconsistent with the
terms of the Classes contained in this Plan. The prospectus for each Fund
contains additional information about the Classes and each Fund's multiple class
structure.
<PAGE>

PaineWebber America Fund
Muliple Class Plan
Page 5

F. DATE OF EFFECTIVENESS:
---------------------

This Multiple Class Plan is effective as of the date hereof, provided that
this Plan shall not become effective with respect to any Fund unless such action
has first been approved by the vote of a majority of the Board and by vote of a
majority of those trustees of the Fund who are not interested persons of
PaineWebber America Fund.

February 29, 1996

<PAGE>

<ARTICLE> 6
<CIK> 0000703887
<NAME> PAINEWEBBER AMERICA FUND
<SERIES>
<NUMBER> 1
<NAME> GROWTH & INCOME FUND CLASS A
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
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</TABLE>

<PAGE>

<ARTICLE> 6
<CIK> 0000703887
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<NAME> GROWTH & INCOME FUND CLASS B
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<S> <C>
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</TABLE>

<PAGE>

<ARTICLE> 6
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<NAME> PAINEWEBBER AMERICA FUND
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<S> <C>
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</TABLE>

<PAGE>

<ARTICLE> 6
<CIK> 0000703887
<NAME> PAINEWEBBER AMERICA FUND
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<NAME> GROWTH & INCOME FUND CLASS D
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<S> <C>
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</TABLE>