PAINEWEBBER AMERICA FUND /NY/, 497, 1996-05-22

PAINEWEBBER AMERICA FUND /NY/
497, 1996-05-22

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PaineWebber Growth and Income Fund
PaineWebber Growth Fund
PaineWebber Small Cap Value Fund
1285 Avenue of the Americas, New York, New York 10019
Prospectus -- May 1, 1996
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PaineWebber Stock Funds are designed for investors generally seeking capital
appreciation by investing principally in equity securities. PaineWebber Growth
and Income Fund seeks to provide both capital growth and current income by in-
vesting in dividend-paying equity securities believed to have potential for
rapid earnings growth. PaineWebber Growth Fund seeks long-term capital appreci-
ation by investing in equity securities of companies with substantial potential
for capital growth. PaineWebber Small Cap Value Fund seeks long-term capital
appreciation by investing primarily in equity securities of small capitaliza-
tion companies.

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

A Statement of Additional Information dated May 1, 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 in-
vestment executive, PaineWebber's correspondent firms or by calling toll-free
1-800-647-1568.
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THE PAINEWEBBER FAMILY OF MUTUAL FUNDS

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

. Asset Allocation Funds for long-term growth and
. Money Market Fund for income by investing in stocks and bonds.
income and stability by
investing in high-
quality, short-term
investments.

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

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

A complete listing of the PaineWebber Family of Mutual Funds is found on the
back cover of this prospectus.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTA-
TIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY
THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS OR THEIR DISTRIBUTOR.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR THEIR DISTRIBU-
TOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY
SUCH COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

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Prospectus Page 1

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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

Table of Contents
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<TABLE>
<CAPTION>
Page
----
<S> <C>
The Funds at a Glance...................................................... 3
Expense Table.............................................................. 6
Financial Highlights....................................................... 8
Investment Objective and Policies.......................................... 18
Investment Philosophy & Process............................................ 18
Performance................................................................ 20
The Funds' Investments..................................................... 23
Flexible Pricing SM........................................................ 25
How to Buy Shares.......................................................... 28
How to Sell Shares......................................................... 29
Other Services............................................................. 29
Management................................................................. 30
Determining the Shares' Net Asset Value.................................... 32
Dividends & Taxes.......................................................... 32
General Information........................................................ 33
</TABLE>

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Prospectus Page 2

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

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, but 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 involves more risk than investing in the securities of U.S.
companies. The Fund may also invest up to 10% of its total 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; the 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, but 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 involves more risk than investing in the securities of U.S.
companies. The Fund may also invest up to 10% of its total net assets in high
yield, high risk bonds and convertible securities, which are considered
predominantly speculative and 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; the 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
equity securities of small capitalization ("small cap") companies.

INVESTMENT OBJECTIVE: Long-term capital appreciation.

RISKS: Equity securities historically have shown greater growth potential than
other types of securities, but they have also shown greater volatility.
Because the Fund invests primarily in equity securities, its price will rise
and fall. The Fund may invest in U.S. dollar-denominated securities of foreign
companies, which involves 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 also
invest up to 10% of its total assets in high yield, high risk convertible
bonds, which are 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; the investment is not guaranteed.

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Prospectus Page 3

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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund
The Funds at a Glance
(Continued)
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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 Growth Fund, Growth and Income Fund
and 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

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. 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, 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, 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.

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. Growth Fund
invests in equity securities of both larger growth companies and smaller
issuers with greater appreciation potential. In addition, Growth Fund can
invest 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, 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.

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 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. In addition,
Small Cap Value 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, Small Cap Value Fund
is designed for investors who are able to bear the risks and fluctuations
associated with investment in smaller companies.

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. As a result, 100% of their purchase is
immediately invested. However, Class B shares have higher ongoing expenses
than Class A shares. Depending upon how long they own the shares, investors
may have to pay a sales charge when they sell Class B shares. This is

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Prospectus Page 4
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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund
The Funds at a Glance
(Continued)
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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. As a result, 100% of their purchase is
immediately invested. However, Class C shares have higher ongoing expenses than
Class A shares. A contingent deferred sales charge of 1% is charged on shares
sold within one year of the purchase date. Class C shares never convert to any
other Class of shares.

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Prospectus Page 5

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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund
Expense Table
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The following tables are intended to assist investors in understanding the
expenses associated with investing in Class A, B and C shares of the Funds.
Expenses shown below represent those incurred for the most recent fiscal year.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHAREHOLDER TRANSACTION EXPENSES ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge on Purchases of Shares (as a % of
offering price)...................................... 4.50% None None
Sales Charge on Reinvested Dividends (as a % of
offering price)...................................... None None None
Maximum Contingent Deferred Sales Charge (as a % of
net asset value at the time of purchase or sale,
whichever is less)................................... None 5% 1%
Exchange Fee.......................................... $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(A)
Management Fees....................................... 0.75% 0.75% 0.75%
12b-1 Fees............................................ 0.23 1.00 1.00
Other Expenses........................................ 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>
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(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.

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

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

CLASS C SHARES: If shares are sold within one year after purchase, a
contingent deferred sales charge of 1% of the net asset value of the
shares at the time of purchase or sale, whichever is less, is imposed.
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12b-1 distribution fees are asset-based sales charges. Long-term Class B and
Class C shareholders may pay more in direct and indirect sales charges
(including 12b-1 distribution fees) than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc. 12b-1 fees have two components, as follows:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
GROWTH FUND/GROWTH AND INCOME FUND
12b-1 service fees...................................... 0.23% 0.25% 0.25%
12b-1 distribution fees................................. 0.00 0.75 0.75
SMALL CAP VALUE
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 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.
For more information, see "Management" and "Flexible Pricing SM."

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Prospectus Page 6

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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund
Expense Table
(Continued)
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EXAMPLES OF EFFECT OF FUND EXPENSES

The following examples should assist investors in understanding various costs
and expenses incurred as shareholders of a Fund. The assumed 5% annual return
shown in the examples is required by regulations of the Securities and
Exchange Commission ("SEC") applicable to all mutual funds. THESE EXAMPLES
SHOULD NOT BE CONSIDERED 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 $ 82 $109 $186
Class B (Assuming sale of all shares at end of
period)....................................... $70 $ 93 $128 $194
Class B (Assuming no sale of shares)........... $20 $ 63 $108 $194
Class C (Assuming sale of all shares at end of
period)....................................... $30 $ 62 $107 $232
Class C (Assuming no sale of shares)........... $20 $ 62 $107 $232
<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>

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ASSUMPTIONS MADE IN THE EXAMPLES

. ALL CLASSES: Reinvestment of all dividends and distributions;
percentage amounts listed under "Annual Fund Operating Expenses"
remain the same for years shown.
. 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 7

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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

Financial Highlights
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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 shown. This information is
supplemented by the financial statements and accompanying notes appearing in
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 in the following
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 by calling 1-800-647-1568. Information
shown below for periods prior to the year ended August 31, 1991 has also been
audited by Ernst & Young LLP, whose reports thereon were unqualified.

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
-----------------------------------------------------------------------------
CLASS A
-----------------------------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- ------- ------- -------
<S> <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
-------- -------- -------- -------- -------- ------- ------- -------
Net investment income... 0.24 0.28 0.28 0.24 0.19 0.51 0.49 0.60
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)
-------- -------- -------- -------- -------- ------- ------- -------
Total increase/decrease
from investment
operations............. 3.42 (0.13) 0.65 1.49 3.69 (0.10) 3.66 (1.76)
-------- -------- -------- -------- -------- ------- ------- -------
Dividends from net
investment income...... (0.12) (0.27) (0.27) (0.27) (0.30) (0.53) (0.48) (0.88)
Distributions from
realized gains on
investments............ (1.21) (0.03) -- -- -- -- -- (2.10)
-------- -------- -------- -------- -------- ------- ------- -------
Total dividends and
distributions.......... (1.33) (0.30) (0.27) (0.27) (0.30) (0.53) (0.48) (2.98)
-------- -------- -------- -------- -------- ------- ------- -------
Net asset value, end of
period................. $ 22.52 $ 20.43 $ 20.86 $ 20.48 $ 19.26 $ 15.87 $ 16.50 $ 13.32
======== ======== ======== ======== ======== ======= ======= =======
Total investment
return(1).............. 18.30% (0.58)% 3.15% 7.78% 23.62% (0.72)% 28.03% (10.73)%
======== ======== ======== ======== ======== ======= ======= =======
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
Expenses to average net
assets**............... 1.19% 1.20% 1.13% 1.22% 1.42% 1.41% 1.41% 1.26%
Net investment income to
average net assets**... 1.07% 1.29% 1.33% 1.26% 1.79% 3.11% 3.26% 4.24%
Portfolio turnover...... 111.27% 94.32% 36.52% 15.57% 52.00% 32.10% 79.08% 88.95%
</TABLE>
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* Annualized.
** 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.
+ 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
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 in-
cluded. Total return information for periods less than one year is not
annualized.
(2) Formerly Class D shares.

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Prospectus Page 8
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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund
Financial Highlights
(Continued)
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<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C(2)
- ----------------- --------------------------------------------------- --------------------------------------
FOR THE FOR THE
PERIOD PERIOD
JULY 1, FOR THE YEARS ENDED JULY 2,
FOR THE YEARS ENDED AUGUST 31, 1991+ TO AUGUST 31, 1992+ TO
- ---------------------------------------------------------- AUGUST 31, -------------------------- AUGUST 31,
1987 1986 1995 1994 1993 1992 1991 1995 1994 1993 1992
- -------- ------- -------- -------- -------- -------- ---------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 17.41 $ 14.18 $ 20.37 $ 20.78 $ 20.41 $ 19.23 $ 18.04 $ 20.42 $ 20.83 $ 20.47 $ 20.95
- -------- ------- -------- -------- -------- -------- ------- ------- ------- ------- -------
0.68 0.85 0.06 0.10 0.12 0.13 0.02 0.06 0.11 0.11 0.02
1.79 3.36 3.18 (0.37) 0.36 1.20 1.17 3.19 (0.38) 0.37 (0.44)
- -------- ------- -------- -------- -------- -------- ------- ------- ------- ------- -------
2.47 4.21 3.24 (0.27) 0.48 1.33 1.19 3.25 (0.27) 0.48 (0.42)
- -------- ------- -------- -------- -------- -------- ------- ------- ------- ------- -------
(0.76) (0.61) (0.03) (0.11) (0.11) (0.15) -- (0.03) (0.11) (0.12) (0.06)
(1.06) (0.37) (1.21) (0.03) -- -- -- (1.21) (0.03) -- --
- -------- ------- -------- -------- -------- -------- ------- ------- ------- ------- -------
(1.82) (0.98) (1.24) (0.14) (0.11) (0.15) -- (1.24) (0.14) (0.12) (0.06)
- -------- ------- -------- -------- -------- -------- ------- ------- ------- ------- -------
$ 18.06 $ 17.41 $ 22.37 $ 20.37 $ 20.78 $ 20.41 $ 19.23 $ 22.43 $ 20.42 $ 20.83 $ 20.47
======== ======= ======== ======== ======== ======== ======= ======= ======= ======= =======
16.25% 31.05% 17.38% (1.31)% 2.34% 6.99% 6.60% 17.37% (1.29)% 2.35% 2.85%
======== ======= ======== ======== ======== ======== ======= ======= ======= ======= =======
$107,778 $98,226 $247,543 $289,290 $461,389 $386,275 $57,539 $30,468 $37,287 $61,869 $13,019
1.15% 1.15% 1.97% 1.97% 1.90% 1.97% 2.10%* 1.98% 1.94% 1.87% 1.73%*
4.14% 5.32% 0.29% 0.51% 0.57% 4.90% 1.18%* 0.28% 0.54% 0.61% 0.94%*
131.70% 83.48% 111.27% 94.32% 36.52% 15.57% 52.00% 111.27% 94.32% 36.52% 15.57%
</TABLE>

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Prospectus Page 9

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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

[INTENTIONALLY LEFT BLANK]

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Prospectus Page 10
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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund
Financial Highlights
(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 shown. This information is
supplemented by the financial statements and accompanying notes appearing in
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 in the following 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 by calling 1-800-647-1568. Information shown below for periods
prior to the year ended August 31, 1991 has also been audited by Ernst & Young
LLP, whose reports thereon were unqualified.

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

- -------------------------------------------------------------------------------
-------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund
Financial Highlights
(Continued)
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GROWTH FUND
-------------------------------------------------------------------------------
CLASS A
-------------------------------------------------------------------------------

FOR THE YEARS ENDED AUGUST 31,
-------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- ------- ------- ------- -------
<S> <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
-------- -------- -------- -------- ------- ------- ------- -------
Net investment income
(loss)................. 0.01 -- 0.07 -- 0.02 0.17 0.06 0.13
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)
-------- -------- -------- -------- ------- ------- ------- -------
Net increase/decrease
from investment
operations............. 2.26 0.51 4.44 (0.11) 4.70 (0.99) 4.46 (2.60)
-------- -------- -------- -------- ------- ------- ------- -------
Dividends from net
investment income...... -- -- -- (0.01) (0.17) -- (0.10) (0.08)
Distributions from
realized gains on
investments............ (0.03) (1.07) (0.62) (0.60) (0.46) (1.15) -- (1.41)
-------- -------- -------- -------- ------- ------- ------- -------
Total dividends and
other distributions.... (0.03) (1.07) (0.62) (0.61) (0.63) (1.15) (0.10) (1.49)
-------- -------- -------- -------- ------- ------- ------- -------
Net asset value, end of
period................. $ 22.27 $ 20.04 $ 20.60 $ 16.78 $ 17.50 $ 13.43 $ 15.57 $ 11.21
======== ======== ======== ======== ======= ======= ======= =======
Total investment
return(1).............. 11.28% 2.33% 26.97% (0.85)% 37.02% (7.05)% 40.10% (15.37)%
======== ======== ======== ======== ======= ======= ======= =======
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
Expenses to average net
assets**............... 1.28%(3) 1.21% 1.22% 1.43% 1.56% 1.59% 1.37% 1.22%
Net investment income
(loss) to average net
assets**............... 0.19%(3) 0.06% 0.38% 0.00% 0.10% 2.96% 0.14% 0.82%
Portfolio turnover...... 36.10% 24.41% 35.81% 32.49% 28.59% 39.16% 43.68% 59.07%
</TABLE>
- -------
* Annualized.
** 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 (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
presented 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
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 in-
cluded. Total return information for periods less than one year is not
annualized.
(2) Formerly Class D shares.
(3) These ratios include non-recurring reorganization expenses of 0.06%.

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

- --------------------------------------------------------------------------------
-------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund
Financial Highlights
(Continued)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GROWTH FUND
- -----------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C(2)
- ------------------ ------------------------------------------------------ -------------------------------------------
FOR THE FOR THE
PERIOD PERIOD
JULY 1, FOR THE YEARS ENDED JULY 2,
FOR THE YEARS ENDED AUGUST 31, 1991+ TO AUGUST 31, 1992+ TO
- ------------------------------------------------------------- AUGUST 31, ------------------------------ AUGUST 31,
1987 1986 1995 1994 1993 1992 1991 1995 1994 1993 1992
- -------- -------- -------- ------- ------- ------- ---------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 12.52 $ 9.70 $ 19.53 $ 20.25 $ 16.64 $ 17.48 $15.63 $ 19.67 $ 20.38 $ 16.75 $17.04
- -------- -------- -------- ------- ------- ------- ------ ------- ------- ------- ------
0.03 0.16 (0.02) (0.06) (0.05) (0.06) (0.02) (0.10) (0.08) (0.06) (0.01)
3.26 2.79 2.05 0.41 4.28 (0.18) 1.87 2.14 0.44 4.31 (0.28)
- -------- -------- -------- ------- ------- ------- ------ ------- ------- ------- ------
3.29 2.95 2.03 0.35 4.23 (0.24) 1.85 2.04 0.36 4.25 (0.29)
- -------- -------- -------- ------- ------- ------- ------ ------- ------- ------- ------
(0.20) (0.13) -- -- -- -- -- -- -- -- --
(0.31) -- (0.03) (1.07) (0.62) (0.60) -- (0.03) (1.07) (0.62) --
- -------- -------- -------- ------- ------- ------- ------ ------- ------- ------- ------
(0.51) (0.13) (0.03) (1.07) (0.62) (0.60) -- (0.03) (1.07) (0.62) --
- -------- -------- -------- ------- ------- ------- ------ ------- ------- ------- ------
$ 15.30 $ 12.52 $ 21.53 $ 19.53 $ 20.25 $ 16.64 $17.48 $ 21.68 $ 19.67 $ 20.38 $16.75
======== ======== ======== ======= ======= ======= ====== ======= ======= ======= ======
27.78% 30.83% 10.40% 1.55% 25.91% (1.58)% 11.84% 10.37% 1.59% 25.86% (2.95)%
======== ======== ======== ======= ======= ======= ====== ======= ======= ======= ======
$140,523 $124,182 $152,357 $97,272 $60,280 $35,867 $3,804 $30,608 $28,561 $16,474 $2,275
1.13% 1.23% 2.06%(3) 2.00% 2.02% 2.20% 2.24%* 2.05%(3) 1.98% 2.06% 1.98%*
0.25% 1.31% (0.60)%(3) (0.66)% (0.46)% (0.70)% (0.81)%* (0.57)%(3) (0.65)% (0.69)% (0.65)%*
66.15% 71.64% 36.10% 24.41% 35.81% 32.49% 28.59% 36.10% 24.41% 35.81% 32.49%
</TABLE>
----------
- --------------------------------------------------------------------------------
Prospectus Page 13
<PAGE>

- --------------------------------------------------------------------------------
-------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

[INTENTIONALLY LEFT BLANK]

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

- -------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

Financial Highlights
(Continued)
- -------------------------------------------------------------------------------
SMALL CAP VALUE FUND

The following table provides investors with data and ratios for one Class A,
Class B and Class C share for each of the periods shown. This information is
supplemented by the financial statements and accompanying notes appearing in
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 following table, 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 by
calling 1-800-647-1568.

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

- --------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund
Financial Highlights
(Continued)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SMALL CAP VALUE FUND
---------------------------------------------
CLASS A
---------------------------------------------
FOR THE
FOR THE PERIOD
SIX MONTHS FOR THE FEBRUARY 1, FOR THE
ENDED YEAR 1994 YEAR
JANUARY 31, ENDED THROUGH ENDED
1996 JULY 31, JULY 31, JANUARY 31,
(UNAUDITED) 1995 1994 1994
----------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $11.30 $10.27 $10.61 $10.00
------- ------- ------- -------
Income from investment operations:
Net investment income (loss).... 0.02 0.05 0.02 0.13
Net realized and unrealized
gains (losses) from investment
transactions................... 0.23 1.50 (0.36) 0.62
------- ------- ------- -------
Total income (loss) from
investment operations............ 0.25 1.55 (0.34) 0.75
------- ------- ------- -------
Dividends and distributions to
shareholders from:
Net investment income............ -- -- -- (0.12)
Net realized gains on investment
transactions.................... (0.83) (0.52) -- (0.02)
------- ------- ------- -------
Total dividends and distributions. (0.83) (0.52) -- (0.14)
------- ------- ------- -------
Net asset value, end of period.... $10.72 $11.30 $10.27 $10.61
======= ======= ======= =======
Total investment return(1)........ 2.20% 15.80% (3.20)% 7.58%
======= ======= ======= =======
Ratios/Supplemental data:
Net assets, end of period (000's)
................................. $19,640 $20,494 $22,848 $25,226
Expenses to average net assets.... 1.90%* 1.98% 1.91%* 1.75%
Net investment income (loss) to
average net assets............... 0.49%* 0.41% 0.41%* 1.41%
Portfolio turnover................ 7% 19% 20% 98%
</TABLE>
- -------
* Annualized.
(1) Total investment 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 16
<PAGE>

<TABLE>
<CAPTION>
SMALL CAP VALUE FUND
- -------------------------------------------------------------------------------------------------
CLASS B CLASS C(2)
- ------------------------------------------------ ------------------------------------------------
FOR THE FOR THE
FOR THE PERIOD FOR THE PERIOD
SIX MONTHS FOR THE FEBRUARY 1, SIX MONTHS FOR THE FEBRUARY 1,
ENDED YEAR 1994 FOR THE ENDED YEAR 1994 FOR THE
JANUARY 31, ENDED THROUGH YEAR ENDED JANUARY 31, ENDED THROUGH YEAR ENDED
1996 JULY 31, JULY 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>
$11.15 $10.22 $10.60 $10.00 $11.14 $10.22 $10.59 $10.00
------- ------- ------- ------- ------- ------- ------- -------
(0.02) (0.04) (0.02) 0.06 (0.02) (0.05) (0.02) 0.06
0.23 1.49 (0.36) 0.62 0.23 1.49 (0.35) 0.62
------- ------- ------- ------- ------- ------- ------- -------
0.21 1.45 (0.38) 0.68 0.21 1.44 (0.37) 0.68
------- ------- ------- ------- ------- ------- ------- -------
-- -- -- (0.06) -- -- -- (0.07)
(0.83) (0.52) -- (0.02) (0.83) (0.52) -- (0.02)
------- ------- ------- ------- ------- ------- ------- -------
(0.83) (0.52) -- (0.08) (0.83) (0.52) -- (0.09)
------- ------- ------- ------- ------- ------- ------- -------
$10.53 $11.15 $10.22 $10.60 $10.52 $11.14 $10.22 $10.59
======= ======= ======= ======= ======= ======= ======= =======
1.87% 14.86% (3.58)% 6.81% 1.87% 14.76 % (3.49)% 6.77%
======= ======= ======= ======= ======= ======= ======= =======
$40,876 $46,142 $52,624 $59,993 $11,603 $13,263 $16,285 $20,941
2.67%* 2.74% 2.69%* 2.50% 2.69%* 2.73% 2.69%* 2.50%
(0.28)%* (0.35)% (0.37)%* 0.67% (0.31)%* (0.34)% (0.36)%* 0.64%
7% 19% 20% 98% 7% 19% 20% 98%
</TABLE>

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

- -------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

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

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

GROWTH AND INCOME FUND

The investment objective of Growth and Income Fund is current income and
capital growth. 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, 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 total 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 Growth Fund is long-term capital appreciation.
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 total assets in U.S. government bonds and in
corporate bonds (including up to 10% in bonds and convertible securities rated
below investment grade). Up to 25% of the Fund's total 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 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 up to $1 billion. 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 bonds, corporate bonds and money market instruments, including up
to 10% of total assets in convertible bonds rated below investment grade. Up
to 25% of the Fund's total 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.

* * * *

As with any mutual fund, 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.

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

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

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 at least 65% of its
total assets in dividend-paying stocks.

The Model screens a universe of small to large capitalization companies from
ten different business sectors to identify undervalued companies with strong
earnings momentum, that rank well in three measures:

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

- -------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

. VALUE: projected dividends, cash flow, earnings and book value;

. MOMENTUM: earnings and price to identify companies that could surprise on
the upside; and

. ECONOMIC SENSITIVITY: to forecast 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 may speak 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 combines
a "bottom-up," stock-by-stock approach with the Mitchell Hutchins Factor
Valuation Model. The Fund can invest in companies of 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.

. VALUE: projected dividends, cash flow, earnings and book value;

. MOMENTUM: earnings and price to identify companies that could surprise on
the upside; and

. ECONOMIC SENSITIVITY: to forecast 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 earnings growth and applies traditional
analysis. The Team may speak 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 that credit factors or ratings affecting
particular issuers may improve.

SMALL CAP VALUE FUND

In selecting small cap equity securities with the potential for capital
appreciation, Mitchell Hutchins follows a disciplined investment process that
relies on the Mitchell Hutchins Factor Valuation Model and the Mitchell
Hutchins Equity Research Team. The Model screens a universe of small to large
capitalization companies from ten different business sectors to identify
undervalued companies with strong earnings momentum, that ranked well in three
measures:

. VALUE: projected dividends, cash flow, earnings and book value;

. MOMENTUM: earnings and price to identify companies that could surprise on
the upside; and

. ECONOMIC SENSITIVITY: to forecast how different equity securities and
industries may perform under various economic scenarios.

Through this screening process, the Model identifies the equity securities of
small cap 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 may speak 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. 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 19
<PAGE>

- -------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

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

These charts show the total returns for the Funds; 1995 returns represent the
calendar year ended December 31, 1995. Sales charges have not been deducted
from total returns. Returns would be lower if sales charges were deducted.
Past results are not a guarantee of future results.

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

GROWTH AND INCOME FUND

[GRAPH APPEARS HERE]

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.

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
Before deducting maximum sales
charges......................... 18.30% 17.38% 17.37%
After deducting maximum sales
charges......................... 12.99% 12.38% 16.37%
FIVE YEARS (OR LIFE OF CLASS)
Before deducting maximum sales
charges......................... 10.07% 7.49% 6.47%
After deducting maximum sales
charges......................... 9.06% 7.11% 6.47%
TEN YEARS
Before deducting maximum sales
charges......................... 10.82% N/A N/A
After deducting maximum sales
charges......................... 10.31% N/A N/A
</TABLE>

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

- --------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

GROWTH FUND

[GRAPH APPEARS HERE]

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.

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
Before deducting maximum sales
charges......................... 11.28% 10.40% 10.37%
After deducting maximum sales
charges......................... 6.30% 5.40% 9.37%
FIVE YEARS (OR LIFE OF CLASS)
Before deducting maximum sales
charges......................... 14.45% 11.14% 10.89%
After deducting maximum sales
charges......................... 13.40% 10.80% 10.89%
TEN YEARS
Before deducting maximum sales
charges......................... 13.08% N/A N/A
After deducting maximum sales
charges......................... 12.56% N/A N/A
</TABLE>

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

- --------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund
----------

SMALL CAP VALUE FUND

[GRAPH APPEARS HERE]

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.

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
Before deducting maximum sales
charges......................... 15.80% 14.86% 14.76%
After deducting maximum sales
charges......................... 10.63% 9.86% 13.76%
LIFE
Before deducting maximum sales
charges......................... 7.79% 6.96% 6.95%
After deducting maximum sales
charges......................... 5.82% 5.50% 6.95%
</TABLE>
PERFORMANCE INFORMATION

The Funds perform a standardized computation of annualized total return and may
show this return in advertisements or promotional materials. Standardized
return shows the change in value of an investment in 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 reflects 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 reflects deduction of the applicable contingent
deferred sales charge imposed on a sale of shares held for the period. One-,
five- and ten-year periods will be shown, unless the Fund or Class has been in
existence for a shorter period. 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 22

<PAGE>

- -------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

The Funds' Investments
- -------------------------------------------------------------------------------

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

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

BONDS (including notes and debentures) are used by corporations and
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 Fund:

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

FOREIGN SECURITIES. Each Fund 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. Investment grade bonds are those 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"). Moody's fourth
highest category (Baa) includes securities which, in its opinion, have
speculative features. For example, 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 a 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.

- --------------------------------------------------------------------------------
Prospectus Page 23

<PAGE>

- -------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

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 to
adverse economic conditions. They are also known as "junk bonds." During an
economic downturn or period of rising interest rates, issuers of these
securities 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.

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.

Growth Fund can invest up to 10% of total 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.

Small Cap Value 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.

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 Fund may use certain strategies designed to adjust
the overall risk of its investment portfolio. These "hedging" strategies
involve derivative contracts, including options (on securities, 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, a 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 Fund may lend its securities to qualified
broker-dealers or institutional investors in an amount up to 33 1/3% of that
Fund's total assets taken at market value. Lending securities enables a Fund
to earn additional income, but could result in a loss or delay in recovering
these securities.

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

- --------------------------------------------------------------------------------
Prospectus Page 24

<PAGE>

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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

OTHER INFORMATION. Growth and Income Fund and Growth Fund each may invest up
to 10% of its net assets, and Small Cap Value Fund up to 15% of its net
assets, in illiquid securities. These include 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 boards 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 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 total assets.

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

Flexible PricingSM

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

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

CLASS A SHARES

HOW PRICE IS CALCULATED: The price is the net asset value plus the initial
sales charge (the maximum is 4.5% of the public offering price) next
calculated after PaineWebber's New York City headquarters or PFPC Inc., the
Funds' Transfer Agent ("Transfer Agent") receives the purchase order. Although
investors pay an initial sales charge when they buy Class A shares, the
ongoing expenses for this class are lower than 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 purchase or sale, whichever is less, is charged on sales of
shares made within one year of the purchase date. Class A shares
representing reinvestment of any dividends or other distributions are not
subject to the 1% charge. Withdrawals under the Systematic Withdrawal Plan
are not subject to this charge. However, investors may not withdraw 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 AND WAIVERS

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

- --------------------------------------------------------------------------------
Prospectus Page 25

<PAGE>

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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

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'
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, its affiliates
or any PaineWebber mutual fund;

. 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 SEC and

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

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

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

. 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;

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

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

<TABLE>
<CAPTION>
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 26

<PAGE>

- -------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

CONVERSION OF CLASS B SHARES

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

MINIMIZING THE CONTINGENT DEFERRED SALES CHARGE

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

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

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

WAIVERS OF THE CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge will not apply to:

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

. 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 either as the sole shareholder or with
his or her spouse as a joint tenant with the right of survivorship.

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

CLASS C SHARES

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

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

- --------------------------------------------------------------------------------
Prospectus Page 27

<PAGE>

- -------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

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

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

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 an account application which you may obtain by calling 1-800-647-1568.
The application and check must be mailed to PFPC Inc., Attn: PaineWebber
Mutual Funds, P.O. Box 8950, Wilmington, DE 19899.

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>

A 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. A $5 fee is imposed on each exchange.

. 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:

. the investor's name and address;

. the Fund's name;

. the Fund account number;

- --------------------------------------------------------------------------------
Prospectus Page 28

<PAGE>

- -------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

. 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.

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

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

How To Sell Shares

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

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

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

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

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

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

REINSTATEMENT PRIVILEGE

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

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

Other Services

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

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

AUTOMATIC INVESTMENT PLAN

Investing on a regular basis helps investors meet their financial goals.
PaineWebber offers an Automatic

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

- --------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

Investment Plan with a minimum initial investment of $1,000 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."

SYSTEMATIC WITHDRAWAL PLAN

The Systematic Withdrawal Plan allows investors to set up monthly, quarterly
(March, June, September and December) or semi-annual (June and December)
withdrawals from their Fund accounts. 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 semi-annual withdrawals of $200, $400 and $600, respectively.

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

INDIVIDUAL RETIREMENT ACCOUNTS

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

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

Management

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

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

Mitchell Hutchins, 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. On 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 Fund's board of trustees.

ABOUT THE INVESTMENT ADVISER

As investment adviser for 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 Growth
and Income Fund since April 1995. Mr. Tincher is a managing director and chief
investment officer of equities 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. Each analyst
specializes in different industries, providing PaineWebber Stock Funds with
more leverage. The Equity Research Team is also assisted by 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 a vice president. Mr. Tincher directed the U.S. funds
management and equity research area at Chase

- --------------------------------------------------------------------------------
Prospectus Page 30

<PAGE>

- -------------------------------------------------------------------------------
PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

and oversaw the management of all Chase U.S. equity funds (the Vista Funds and
Trust Investment Funds).

Ellen R. Harris has been responsible for the day-to-day portfolio management
of 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 R. Jones has been primarily responsible for day-to-day portfolio
management of Small Cap Value Fund since April 1996. 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, which he joined in 1983.

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

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.

DISTRIBUTION ARRANGEMENTS

Mitchell Hutchins is the distributor of each Fund's 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 the 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
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.

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Prospectus Page 31

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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

Determining the Shares' Net Asset Value

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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 should be recognized that judgment plays a greater
role in valuing lower-rated corporate bonds because there is less reliable,
objective data available.

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Dividends & Taxes

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DIVIDENDS

Growth Fund and Small Cap Value Fund each pays an annual dividend and Growth
and Income Fund pays 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."

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

TAXES

Each of the Funds intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code so that it will not have to
pay Federal income tax on 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.

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

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Prospectus Page 32

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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

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
Fund 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 takes into account any
initial sales charge paid on Class A shares). An exchange of any Fund's shares
for shares of another PaineWebber mutual fund generally will have similar tax
consequences. In addition, if a Fund's shares are bought within 30 days before
or after selling other shares of the Fund (regardless of class) at a loss, all
or a portion of that loss will not be deductible and will increase the basis
of the newly purchased shares.

SPECIAL TAX RULES FOR CLASS A SHAREHOLDERS

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

* * * *

Because the foregoing only summarizes some of the important considerations
affecting the Funds and their shareholders, a further discussion is contained
in the Statement of Additional Information. Prospective shareholders are urged
to consult their tax advisers.

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General Information

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ORGANIZATION

GROWTH AND INCOME FUND

Growth and Income Fund is a diversified series of PaineWebber America Fund, an
open-end management investment company which 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

Growth Fund is a diversified series of PaineWebber Olympus Fund, an open-end
management investment company which 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

Small Cap Value Fund is a diversified series of PaineWebber Securities Trust,
an open-end management investment company which 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 Small
Cap Value Fund, shares of one other series have been authorized.

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

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Prospectus Page 33

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PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund

respect to sales charges, if any, distribution and/or service fees, if any,
other expenses allocable exclusively to each class, voting rights on matters
exclusively affecting that class, and its exchange privilege. The different
sales charges and other expenses applicable to the different classes of shares
of the Funds will affect the performance of those classes.

Each share of each Fund is entitled to participate equally in dividends, other
distributions and the proceeds of any liquidation of that Fund. However, due to
the differing expenses of the classes, dividends on Class B and Class C shares
are likely to be lower than for Class A shares and are likely to be 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.
The board of trustees of each Fund has considered this factor in approving the
use of a single, combined Prospectus.

VOTING RIGHTS

Shareholders of each Fund are entitled to one vote for each full share held and
fractional votes for fractional shares held. Voting rights are not cumulative
and, as a result, the holders of more than 50% of all the shares of any Fund
(or Trust if there is more than one series) 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 the series in a Trust is required by law and except where
only the shareholders of a particular class of a Fund may vote on matters
affecting only that class, such as the terms of a Plan as it relates to the
class.

SHAREHOLDER MEETINGS

The Funds, do not intend to hold annual meetings.

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

REPORTS TO SHAREHOLDERS

Each Fund sends its shareholders audited annual and unaudited semi-annual
reports, each of which includes a list of the investment securities held by
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 Heritage Drive, North
Quincy, Massachusetts 02171, serves as each Fund's custodian and recordkeeping
agent. PFPC Inc., a subsidiary of PNC Bank, N.A., serves as each Fund's
transfer and dividend disbursing agent. It is located at 400 Bellevue Parkway,
Wilmington, DE 19809.

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Prospectus Page 34

<PAGE>

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PaineWebber Growth and Income Fund
PaineWebber Growth Fund
PaineWebber Small Cap Value Fund
Prospectus -- May 1, 1996

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[_] PAINEWEBBER BOND FUNDS [_] PAINEWEBBER STOCK FUNDS

High Income Fund Capital Appreciation Fund
Investment Grade Income Growth Fund
Fund Growth and Income Fund
Low Duration U.S. Financial Services Growth Fund
Government Income Fund Small Cap Value Fund
Strategic Income Fund Utility Income Fund
U.S. Government Income
Fund

[_] PAINEWEBBER TAX-FREE BOND [_] PAINEWEBBER GLOBAL FUNDS
FUNDS

Global Equity Fund
California Tax-Free Global Income Fund
Income Fund Emerging Markets Equity Fund
Municipal High Income
Fund

National Tax-Free
Income Fund
New York Tax-Free [_] PAINEWEBBER MONEY MARKET
Income Fund FUND

[_] PAINEWEBBER
ASSET ALLOCATION FUNDS

Balanced Fund
Tactical Allocation
Fund

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