PAINEWEBBER OLYMPUS FUND/NY, 485APOS, 2000-10-31

PAINEWEBBER OLYMPUS FUND/NY
485APOS, 2000-10-31

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<PAGE>

As filed with the Securities and Exchange Commission on October 31, 2000

1933 Act Registration No. 2-94983
1940 Act Registration No. 811-4180

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-lA

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
-------
Post-Effective Amendment No. 42 [X]
-------

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 40 [X]
------

(Check appropriate box or boxes.)

PAINEWEBBER OLYMPUS FUND
(Exact Name of Registrant as Specified in Charter)
51 West 52nd Street
New York, New York 10019-6114
(Address of principal executive offices) (zip code)

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

AMY DOBERMAN, ESQ.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019-6028
(Name and address of agent for service)

Copies to:

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

Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment.

It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
--------
[ ] On to Rule 485(b)
-------- -----------------------
[ ] 60 days after filing pursuant to Rule 485(a)(1)
--------
[ X ] On December 31, 2000 pursuant to Rule 485(a)(1)
--------
[ ] 75 days after filing pursuant to Rule 485(a)(2)
--------
[ ] On pursuant to Rule 485(a)(2)
-------- --------------

Title of Securities Being Registered: Class A, B, C and Y Shares of Beneficial
Interest of PaineWebber Growth Fund.

<PAGE>

PaineWebber Growth Fund

PaineWebber Growth and Income Fund

PaineWebber Mid Cap Fund

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

PROSPECTUS

DECEMBER 31, 2000

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

This prospectus offers Class A, Class B, Class C and Class Y shares in three of
PaineWebber's stock funds. Each class has different sales charges and ongoing
expenses. You can choose the class that is best for you based on how much you
plan to invest and how long you plan to hold your fund shares. Class Y shares
are available only to certain types of investors.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved any fund's shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.

On October 6, 2000, the board of trustees for each of the above funds
approved the submission to its shareholders of an Agreement and Plan of
Reorganization and Termination under which the fund would transfer
substantially all of its assets and liabilities to the series indicated
below of PaineWebber PACE Select Advisors Trust, another open-end mutual
fund (each series may be referred to as a 'PACE fund').

<TABLE>
<CAPTION>
PROPOSED MERGER PARTNER
-----------------------
<S> <C>
PaineWebber Growth Fund PACE Large Company Growth Equity
Investments

PaineWebber Growth and Income Fund PACE Large Company Value Equity Investments

PaineWebber Mid Cap Fund PACE Small/Medium Company Growth Equity
Investments
</TABLE>

The same sub-advisers that now manage each fund's investments also manage
the investments of the PACE fund proposed as its merger partner. If a fund's
shareholders approve its proposed merger, they will receive shares of the
applicable PACE fund in exchange for their fund shares and the fund will
cease operations. Each merger is expected to be a tax-free reorganization,
which means that a fund's shareholders will not realize any gain or loss on
their receipt of PACE fund shares in the merger and neither fund that is a
party to the merger will realize any gain or loss. The proxy solicitation
materials previously mailed to each fund's shareholders provide more
information about the proposed mergers.

You may continue to buy, sell and exchange your fund shares as described in
this prospectus prior to the shareholder meetings. When you sell or exchange
your fund shares, however, you generally will be subject to federal income
tax on any gain you realize. If a merger proposal is approved for a fund,
the fund expects to close to new purchases and exchange purchases
approximately five business days prior to the date on which the merger is to
be effected.

<PAGE>

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------------------------
PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

Contents
THE FUNDS

<TABLE>
<S> <C> <C>
----------------------------------------------------------------------------------------------------------------
What every investor 3 PaineWebber Growth Fund
should know about Investment Objective, Strategies and Risks
the funds Performance
Expenses and Fee Tables
6 PaineWebber Growth and Income Fund
Investment Objective, Strategies and Risks
Performance
Expenses and Fee Tables
10 PaineWebber Mid Cap Fund
Investment Objective, Strategies and Risks
Performance
Expenses and Fee Tables
13 More About Risks and Investment Strategies

YOUR INVESTMENT

----------------------------------------------------------------------------------------------------------------
Information for 15 Managing Your Fund Account
managing your fund -- Flexible Pricing
account -- Buying Shares
-- Selling Shares
-- Exchanging Shares
-- Pricing and Valuation
ADDITIONAL INFORMATION

----------------------------------------------------------------------------------------------------------------
Additional important 20 Management
information about 22 Dividends and Taxes
the funds 24 Financial Highlights

----------------------------------------------------------------------------------------------------------------
Where to learn more Back Cover
about PaineWebber
mutual funds
</TABLE>

The funds are not complete or
balanced investment programs.

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

<PAGE>

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------------------------
PaineWebber Growth Fund

PaineWebber Growth Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
--------------------------------------------------------------------------------

FUND OBJECTIVE

Long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The fund invests primarily in common stocks that are believed to have
substantial potential for capital growth.

The fund generally invests in larger capitalization companies but has the
flexibility to invest in companies having any market capitalization. Some of the
fund's investments may be in U.S. dollar denominated securities of foreign
issuers and the fund also may invest in bonds. The fund may (but is not required
to) use options, futures contracts and other derivatives as part of its
investment strategy or to help manage portfolio risk.

The fund's manager, Mitchell Hutchins Asset Management Inc., has appointed
Alliance Capital Management L.P. ('Alliance Capital') and State Street Global
Advisors ('SSgA') to serve as sub-advisers for the fund's investments. Alliance
Capital initially manages approximately 60% of the fund's assets and SSgA
manages approximately 40%. Mitchell Hutchins allocates the fund's assets between
the two sub-advisers. The relative values of assets allocated to each
sub-adviser can change at any time.

In managing its share of the fund's assets, Alliance Capital follows its
'disciplined growth' strategy and seeks to identify the best combinations of
earnings growth and reasonable valuation in selecting stocks for the fund.
Alliance Capital ranks each stock in its investment universe based on its
analysts' assessments and fundamental research that includes six measures of
earnings growth and valuation. The fund normally invests in stocks that rank in
the top 30% of this research universe and generally sells stocks that rank in
the bottom half.

In managing its share of the fund's assets, SSgA seeks to outperform the Russell
1000 Growth Index (before fees and expenses). SSgA uses several independent
valuation measures to identify investment opportunities within a large cap
growth universe and combines factors to produce an overall rank. Comprehensive
research determines the optimal weighting of these perspectives to arrive at
schemes that vary by industry. SSgA ranks all companies within the investable
universe from top to bottom based on their relative attractiveness. SSgA
constructs the fund's portfolio by selecting the highest ranked stocks from the
universe and manages deviations from the benchmark to maximize the risk/reward
trade-off. The resulting portfolio has characteristics similar to the Russell
1000 Growth Index.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

Equity Risk -- Stocks and other equity securities generally fluctuate in
value more than bonds. The fund could lose all of its investment in a
company's stock.

Index Strategy Risk -- SSgA's proprietary strategies may not result in the
portion of fund assets it manages outperforming the total return of the
designated index, and these assets may underperform the index. Its performance
also may deviate from that of the index because of shareholder purchases and
sales of shares, which can occur daily, and because of fees and expenses borne
by the fund.

Derivatives Risk -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

Foreign Investing Risk -- The value of the fund's investments in foreign
securities may fall due to adverse political, social and economic developments
abroad. However, because the fund's foreign investments must be denominated in
U.S. dollars, it generally is not subject to the risk of changes in currency
valuations.

More information about risks of an investment in the fund is provided below in
'More About Risks and Investment Strategies.'

------------
--------------------------------------------------------------------------------
Prospectus Page 3

<PAGE>

--------------------------------------------------------------------------------
------------------------
PaineWebber Growth Fund

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

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.

The bar chart shows how the fund's performance has varied from year to year. The
chart shows Class A shares because they have the longest performance history of
any class of fund shares. The chart does not reflect the effect of sales
charges; if it did, the total returns shown would be lower.

The table that follows the chart shows the average annual returns for each class
of the fund's shares. That table does reflect fund sales charges. The table
compares fund returns to returns on a broad-based market index that is unmanaged
and that, therefore, does not include any sales charges or expenses.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

TOTAL RETURN ON CLASS A SHARES

<TABLE>
<CAPTION>
[PERFORMANCE GRAPH]
CALENDAR YEAR TOTAL RETURN
------------- -------------
<S> <C>
1990 -7.72%
1991 47.61%
1992 4.15%
1993 19.17%
1994 -10.90%
1995 33.02%
1996 14.11%
1997 17.01%
1998 31.95%
1999
</TABLE>

Total return January 1, 2000 to September 30, 2000 -- %

Best quarter during years shown: quarter, -- %

Worst quarter during years shown: quarter, -- %

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
CLASS A CLASS B* CLASS C CLASS Y S&P 500
CLASS (3/18/85) (7/1/91) (7/2/92) (8/26/91) INDEX
(INCEPTION DATE) --------- -------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
One Year.......................................... % % % % %
Five Years........................................ % % % % %
Ten Years......................................... % N/A N/A N/A %
Life of Class..................................... % % % % **
</TABLE>

---------

* Assumes conversion of Class B shares to Class A after six years.

** Average annual total returns for the S&P 500 Index for the life of each class
were as follows:
Class A -- %; Class B -- %; Class C -- %; Class Y -- %.

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

<PAGE>

--------------------------------------------------------------------------------
------------------------
PaineWebber Growth Fund

EXPENSES AND FEE TABLES
--------------------------------------------------------------------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price)................................ 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
(as a % of offering price)................................ None 5% 1% None
Exchange Fee................................................ None None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.75% 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 0.00
Other Expenses..............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %
---- ---- ---- ----
---- ---- ---- ----
</TABLE>

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A................................................. $ $ $ $
Class B (assuming sale of all shares at end of
period)...............................................
Class B (assuming no sale of shares)....................
Class C (assuming sale of all shares at end of
period)...............................................
Class C (assuming no sale of shares)....................
Class Y.................................................
</TABLE>

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

<PAGE>

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

PaineWebber Growth and Income Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
--------------------------------------------------------------------------------

FUND OBJECTIVE

Current income and capital growth.

PRINCIPAL INVESTMENT STRATEGIES

The fund invests in a combination of securities to obtain both growth and
income. To obtain growth, the fund invests in stocks that are believed to have
substantial potential for capital growth. To obtain current income, the fund
invests in dividend paying stocks and, to a lesser extent, convertible bonds and
money market instruments.

The fund generally invests in large capitalization companies. Some of the fund's
investments may be in U.S. dollar denominated securities of foreign issuers. The
fund may (but is not required to) use options, futures contracts and other
derivatives as part of its investment strategy or to help manage portfolio
risks.

The fund's manager, Mitchell Hutchins Asset Management Inc., has appointed
Institutional Capital Corporation ('ICAP'), Westwood Management Corporation
('Westwood') and State Street Global Advisors ('SSgA') to serve as sub-advisers
for the fund's investments. SSgA initially manages approximately 50% of the
fund's assets and ICAP and Westwood manage approximately 25% each. Mitchell
Hutchins allocates the fund's assets among the three sub-advisers. The relative
values of assets allocated to each sub-adviser can change at any time.

In managing its share of the fund's assets, ICAP uses its proprietary valuation
model to identify large-capitalization companies that ICAP believes offer the
best relative values because they sell below the price-to-earnings ratio
warranted by their prospects. ICAP looks for companies where a catalyst for a
positive change is about to occur with potential to produce stock appreciation
of 20% or more relative to the market over a 12 to 18 month period. The catalyst
can be thematic (e.g., global economic recovery) or company specific (e.g., a
corporate restructuring or a new product). ICAP also uses internally generated
research to evaluate the financial condition and business prospects of every
company it considers. ICAP monitors each stock purchased and sells the stock
when its target price is achieved, the catalyst becomes inoperative or ICAP
identifies another stock with greater opportunity for appreciation.

In managing its share of the fund's assets, Westwood maintains a list of
securities that it believes have proven records and potential for above-average
earnings growth. It considers purchasing a security on such list if Westwood's
forecast for growth rates and earnings estimates exceeds Wall Street
expectations or Westwood's forecasted price/earnings ratio is less than the
forecasted growth rate. Westwood monitors the issuing companies and will sell a
stock if Westwood expects limited future price appreciation or the projected
price/earnings ratio exceeds the three-year growth rate.

In managing its share of the fund's assets, SSgA seeks to outperform the Russell
1000 Value Index (before fees and expenses). SSgA uses several independent
valuation measures to identify investment opportunities within a large cap value
universe and combines factors to produce an overall rank. Comprehensive research
determines the optimal weighting of these perspectives to arrive at schemes that
vary by industry. SSgA ranks all companies within the investable universe from
top to bottom based on their relative attractiveness. SSgA constructs the fund's
portfolio by selecting the highest ranked stocks from the universe and manages
deviations from the benchmark to maximize the risk/reward trade-off. The
resulting portfolio has characteristics similar to the Russell 1000 Value Index.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the fund are:

Equity Risk -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

Index Strategy Risk -- SSgA's proprietary strategies may not result in the
portion of fund assets it

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

<PAGE>

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

manages outperforming the total return of the designated index, and these
assets may underperform the index. Its performance also may deviate from that
of the index because of shareholder purchases and sales of shares, which can
occur daily, and because of fees and expenses borne by the fund.

Derivatives Risk -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
'More About Risks and Investment Strategies.'

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

<PAGE>

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

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

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

TOTAL RETURN ON CLASS A SHARES

<TABLE>
<CAPTION>
[PERFORMANCE GRAPH]
CALENDAR YEAR TOTAL RETURN
------------- -------------
<S> <C>
1990 -1.01%
1991 35.34%
1992 3.90%
1993 -2.59%
1994 -5.87%
1995 33.21%
1996 23.46%
1997 31.86%
1998 17.97%
1999
</TABLE>

Total return January 1, 2000 to September 30, 2000 -- %
Best quarter during years shown: quarter, -- %
Worst quarter during years shown: quarter, -- %

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
CLASS A CLASS B* CLASS C CLASS Y S&P 500
CLASS (12/20/83) (7/1/91) (7/2/92) (2/12/92) INDEX
(INCEPTION DATE) ---------- -------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
One Year.......................................... % % % % %
Five Years........................................ % % % % %
Ten Years......................................... % N/A N/A N/A %
Life of Class..................................... % % % % **
</TABLE>

---------

* Assumes conversion of Class B shares to Class A after six years.

** Average annual total returns for the S&P 500 Index for the life of each class
were as follows:
Class A -- %; Class B -- %; Class C -- %; Class Y -- %.

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

<PAGE>

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

EXPENSES AND FEE TABLES
--------------------------------------------------------------------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price)................................ 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
(as a % of offering price)................................ None 5% 1% None
Exchange Fee................................................ None None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.70% 0.70% 0.70% 0.70%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 0.00
Other Expenses..............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %
---- ---- ---- ----
---- ---- ---- ----
</TABLE>

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

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

<PAGE>

--------------------------------------------------------------------------------
------------------------
PaineWebber Mid Cap Fund

PaineWebber Mid Cap Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
--------------------------------------------------------------------------------

FUND OBJECTIVE

Long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The fund invests primarily in common stocks of medium capitalization ('mid cap')
companies that are believed to have substantial potential for capital growth.
The fund considers companies with market capitalizations of between $750 million
and $8 billion to be mid cap.

The fund also invests, to a lesser extent, in stocks of larger and smaller
companies and in bonds and money market instruments. Some of the fund's
investments may be in U.S. dollar denominated securities of foreign issuers. The
fund may (but is not required to) use options, futures contracts and other
derivatives as part of its investment strategy or to help manage portfolio
risks.

The fund's manager, Mitchell Hutchins Asset Management Inc., has appointed
Delaware Management Company to serve as sub-adviser for the fund's investments.
In deciding which stocks to buy or sell for the fund, Delaware Management
Company employs a bottom-up, fundamental analysis to attempt to identify
companies that have substantially above-average earnings growth because of
management changes, new products, growth of established products or structural
changes in the economy. Delaware Management Company also considers the quality
of a company's management team and the strength of its finances and internal
controls in selecting stocks for the fund. Although Delaware Management Company
follows companies in a full range of market sectors, it may focus on a limited
number of attractive industries.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund. The principal risks presented by the funds are:

Equity Risk -- Stocks and other equity securities generally fluctuate in value
more than bonds. The fund could lose all of its investment in a company's
stock.

Limited Capitalization Risk -- Securities of mid capitalization companies
generally involve greater risk than securities of larger capitalization
companies because they may be more vulnerable to adverse business or economic
developments.

Derivatives Risk -- The fund's investments in derivatives may rise or fall
more rapidly than other investments.

More information about risks of an investment in the fund is provided below in
'More About Risks and Investment Strategies.'

------------
--------------------------------------------------------------------------------
Prospectus Page 10

<PAGE>

--------------------------------------------------------------------------------
------------------------
PaineWebber Mid Cap Fund

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

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.

The bar chart shows how the fund's performance has varied from year to year. The
chart shows Class A shares because they have as long a performance history as
any class of fund shares. The chart does not reflect the effect of sales
charges; if it did, the total returns shown would be lower.

The table that follows the chart shows the average annual returns for each class
of the fund's shares. That table does reflect fund sales charges. The table
compares fund returns to returns on a broad-based market index of mid-cap
companies that is unmanaged and that, therefore, does not include any sales
charges or expenses.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

TOTAL RETURN ON CLASS A SHARES (1993 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS)

<TABLE>
<CAPTION>
[PERFORMANCE GRAPH]
CALENDAR YEAR TOTAL RETURN
------------- -------------
<S> <C>
1990
1991
1992
1993 16.10%
1994 -1.36%
1995 28.79%
1996 17.87%
1997 15.14%
1998 11.81%
1999
</TABLE>

Total return January 1, 2000 to September 30, 2000 -- %

Best quarter during years shown: quarter, -- %

Worst quarter during years shown: quarter, -- %

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
CLASS A CLASS B* CLASS C CLASS Y S&P MIDCAP 400
CLASS (4/7/92) (4/7/92) (7/2/92) (3/17/98) INDEX
(INCEPTION DATE) -------- -------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
One Year.................................... % % % % %
Five Years.................................. % % % N/A %
Life of Class............................... % % % % **
</TABLE>

---------

* Assumes conversion of Class B shares to Class A after six years.

** Average annual total returns for the S&P MidCap 400 Index for the life of
each class were as follows: Class A -- %; Class B -- %;
Class C -- %; Class Y -- %.

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

<PAGE>

--------------------------------------------------------------------------------
------------------------
PaineWebber Mid Cap Fund

EXPENSES AND FEE TABLES
--------------------------------------------------------------------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price)................................ 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
(as a % of offering price)................................ None 5% 1% None
Exchange Fee................................................ None None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fees............................................. 1.00% 1.00% 1.00% 1.00%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 0.00
Other Expenses..............................................
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ % % % %
---- ---- ---- ----
---- ---- ---- ----
</TABLE>

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A................................................ $ $ $ $
Class B (assuming sale of all shares at end of
period)..............................................
Class B (assuming no sale of shares)...................
Class C (assuming sale of all shares at end of
period)..............................................
Class C (assuming no sale of shares)...................
Class Y................................................
</TABLE>

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Prospectus Page 12

<PAGE>

--------------------------------------------------------------------------------
------------------------
PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

MORE ABOUT RISKS
AND INVESTMENT STRATEGIES
--------------------------------------------------------------------------------

PRINCIPAL RISKS

The main risks of investing in one or more of the funds are described below. Not
all of these risks apply to each fund. You can find a list of the main risks
that apply to a particular fund by looking under the 'Investment Objective,
Strategies and Risks' heading for that fund. Other risks of investing in a fund,
along with further detail about some of the risks described below, are discussed
in the funds' Statement of Additional Information ('SAI'). Information on how
you can obtain the SAI is on the back cover of this prospectus.

Derivatives Risk. The value of 'derivatives' -- so-called because their value
'derives' from the value of an underlying asset, reference rate or index -- may
rise or fall more rapidly than other investments. For some derivatives, it is
possible for a fund to lose more than the amount it invested in the derivative.
Options and futures contracts are examples of derivatives. A fund's use of
derivatives may not succeed for various reasons, including unexpected changes in
the values of the derivatives or the assets underlying them. Also, if a fund
uses derivatives to adjust or 'hedge' the overall risk of its portfolio, the
hedge may not succeed if changes in the values of the derivatives are not
matched by opposite changes in the values of the assets being hedged.

Equity Risk. The prices of common stocks and other equity securities generally
fluctuate more than those of other investments. They reflect changes in the
issuing company's financial condition and changes in the overall market. A fund
may lose a substantial part, or even all, of its investment in a company's
stock.

Foreign Investing Risk. Foreign investing involves risks relating to political,
social and economic developments abroad to a greater extent than investing in
the securities of U.S. issuers. In addition, there are differences between U.S.
and foreign regulatory requirements and market practices. Foreign investments
denominated in foreign currencies are subject to the risk that the value of a
foreign currency will fall in relation to the U.S. dollar. Currency exchange
rates can be volatile and can be affected by, among other factors, the general
economics of a country, the actions of U.S. and foreign governments or central
banks, the imposition of currency controls and speculation. Investments in
foreign government bonds involve special risks because the investors may have
limited legal recourse in the event of default. Political conditions, especially
a country's willingness to meet the terms of its debt obligations, can be of
considerable significance.

Index Strategy Risk. SSgA's proprietary strategies may not result in the portion
of fund assets it manages for Growth Fund and Growth and Income Fund
outperforming the total return of the designated index, and these assets may
underperform the index. Its performance also may deviate from that of the index
because of shareholder purchases and sales of shares, which can occur daily, and
because of fees and expenses borne by the fund.

Limited Capitalization Risk. Securities of mid cap companies generally involve
greater risk than securities of larger capitalization companies because they may
be more vulnerable to adverse business or economic developments. Mid cap
companies also may have limited product lines, markets or financial resources,
and they may be dependent on a relatively small management group. Securities of
mid cap companies may be less liquid and more volatile than securities of larger
companies or the market averages in general. In general, all of these risks are
greater for small capitalization companies than for mid cap companies. In
addition, small capitalization 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.

ADDITIONAL RISKS

Credit and Interest Rate Risks. Each fund is authorized to invest in bonds and
other income-producing securities. These securities are subject to credit risk
and interest rate risk.

Credit risk is the risk that the issuer of a bond will not make principal or
interest payments when they are due. Even if an issuer does not default on a

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PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

payment, a bond's value may decline if the market believes that the issuer has
become less able, or less willing, to make payments on time. Even high quality
bonds are subject to some credit risk. However, credit risk is higher for lower
quality bonds. Bonds that are not investment grade involve high credit risk and
are considered speculative. Lower quality bonds may fluctuate in value more than
higher quality bonds and, during periods of market volatility, may be more
difficult to sell at the time and price a fund desires.

The value of bonds can be expected to fall when interest rates rise and to rise
when interest rates fall. Interest rate risk is the risk that interest rates
will rise, so that the value of a fund's investments in bonds will fall. Because
interest rate risk is the primary risk presented by U.S. government and other
very high quality bonds, changes in interest rates may actually have a larger
effect on the value of those bonds than on lower quality bonds.

ADDITIONAL INVESTMENT STRATEGIES

Defensive Positions; Cash Reserves. In order to protect itself from adverse
market conditions, a fund may take a temporary defensive position that is
different from its normal investment strategy. This means that the fund may
temporarily invest a larger-than-normal part, or even all, of its assets in cash
or money market instruments. In addition, if a fund's board appoints a new
sub-adviser to manage all or a portion of the fund's investments, the fund may
increase its cash reserves to facilitate the transition to the investment style
and strategies of the new sub-adviser. Since these investments provide
relatively low income, a defensive or transition position may not be consistent
with achieving a fund's investment objective. Each of the funds may invest up to
35% of its total assets in cash or money market instruments as a cash reserve
for liquidity or, except in the case of Growth Fund, as part of its ordinary
investment strategy.

Portfolio Turnover. Each fund may engage in frequent trading to achieve its
investment objective. Frequent trading can result in portfolio turnover in
excess of 100% (high portfolio turnover).

Frequent trading may increase the portion of a fund's capital gains that are
realized for tax purposes in any given year. This may increase the fund's
taxable dividends in that year. Frequent trading also may increase the portion
of a fund's realized capital gains that are considered 'short-term' for tax
purposes. Shareholders will pay higher taxes on dividends that represent
short-term gains than they would pay on dividends that represent long-term
gains. Frequent trading also may result in higher fund expenses due to
transaction costs.

The funds do not restrict the frequency of trading in order to limit expenses or
the tax effect that the fund's dividends may have on shareholders.

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PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

MANAGING YOUR FUND ACCOUNT
--------------------------------------------------------------------------------

FLEXIBLE PRICING

The funds offer four classes of shares -- Class A, Class B, Class C and
Class Y. Each class has different sales charges and ongoing expenses. You can
choose the class that is best for you, based on how much you plan to invest and
how long you plan to hold your fund investment. Class Y shares are only
available to certain types of investors.

Each fund has adopted a plan under rule 12b-1 for its Class A, Class B and Class
C shares that allows it to pay service and (for Class B and Class C shares)
distribution fees for the sale of its shares and services provided to
shareholders. Because the 12b-1 distribution fees for Class B and Class C shares
are paid out of a fund's assets on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than if you paid a
front-end sales charge.

CLASS A SHARES

Class A shares have a front-end sales charge that is included in the offering
price of the Class A shares. This sales charge is not invested in the fund.
Class A shares pay an annual 12b-1 service fee of 0.25% of average net assets,
but they pay no 12b-1 distribution fees. The ongoing expenses for Class A shares
are lower than for Class B and Class C shares.

The Class A sales charges for each fund are described in the following table.

CLASS A SALES CHARGES

<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF: DISCOUNT TO SELECTED DEALERS AS
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED PERCENTAGE 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' offering price or
the net asset value at the time of sale by the shareholder, whichever is
less, is charged on sales of shares made within one year of the purchase
date. Class A shares representing reinvestment of dividends are not subject
to this 1% charge. Withdrawals in the first year after purchase of up to 12%
of the value of the fund account under the funds' Systematic Withdrawal Plan
are not subject to this charge.

(2) Mitchell Hutchins pays 1% to PaineWebber.

Sales Charge Reductions and Waivers. You may qualify for a lower sales charge if
you already own Class A shares of a PaineWebber mutual fund. You can combine the
value of Class A shares that you own in other PaineWebber funds and the purchase
amount of the Class A shares of the PaineWebber fund that you are buying.

You may also qualify for a lower sales charge if you combine your purchases with
those of:

your spouse, parents or children under age 21;

your Individual Retirement Accounts (IRAs);

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

a company that you control;

a trust that you created;

Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts
created by you or by a group of investors for your children; or

accounts with the same adviser.

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PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

You may qualify for a complete waiver of the sales charge if you:

Are an employee of PaineWebber or its affiliates or the spouse, parent or child
under age 21 of a PaineWebber employee;

Buy these shares through a PaineWebber Financial Advisor who was formerly
employed as an investment executive with a competing brokerage firm that was
registered as a broker-dealer with the SEC; and

-- you were the Financial Advisor's client at the competing brokerage firm;

-- within 90 days of buying shares in a fund, you sell shares of one or more
mutual funds that were principally underwritten by the competing
brokerage firm or its affiliates, and you either paid a sales charge to
buy those shares, pay a contingent deferred sales charge when selling
them or held those shares until the contingent deferred sales charge was
waived; and

-- you purchase an amount that does not exceed the total amount of money you
received from the sale of the other mutual fund.

Acquire these shares through the reinvestment of dividends of a PaineWebber
unit investment trust;

Are a 401(k) or 403(b) qualified employee benefit plan with 50 or more eligible
employees in the plan or at least $1 million in assets;

Are a participant in the PaineWebber Members Only'sm' Program. For investments
made pursuant to this waiver, Mitchell Hutchins may make payments out of its
own resources to PaineWebber and to participating membership organizations in a
total amount not to exceed 1% of the amount invested; or

Acquire these shares through a PaineWebber InsightOne'sm' Program brokerage
account.

CLASS B SHARES

Class B shares have a contingent deferred sales charge. When you purchase Class
B shares, we invest 100% of your purchase in fund shares. However, you may have
to pay the deferred sales charge when you sell your fund shares, depending on
how long you own the shares.

Class B shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
If you hold your Class B shares for six years, they will automatically convert
to Class A shares, which have lower ongoing expenses.

If you sell Class B shares before the end of six years, you will pay a deferred
sales charge. We calculate the deferred sales charge by multiplying the lesser
of the net asset value of the Class B shares at the time of purchase or the net
asset value at the time of sale by the percentage shown below:

<TABLE>
<CAPTION>
PERCENTAGE BY WHICH THE
IF YOU SELL SHARES' NET ASSET
SHARES WITHIN: 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>

We will not impose the deferred sales charge on Class B shares representing
reinvestment of dividends or on withdrawals in any year of up to 12% of the
value of your Class B shares under the Systematic Withdrawal Plan.

To minimize your deferred sales charge, we will assume that you are selling:

First, Class B shares representing reinvested dividends, and

Second, Class B shares that you have owned the longest.

Sales Charge Waivers. You may qualify for a waiver of the deferred sales charge
on a sale of shares if:

You participate in the Systematic Withdrawal Plan;

You are older than 59 1/2 and are selling shares to take a distribution from
certain types of retirement plans;

You receive a tax-free return of an excess IRA contribution;

You receive a tax-qualified retirement plan distribution following
retirement;

The shares are sold within one year of your death and you owned the shares
either (1) as the sole shareholder or (2) with your spouse as a joint tenant
with the right of survivorship; or

The shares are held in trust and the death of the trustee requires
liquidation of the trust.

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PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

CLASS C SHARES

Class C shares have a level load sales charge in the form of ongoing 12b-1
distribution fees. When you purchase Class C shares, we will invest 100% of your
purchase in fund shares.

Class C shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
Class C shares do not convert to another class of shares. This means that you
will pay the 12b-1 fees for as long as you own your shares.

Class C shares also have a contingent deferred sales charge. You may have to pay
the deferred sales charge if you sell your shares within one year of the date
you purchased them. We calculate the deferred sales charge on sales of Class C
shares by multiplying 1.00% by the lesser of the net asset value of the Class C
shares at the time of purchase or the net asset value at the time of sale. We
will not impose the deferred sales charge on Class C shares representing
reinvestment of dividends or on withdrawals in the first year after purchase, of
up to 12% of the value of your Class C shares under the Systematic Withdrawal
Plan.

You may be eligible to sell your shares without paying a contingent deferred
sales charge if you are a 401(k) or 403(b) qualified employee benefit plan with
less than 100 eligible employees or less than $1 million in assets.

NOTE ON SALES CHARGE WAIVERS FOR CLASS A, CLASS B AND CLASS C SHARES

If you think you qualify for any of the sale charge waivers described above, you
will need to provide documentation to PaineWebber or the fund. For more
information, you should contact your PaineWebber Financial Advisor or
correspondent firm or call 1-800-647-1568. If you want information on the Fund's
Systematic Withdrawal Plan, see the SAI or contact your PaineWebber Financial
Advisor or correspondent firm.

CLASS Y SHARES

Class Y shares have no sales charge. Only specific types of investors can
purchase Class Y shares. You may be eligible to purchase Class Y shares if you:

Buy shares through PaineWebber's PACE'sm' Multi Advisor Program;

Buy $10 million or more of PaineWebber fund shares at any one time;

Are a qualified retirement plan with 5,000 or more eligible employees or $50
million in assets; or

Are a corporation, bank, trust company, insurance company, pension fund,
employee benefit plan, professional firm, trust, estate or educational,
religious or charitable organization with 5,000 or more employees or with
over $50 million in investable assets.

The trustee of PaineWebber's 401(k) Plus Plan for its employees is also eligible
to purchase Class Y shares.

Class Y shares do not pay ongoing distribution or service fees or sales charges.
The ongoing expenses for Class Y shares are the lowest for all the classes.

BUYING SHARES

If you are a PaineWebber client, or a client of a PaineWebber correspondent
firm, you can purchase fund shares through your Financial Advisor. Otherwise,
you can invest in the funds through the funds' transfer agent, PFPC Inc. You can
obtain an application by calling 1-800-647-1568. You must complete and sign the
application and mail it, along with a check, to:

PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.

If you wish to invest in other PaineWebber funds, you can do so by:

Contacting your Financial Advisor (if you have an account at PaineWebber or
at a PaineWebber correspondent firm);

Mailing an application with a check; or

Opening an account by exchanging shares from another PaineWebber fund.

You do not have to complete an application when you make additional investments
in the same fund.

The funds and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of shares.

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PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

MINIMUM INVESTMENTS

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

Each fund may waive or reduce these amounts for:

Employees of PaineWebber or its affiliates; or

Participants in certain pension plans, retirement accounts, unaffiliated
investment programs or the funds' automatic investment plans.

Frequent Trading. The interests of a fund's long-term shareholders and its
ability to manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market fluctuations -- also
known as 'market timing'. When large dollar amounts are involved, the fund may
have difficulty implementing long-term investment strategies, because it cannot
predict how much cash it will have to invest. Market timing also may force the
fund to sell portfolio securities at disadvantageous times to raise the cash
needed to buy a market timer's fund shares. These factors may hurt the fund's
performance and its shareholders. When Mitchell Hutchins believes frequent
trading would have a disruptive effect on a fund's ability to manage its
investments, Mitchell Hutchins and the fund may reject purchase orders and
exchanges into the fund by any person, group or account that Mitchell Hutchins
believes to be a market timer. A fund may notify the market timer that a
purchase order or an exchange has been rejected after the day the order is
placed.

SELLING SHARES

You can sell your fund shares at any time. If you own more than one class of
shares, you should specify which class you want to sell. If you do not, the fund
will assume that you want to sell shares in the following order: Class A, then
Class C, then Class B and last, Class Y.

If you want to sell shares that you purchased recently, the fund may delay
payment until it verifies that it has received good payment. If you purchased
shares by check, this can take up to 15 days.

If you have an account with PaineWebber or a PaineWebber correspondent firm, you
can sell shares by contacting your Financial Advisor.

If you do not have an account at PaineWebber or a correspondent firm, and you
bought your shares through the transfer agent, you can sell your shares by
writing to the fund's transfer agent. Your letter must include:

Your name and address;

The fund's name;

The fund account number;

The dollar amount or number of shares you want to sell; and

A guarantee of each registered owner's signature. A signature guarantee may
be obtained from a financial institution, broker, dealer or clearing agency
that is a participant in one of the medallion programs recognized by the
Securities Transfer Agents Association. These are: Securities Transfer
Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP)
and the New York Stock Exchange Medallion Signature Program (MSP). The funds
will not accept signature guarantees that are not a part of these programs.

Mail the letter to:

PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.

If you sell Class A shares and then repurchase Class A shares of the same fund
within 365 days of the sale, you can reinstate your account without paying a
sales charge.

It costs each fund money to maintain shareholder accounts. Therefore, the funds
reserve the right to repurchase all shares in any account that has a net asset
value of less than $500. If a fund elects to do this with your account, it will
notify you that you can increase the amount invested to $500 or more within 60
days. A fund will not repurchase shares in accounts that fall below $500 solely
because of a decrease in the fund's net asset value.

EXCHANGING SHARES

You may exchange Class A, Class B or Class C shares of each fund for shares of
the same class of most other PaineWebber funds. You may not exchange Class Y
shares.

You will not pay either a front-end sales charge or a deferred sales charge when
you exchange shares. However, you may have to pay a deferred sales

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PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

charge if you later sell the shares you acquired in the exchange. Each fund will
use the date that you purchased the shares in the first fund to determine
whether you must pay a deferred sales charge when you sell the shares in the
acquired fund.

Other PaineWebber funds may have different minimum investment amounts. You may
not be able to exchange your shares if your exchange is not as large as the
minimum investment amount in that other fund.

You may exchange shares of one fund for shares of another fund only after the
first purchase has settled and the first fund has received your payment.

PaineWebber and Correspondent Firm Clients. If you bought your shares through
PaineWebber or a correspondent firm, you may exchange your shares by placing an
order with your Financial Advisor.

Other Investors. If you are not a PaineWebber or correspondent firm client, you
may exchange your shares by writing to the fund's transfer agent. You must
include:

Your name and address;

The name of the fund whose shares you are selling and the name of the fund
whose shares you want to buy;

Your account number;

How much you are exchanging (by dollar amount or by number of shares to be
sold); and

A guarantee of your signature. (See 'Selling Shares' for information on
obtaining a signature guarantee.)

Mail the letter to:

PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.

A fund may modify or terminate the exchange privilege at any time.

PRICING AND VALUATION

The price at which you may buy, sell or exchange fund shares is based on net
asset value per share. Each fund calculates net asset value on days that the New
York Stock Exchange is open. Each fund calculates net asset value separately for
each class as of the close of regular trading on the NYSE (generally,
4:00 p.m., Eastern time). The NYSE normally is not open, and the funds do not
price their shares, on most national holidays and on Good Friday. If trading on
the NYSE is halted for the day before 4:00 p.m., Eastern time, the fund's net
asset value per share will be calculated as of the time trading was halted.

Your price for buying, selling or exchanging shares will be based on the net
asset value that is next calculated after the fund accepts your order. If you
place your order through PaineWebber, your PaineWebber Financial Advisor is
responsible for making sure that your order is promptly sent to the fund.

You should keep in mind that a front-end sales charge may be applied to your
purchase if you buy Class A shares. A deferred sales charge may be applied when
you sell Class B or Class C shares.

Each fund calculates its net asset value based on the current market value for
its portfolio securities. The funds normally obtain market values for their
securities from independent pricing services that use reported last sales
prices, current market quotations or valuations from computerized 'matrix'
systems that derive values based on comparable securities. If a market value is
not available from an independent pricing source for a particular security, that
security is valued at a fair value determined by or under the direction of the
fund's board. The funds normally use the amortized cost method to value bonds
that will mature in 60 days or less.

Judgment plays a greater role in valuing thinly traded securities, including
many lower-rated bonds, because there is less reliable, objective data
available.

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PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

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

MANAGER

Mitchell Hutchins Asset Management Inc. is the manager and administrator of each
fund. Mitchell Hutchins is located at 51 West 52nd Street, New York, New York,
10019-6114, and is a wholly owned asset management subsidiary of PaineWebber
Incorporated, which is a wholly owned indirect subsidiary of UBS AG, an
internationally diversified organization with headquarters in Switzerland and
operations in many areas of the financial services industry. On October 31,
2000, Mitchell Hutchins was adviser or sub-adviser of 31 investment companies
with 75 separate portfolios and aggregate assets of approximately $ billion.

Mitchell Hutchins, with the approval of each fund's board, has selected
investment sub-advisers for the funds and reviews the performance of those sub-
advisers.

SUB-ADVISERS AND PORTFOLIO MANAGERS

GROWTH FUND. Alliance Capital Management L.P. ('Alliance Capital') and State
Street Global Advisors ('SSgA') serve as sub-advisers for this fund. Alliance
Capital is located at 1345 Avenue of the Americas, New York, New York 10105. It
is a leading international investment manager supervising client accounts with
assets as of June 30, 2000 of approximately $388 billion.

Jane Mack Gould is primarily responsible for the day-to-day portfolio management
of the fund's assets allocated to Alliance Capital and has held her fund
responsibilities since October 10, 2000. Ms. Gould is a senior vice president
and portfolio manager and has been with Alliance Capital since 1971.

SSgA is located at Two International Place, Boston, Massachusetts 02110, and is
the investment management division of State Street Bank and Trust Company. SSgA
uses a team approach in the day-to-day management of its share of the fund's
assets. SSgA has held its fund responsibilities since October 10, 2000.

GROWTH AND INCOME FUND. Institutional Capital Corporation ('ICAP'), Westwood
Management Corporation ('Westwood') and State Street Global Advisors ('SSgA')
serve as sub-advisers for this fund. ICAP is located at 225 West Wacker Drive,
Suite 2400, Chicago, Illinois 60606-1229, and has been in the investment
management business since 1970. As of September 30, 2000, ICAP had approximately
$14.4 billion in assets under management. ICAP uses a team approach in the
day-to-day management of its share of the fund's assets. ICAP has held its fund
responsibilities since October 10, 2000.

Westwood is located at 300 Crescent Court, Suite 1300, Dallas, Texas 75201, and
has been in the investment management business since 1983. As of September 30,
2000, Westwood had approximately $3.2 billion in assets under management.
Susan M. Byrne, president of Westwood since 1983, is primarily responsible for
the day-to-day management of Westwood's share of the fund's assets. Ms. Byrne
has held her fund responsibilities since October 10, 2000.

MID CAP FUND. Delaware Management Company, a series of Delaware Management
Business Trust, a Delaware business trust, serves as sub-adviser for this fund.
Delaware Management Company is located at One Commerce Square, Philadelphia, PA
19103. Delaware Management Company and its predecessors have been managing funds
for affiliated organizations in the financial services industry since 1938. As
of September 30, 2000, Delaware Management Company and its affiliates had over
$80 billion in assets under management.

Gerald S. Frey is primarily responsible for the fund's day-to-day portfolio
management and has held his fund responsibilities since October 10, 2000.

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PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

Mr. Frey is a vice president of Delaware Management Company. Prior to joining
the group of companies of which Delaware Management Company is a part in 1996,
Mr. Frey was a senior director with Morgan Grenfell Capital Management,
Incorporated in New York. He has 18 years of experience in the money management
business.

In making investment decisions for the fund, Mr. Frey regularly consults with
other members of the Delaware Management Company team: John A. Heffern,
Marshall T. Bassett, Jeffrey Hynoski, Steven Lampe, Lori F. Wachs and Frank
Houghton. All team members have held their fund responsibilities since
October 10, 2000.

Mr. Heffern joined Delaware Management Company in 1997 and serves as a vice
president. Previously, he was a senior vice president, equity research at
NatWest Security Corporation's Specialty Financial Services unit. Prior to that,
he was a principal and senior regional bank analyst at Alex. Brown & Sons.

Mr. Bassett joined Delaware Management Company in 1997 and serves as a vice
president. Previously, he was employed by Morgan Stanley Asset Management's
Emerging Growth Group, most recently as a vice president, where he analyzed
small growth companies. Prior to that, he was trust officer at Sovran Bank and
Trust Company.

Mr. Hynoski joined Delaware Management Company in 1998 and serves as a vice
president. Previously, he held the position of vice president with Bessemer
Trust since 1993. Prior to that, he served as an analyst for Lord Abbett and
Cowen Asset Management.

Mr. Lampe joined Delaware Management Company in 1995 and serves as a vice
president. Prior to that, he held a manager position with Price Waterhouse
servicing the financial services industry.

Ms. Wachs joined Delaware Management Company in 1992 and serves as an assistant
vice president. Previously, she was an equity analyst at Goldman Sachs & Company
for two years.

Mr. Houghton joined Delaware Management Company in March 2000 and serves as a
vice president. Previously, he was with Lynch & Mayer, Inc., which he joined in
1990 as a portfolio manager and where he served as president from 1999 to 2000.
Prior to joining Lynch & Mayer, Inc., Mr. Houghton was chairman of BMI Capital
from 1984 to 1990, a portfolio manager at Neuberger & Berman from 1977 to 1984
and a partner of Oppenheimer & Co., Inc., from 1969 to 1977.

ADVISORY FEES

The funds paid advisory fees to Mitchell Hutchins for the most recent fiscal
year at the following rate of average daily net assets:

<TABLE>
<S> <C>
Growth Fund.................... 0.75%
Growth and Income Fund......... 0.70%
Mid Cap Fund................... 1.00%
</TABLE>

OTHER INFORMATION

The funds have received an exemptive order from the SEC that permits their
boards to appoint and replace sub-advisers and to amend sub-advisory contracts
without obtaining shareholder approval. A fund's shareholders must approve this
policy before its board may implement it. As of the date of this prospectus, the
shareholders of the funds have not been asked to do so.

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PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

DIVIDENDS AND TAXES
--------------------------------------------------------------------------------

DIVIDENDS

Growth and Income Fund normally pays semi-annual dividends and distributes any
gains annually. The other funds normally declare and pay dividends and
distribute any gains annually.

Classes with higher expenses are expected to have lower dividends. For example,
Class B shares and Class C are expected to have the lowest dividends of any
class of a fund's shares, while Class Y shares are expected to have the highest.

You will receive dividends in additional shares of the same class unless you
elect to receive them in cash. Contact your Financial Advisor at PaineWebber or
one of its correspondent firms if you prefer to receive dividends in cash.

TAXES

The dividends that you receive from a fund generally are subject to federal
income tax regardless of whether you receive them in additional fund shares or
in cash. If you hold fund shares through a tax-exempt account or plan, such as
an IRA or 401(k) plan, dividends on your shares generally will not be subject to
tax.

When you sell fund shares, you generally will be subject to federal income tax
on any gain you realize. If you exchange any fund's shares for shares of another
PaineWebber mutual fund, the transaction will be treated as a sale of the first
fund's shares, and any gain will be subject to federal income tax.

Growth and Income Fund expects that its dividends will include both ordinary
income and capital gain distributions. The other funds expect that their
dividends will be comprised primarily of capital gain distributions. The
distribution of capital gains will be taxed at a lower rate than ordinary income
if the fund held the assets that generated the gains for more than 12 months.
Your fund will tell you annually how you should treat its dividends for tax
purposes.

------------
--------------------------------------------------------------------------------
Prospectus Page 22

<PAGE>

--------------------------------------------------------------------------------
------------------------
PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

[THIS PAGE INTENTIONALLY LEFT BLANK]

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

<PAGE>

--------------------------------------------------------------------------------
------------------------
PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

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

The following financial highlights tables are intended to help you understand
the funds' financial performance for the past 5 years. Shorter periods are shown
for classes of fund shares that have existed for less than 5 years. Certain
information reflects financial results for a single fund share. In the tables,
'total investment return' represents the rate that an investor would have earned
(or lost) on an investment in a fund (assuming reinvestment of all dividends).

This information in the financial highlights has been audited by Ernst & Young
LLP, independent auditors, whose reports, along with the funds' financial
statements, are included in the funds' Annual Reports to Shareholders. Annual
Reports may be obtained without charge by calling 1-800-647-1568.

PAINEWEBBER GROWTH FUND

<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year... $ $ 20.08 $ 25.94 $ 24.37 $ 22.27
-------- -------- -------- -------- --------
Net investment income (loss)......... (0.10) (0.09) (0.08)'D' (0.12)
Net realized and unrealized gains
from investments.................... 8.88 1.01 3.76'D' 4.06
-------- -------- -------- -------- --------
Total increase from investment
operations.......................... 8.78 0.92 3.68 3.94
-------- -------- -------- -------- --------
Distributions from net realized gains
from investment transactions........ (2.01) (6.78) (2.11) (1.84)
-------- -------- -------- -------- --------
Net asset value, end of year......... $ $ 26.85 $ 20.08 $ 25.94 $ 24.37
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return(1)........... % 44.97% 3.37% 15.85% 18.43%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios/Supplemental data:
Net assets, end of year (000's)...... $ $295,906 $202,253 $201,725 $203,882
Expenses to average net assets, net
of waivers from adviser............. % 1.15% 1.19% 1.27% 1.28%
Net investment income (loss) to
average net assets, net of waivers
from adviser........................ % (0.41)% (0.39)% (0.32)% (0.49)%
Portfolio turnover................... % 38% 52% 86% 60%
<CAPTION>
CLASS B
--------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
--------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year... $ $ 18.44 $ 24.51 $ 23.30 $ 21.53
------- ------- -------- -------- --------
Net investment income (loss)......... (0.30) (0.30) (0.26)'D' (0.39)
Net realized and unrealized gains
from investments.................... 8.13 1.01 3.58 'D' 4.00
------- ------- -------- -------- --------
Total increase from investment
operations.......................... 7.83 0.71 3.32 3.61
------- ------- -------- -------- --------
Distributions from net realized gains
from investment transactions........ (2.01) (6.78) (2.11) (1.84)
------- ------- -------- -------- --------
Net asset value, end of year......... $ $ 24.26 $ 18.44 $ 24.51 $ 23.30
------- ------- -------- -------- --------
------- ------- -------- -------- --------
Total investment return(1)........... % 43.75% 2.55% 14.98% 17.48%
------- ------- -------- -------- --------
------- ------- -------- -------- --------
Ratios/Supplemental data:
Net assets, end of year (000's)...... $ $85,576 $ 74,094 $115,529 $140,551
Expenses to average net assets, net
of waivers from adviser............. % 1.96% 1.99% 2.06% 2.06%
Net investment income (loss) to
average net assets, net of waivers
from adviser........................ % (1.22)% (1.18)% (1.12)% (1.27)%
Portfolio turnover................... % 38% 52% 86% 60%
</TABLE>

---------
'D' Calculated using the average shares outstanding for the year.

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each year reported. The figures do not
include any applicable sales charges or program fees; results would be lower
if they were included.

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

<PAGE>

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

PAINEWEBBER GROWTH FUND

<TABLE>
<CAPTION>
CLASS C CLASS Y
------------------------------------------------------- -----------------------------------------------
FOR THE YEARS ENDED AUGUST 31, FOR THE YEARS ENDED AUGUST 31,
------------------------------------------------------- -----------------------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ $ 18.65 $ 24.71 $ 23.48 $ 21.68 $ $ 20.67 $ 26.46 $ 24.74 $ 22.53
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.26) (0.27) (0.27)'D' (0.34) (0.03) (0.03) (0.01)'D' (0.02)

8.18 0.99 3.61 'D' 3.98 9.16 1.02 3.84 'D' 4.07
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
7.92 0.72 3.34 3.64 9.13 0.99 3.83 4.05
------- ------- ------- ------- ------- ------- ------- ------- ------- -------

(2.01) (6.78) (2.11) (1.84) (2.01) (6.78) (2.11) (1.84)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$ $ 24.56 $ 18.65 $ 24.71 $ 23.48 $ $ 27.79 $ 20.67 $ 26.46 $ 24.74
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
% 43.74% 2.59% 14.95% 17.50% % 45.40% 3.61% 16.24% 18.72%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$ $35,793 $21,714 $24,760 $29,923 $ $33,383 $21,440 $20,281 $21,409
% 1.94% 1.99% 2.07% 2.07% % 0.86% 0.91% 1.00% 1.02%
% (1.20)% (1.19)% (1.13)% (1.28)% % (0.12)% (0.12)% (0.05)% (0.23)%
% 38% 52% 86% 60% % 38% 52% 86% 60%
</TABLE>

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Prospectus Page 25

<PAGE>

--------------------------------------------------------------------------------
------------------------
PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

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

PAINEWEBBER GROWTH AND INCOME FUND

<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year............................... $ $ 26.92 $ 30.60 $ 24.35 $ 22.52
-------- -------- -------- -------- --------
Net investment income............... 0.13 0.19 0.23 0.22
Net realized and unrealized gains
(losses) from investments and
options............................ 6.88 (0.99) 9.29 3.46
-------- -------- -------- -------- --------
Total increase (decrease) from
investment operations.............. 7.01 (0.80) 9.52 3.68
-------- -------- -------- -------- --------
Dividends from net investment
income............................. (0.08) (0.21) (0.25) (0.34)
Distributions from net realized
gains from investment
transactions....................... (1.78) (2.67) (3.02) (1.51)
-------- -------- -------- -------- --------
Total dividends and distributions to
shareholders....................... (1.86) (2.88) (3.27) (1.85)
-------- -------- -------- -------- --------
Net asset value, end of year........ $ $ 32.07 $ 26.92 $ 30.60 $ 24.35
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return(1).......... % 26.48% (3..51)% 42.42% 17.40%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios/Supplemental data:
Net assets, end of year (000's)..... $ $844,415 $670,606 $441,699 $276,016
Expenses to average net assets...... % 1.08% 1.07% 1.15% 1.20%(2)
Net investment income (loss) to
average net assets................. % 0.41% 0.71% 0.88% 0.98%(2)
Portfolio turnover.................. % 57% 62% 70% 112%
<CAPTION>
CLASS B
------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year............................... $ $ 26.77 $ 30.46 $ 24.26 $ 22.37
-------- -------- -------- -------- --------
Net investment income............... (0.15) (0.02) 0.04 0.04
Net realized and unrealized gains
(losses) from investments and
options............................ 6.88 (1.02) 9.23 3.45
-------- -------- -------- -------- --------
Total increase (decrease) from
investment operations.............. 6.73 (1.04) 9.27 3.49
-------- -------- -------- -------- --------
Dividends from net investment
income............................. -- -- (0.05) (0.09)
Distributions from net realized
gains from investment
transactions....................... (1.78) (2.65) (3.02) (1.51)
-------- -------- -------- -------- --------
Total dividends and distributions to
shareholders....................... (1.78) (2.65) (3.07) (1.60)
-------- -------- -------- -------- --------
Net asset value, end of year........ $ $ 31.72 $ 26.77 $ 30.46 $ 24.26
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return(1).......... % 25.51% (4.28)% 41.33% 16.49%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios/Supplemental data:
Net assets, end of year (000's)..... $ $306,557 $353,150 $376,840 $277,753
Expenses to average net assets...... % 1.86% 1.87% 1.93% 1.99%(2)
Net investment income (loss) to
average net assets................. % (0.37)% (0.08)% 0.11% 0.17%(2)
Portfolio turnover.................. % 57% 62% 70% 112%
</TABLE>

---------

(2) These ratios include non-recurring acquisition expenses of 0.04%.
------------
--------------------------------------------------------------------------------
Prospectus Page 26

<PAGE>

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

PAINEWEBBER GROWTH AND INCOME FUND

<TABLE>
<CAPTION>
CLASS C CLASS Y
---------------------------------------------------- -----------------------------------------------
FOR THE YEARS ENDED AUGUST 31, FOR THE YEARS ENDED AUGUST 31,
---------------------------------------------------- -----------------------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ $ 26.82 $ 30.53 $ 24.33 $ 22.43 $ $ 26.92 $ 30.59 $ 24.35 $ 22.54
-------- -------- -------- -------- -------- ------- ------- ------- ------- -------
(0.12) 0.01 0.05 0.05 0.24 0.30 0.32 0.30
6.86 (1.03) 9.24 3.46 6.86 (1.02) 9.26 3.45
-------- -------- -------- -------- -------- ------- ------- ------- ------- -------
6.74 (1.02) 9.29 3.51 7.10 (0.72) 9.58 3.75
-------- -------- -------- -------- -------- ------- ------- ------- ------- -------
-- (0.02) (0.07) (0.10) (0.12) (0.28) (0.32) (0.43)
(1.78) (2.67) (3.02) (1.51) (1.78) (2.67) (3.02) (1.51)
-------- -------- -------- -------- -------- ------- ------- ------- ------- -------
(1.78) (2.69) (3.09) (1.61) (1.90) (2.95) (3.34) (1.94)
-------- -------- -------- -------- -------- ------- ------- ------- ------- -------
$ $ 31.78 $ 26.82 $ 30.53 $ 24.33 $ $ 32.12 $ 26.92 $ 30.59 $ 24.35
-------- -------- -------- -------- -------- ------- ------- ------- ------- -------
-------- -------- -------- -------- -------- ------- ------- ------- ------- -------
% 25.49% (4.23)% 41.30% 16.52% % 26.82% (3.24)% 42.74% 17.77%
-------- -------- -------- -------- -------- ------- ------- ------- ------- -------
-------- -------- -------- -------- -------- ------- ------- ------- ------- -------
$ $165,948 $149,458 $ 84,922 $ 43,148 $ $30,468 $65,104 $65,518 $46,745
% 1.85% 1.85% 1.92% 1.99%(2) % 0.79% 0.80% 0.88% 0.92%(2)
% (0.36)% (0.07)% 0.10% 0.18%(2) % 0.70% 0.99% 1.14% 1.26%(2)
% 57% 62% 70% 112% % 57% 62% 70% 112%
</TABLE>

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Prospectus Page 27

<PAGE>

--------------------------------------------------------------------------------
------------------------
PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

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

PAINEWEBBER MID CAP FUND

<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
FOR THE
FIVE
FOR THE YEARS MONTHS
ENDED AUGUST 31, ENDED FOR THE YEARS ENDED MARCH 31,
------------------- AUGUST 31, -------------------------------
2000 1999 1998# 1998 1997 1996
-------- -------- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ $ 7.97 $ 15.00 $ 13.44 $ 15.61 $ 12.81
-------- -------- ------- -------- ------- -------
Net investment loss..... (0.07) (0.03) (0.13) (0.17) (0.16)
Net realized unrealized
gains (losses) from
investments............ 3.43 (3.15) 5.15 0.32 3.71
-------- -------- ------- -------- ------- -------
Net increase (decrease)
from investment
operations............. 3.36 (3.18) 5.02 0.15 3.55
-------- -------- ------- -------- ------- -------
Distributions from net
realized gains from
investments............ (0.66) (3.85) (3.46) (2.32) (0.75)
-------- -------- ------- -------- ------- -------
Net asset value, end of
period................. $ $ 10.67 $ 7.97 $ 15.00 $ 13.44 $ 15.61
-------- -------- ------- -------- ------- -------
-------- -------- ------- -------- ------- -------
Total investment
return(1).............. % 43.38% (27.31)% 41.50% (0.21)% 28.16%
-------- -------- ------- -------- ------- -------
-------- -------- ------- -------- ------- -------

Ratios/Supplemental
Data:
Net assets, end of
period (000's)......... $ $113,126 $90,650 $101,698 $76,909 76,558
Expenses to average net
assets, net of waivers
from adviser........... % 1.60% 1.48%* 1.51% 1.60% 1.58%
Net investment loss to
average net assets, net
of waivers from
adviser................ % (0.64)% (0.61)%* (1.16)% (1.20)% (1.11)%
Portfolio turnover...... % 79% 80% 64% 56% 57%

<CAPTION>
CLASS B
-----------------------------------------------------------------
FOR THE
FIVE
FOR THE YEARS MONTHS
ENDED AUGUST 31, ENDED FOR THE YEARS ENDED MARCH 31,
------------------- AUGUST 31, -------------------------------
2000 1999 1998# 1998 1997 1996
-------- -------- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ $ 7.99 $ 15.07 $ 13.59 $ 15.88 $ 13.11
------- ------- ------- -------- -------- --------
Net investment loss..... (0.27) (0.07) (0.31) (0.31) (0.29)
Net realized unrealized
gains (losses) from
investments............ 3.53 (3.16) 5.25 0.34 3.81
------- ------- ------- -------- -------- --------
Net increase (decrease)
from investment
operations............. 3.26 (3.23) 4.94 0.03 3.52
------- ------- ------- -------- -------- --------
Distributions from net
realized gains from
investments............ (0.66) (3.85) (3.46) (2.32) (0.75)
------- ------- ------- -------- -------- --------
Net asset value, end of
period................. $ $ 10.59 $ 7.99 $ 15.07 $ 13.59 $ 15.88
------- ------- ------- -------- -------- --------
------- ------- ------- -------- -------- --------
Total investment
return(1).............. % 41.95% (27.54)% 40.39% (0.99)% 27.28%
------- ------- ------- -------- -------- --------
------- ------- ------- -------- -------- --------
Ratios/Supplemental
Data:
Net assets, end of
period (000's)......... $ $28,077 $54,978 $143,058 $134,495 $157,021
Expenses to average net
assets, net of waivers
from adviser........... % 2.55% 2.32%* 2.28% 2.36% 2.34%
Net investment loss to
average net assets, net
of waivers from
adviser................ % (1.61)% (1.48)%* (1.92)% (1.95)% (1.87)%
Portfolio turnover...... % 79% 80% 64% 56% 57%
</TABLE>

---------

* Annualized.

# Effective May 1, 1998, Mitchell Hutchins took over day-to-day management of
the Fund's assets.

'D' Commencement of issuance of shares.

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates, and a sale
at net asset value on the last day of each period reported. The figures do
not include any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for periods less than
one year has not been annualized.

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

<PAGE>

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

PAINEWEBBER MID CAP FUND

<TABLE>
<CAPTION>
CLASS C CLASS Y
--------------------------------------------------------------- -------------------------------------------
FOR THE FOR THE FOR THE
FIVE FIVE PERIOD
FOR THE YEARS MONTHS FOR THE YEARS MONTHS MARCH 17,
ENDED AUGUST 31, ENDED FOR THE YEARS ENDED MARCH 31, ENDED AUGUST 31, ENDED 1998'D' TO
----------------- AUGUST 31, ------------------------------ ----------------- AUGUST 31, MARCH 31,
2000 1999 1998# 1998 1997 1996 2000 1999 1998# 1998
------- ------- ----- ---- ---- ---- ------- ------- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ $ 7.26 $ 14.07 $ 12.87 $ 15.14 $ 12.54 $ $ 7.97 $15.00 $14.90
------- ------- ------- ------- ------- ------- ------ ------ ------ ------
(0.15) (0.06) (0.26) (0.29) (0.27) (0.02) (0.01) 0.00
3.12 (2.90) 4.92 0.34 3.62 3.41 (3.17) 0.10
------- ------- ------- ------- ------- ------- ------ ------ ------ ------
2.97 (2.96) 4.66 0.05 3.35 3.39 (3.18) 0.10
------- ------- ------- ------- ------- ------- ------ ------ ------ ------
(0.66) (3.85) (3.46) (2.32) (0.75) (0.66) (3.85) --
------- ------- ------- ------- ------- ------- ------ ------ ------ ------
$ $ 9.57 $ 7.26 $ 14.07 $ 12.87 $ 15.14 $ $10.70 $ 7.97 $15.00
------- ------- ------- ------- ------- ------- ------ ------ ------ ------
------- ------- ------- ------- ------- ------- ------ ------ ------ ------
% 42.17% (27.58)% 40.46% (0.91)% 27.16% % 43.77% (27.31)% 0.67%
------- ------- ------- ------- ------- ------- ------ ------ ------ ------
------- ------- ------- ------- ------- ------- ------ ------ ------ ------

$ $16,594 $16,875 $27,814 $24,810 $27,601 $ $ 290 $ 65 $ 35
% 2.43% 2.28%* 2.29% 2.37% 2.36% % 1.36% 1.23%* 1.22%*
% (1.47)% (1.42)%* (1.94)% (1.97)% (1.89)% % (0.36)% (0.29)%* 0.00%*
% 79% 80% 64% 56% 57% % 79% 80% 64%
</TABLE>

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Prospectus Page 29

<PAGE>

--------------------------------------------------------------------------------
------------------------
PaineWebber Growth Fund PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
TICKER SYMBOL: Growth Fund Class: A: PGRAX Growth and Income Fund Class: A: PDGAX

B: PGRBX B: PDGBX

C: PGRDX C: PWDDX

Y: PGRYZ Y: PWGYX

Mid Cap Fund Class: A: PWCAX

B: PWCBX

C: PWCDX

Y: None
</TABLE>

If you want more information about the funds, the following documents are
available free upon request:

ANNUAL/SEMI-ANNUAL REPORTS

Additional information about the funds' investments is available in the funds'
annual and semi-annual reports to shareholders. In the funds' annual reports,
you will find a discussion of the market conditions and investment strategies
that significantly affected the funds' performance during the last fiscal year.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI provides more detailed information about the funds and is incorporated
by reference into this prospectus.

You may discuss your questions about the funds by contacting your Financial
Advisor. You may obtain free copies of the funds' annual and semi-annual reports
and the SAI by contacting the funds directly at 1-800-647-1568.

You may review and copy information about the funds, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You may obtain information about the operations of the SEC's Public
Reference Room by calling the SEC at 1-202-942-8090. You may get copies of
reports and other information about the funds:

For a fee, by electronic request at [email protected] or by writing the
SEC's Public Reference Section, Washington, D.C. 20549-0102; or

Free, from the EDGAR Database on the SEC's Internet website at:
http://www.sec.gov

PaineWebber Olympus Fund
-- PaineWebber Growth Fund
Investment Company Act File No. 811-4180

PaineWebber America Fund
-- PaineWebber Growth and Income Fund
Investment Company Act File No. 811-3502

PaineWebber Managed Assets Trust
-- PaineWebber Mid Cap Fund
Investment Company Act File No. 811-6376

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

<PAGE>

PAINEWEBBER GROWTH FUND
PAINEWEBBER GROWTH AND INCOME FUND
PAINEWEBBER MID CAP FUND
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114

STATEMENT OF ADDITIONAL INFORMATION

The three funds named above are diversified series of professionally
managed, open-end management investment companies organized as Massachusetts
business trusts (each a 'Trust'). PaineWebber Growth Fund is a series of
PaineWebber Olympus Fund. PaineWebber Growth and Income Fund is a series of
PaineWebber America Fund. PaineWebber Mid Cap Fund is a series of PaineWebber
Managed Assets Trust.

Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), a wholly
owned asset management subsidiary of PaineWebber Incorporated ('PaineWebber')
serves as the manager and administrator for each fund. As distributor for the
funds, Mitchell Hutchins has appointed PaineWebber to serve as dealer for the
sale of fund shares. Mitchell Hutchins has appointed unaffiliated investment
advisers (each a 'sub-adviser') to serve as sub-advisers for each fund's
investments.

Portions of each fund's Annual Report to Shareholders are incorporated by
reference into this Statement of Additional Information ('SAI'). The Annual
Reports accompany this SAI. You may obtain an additional copy of a fund's Annual
Report without charge by calling toll-free 1-800-647-1568.

This SAI is not a prospectus and should be read only in conjunction with the
funds' current Prospectus, dated December 31, 2000. A copy of the Prospectus may
be obtained by calling any PaineWebber Financial Advisor or correspondent firm
or by calling toll-free 1-800-647-1568. This SAI is dated December 31, 2000.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Funds and Their Investment Policies..................... 2
The Funds' Investments, Related Risks and Limitations....... 3
Strategies Using Derivative Instruments..................... 11
Organization of Trusts; Trustees and Officers; Principal
Holders and Management Ownership of Securities............ 18
Investment Management, Administration and Distribution
Arrangements.............................................. 25
Portfolio Transactions...................................... 32
Reduced Sales Charges, Additional Exchange and Redemption
Information and Other Services............................ 34
Conversion of Class B Shares................................ 39
Valuation of Shares......................................... 40
Performance Information..................................... 40
Taxes....................................................... 44
Other Information........................................... 47
Financial Statements........................................ 48
Appendix.................................................... A-1
</TABLE>

<PAGE>

THE FUNDS AND THEIR INVESTMENT POLICIES

No fund's investment objective may be changed without shareholder approval.
Except where noted, the other investment policies of each fund may be changed by
its board without shareholder approval. As with other mutual funds, there is no
assurance that a fund will achieve its investment objective.

The investment objective of GROWTH FUND is long-term capital appreciation.
The fund generally invests in common stocks of larger capitalization companies
that are believed to have substantial potential for capital growth. Alliance
Capital Management L.P. and State Street Global Advisors serve as the fund's
sub-advisers. Under normal circumstances, the fund invests at least 65% of its
total assets in equity securities.

Growth 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 that are rated below
investment grade. These bonds may be convertible bonds and may be rated no lower
than B+ by Standard and Poor's, a division of The McGraw-Hill Companies, Inc.
('S&P'), B-1 by Moody's Investors Service, Inc. ('Moody's) or comparably rated
by another rating agency or, if unrated, determined by a sub-adviser to be of
comparable quality. The fund may invest up to 25% of its total assets 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 market.

Growth Fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33 1/3% of its total assets. The fund
may borrow from banks or through reverse repurchase agreements for temporary or
emergency purposes, but not in excess of 10% of its total assets. The fund may
invest in the securities of other investment companies and may sell short
'against the box.'

The investment objective of GROWTH AND INCOME FUND is current income and
capital growth. Institutional Capital Corporation, Westwood Management
Corporation and State Street Global Advisors serve as the fund's sub-advisers.
Under normal circumstances, the fund invests at least 65% of its total assets in
equity securities believed to have substantial potential for capital growth. The
fund seeks to achieve the income portion of its objective by investing, under
normal circumstances, at least 65% of its total assets in income-producing
securities, which may include dividend-paying equity securities, bonds and money
market instruments. The fund may invest up to 10% of its total assets in
convertible securities rated below investment grade but no lower than B by S&P
or Moody's, comparably rated by another rating agency or, if unrated, determined
by a sub-adviser to be of comparable quality. The fund may also invest up to 25%
of its total assets in U.S. dollar denominated equity securities of foreign
issuers that are traded on recognized U.S. exchanges or in the U.S. over-the-
counter market.

Growth and Income Fund may invest up to 10% of its net assets in illiquid
securities. The fund may purchase securities on a when-issued or delayed
delivery basis. The fund may lend its portfolio securities to qualified
broker-dealers or institutional investors in an amount up to 33 1/3% of its
total assets. The fund may borrow from banks or through reverse repurchase
agreements for temporary or emergency purposes, but not in excess of 10% of its
total assets. The fund may invest in the securities of other investment
companies and may sell short 'against the box.'

The investment objective of MID CAP FUND is long-term capital appreciation.
Delaware Management Company serves as the fund's sub-adviser. Under normal
circumstances, the fund invests at least 65% of its total assets in equity
securities of medium capitalization ('mid cap') companies, which the fund
defines as companies having market capitalizations of at least $750 million and
no more than $8 billion at the time of purchase. The fund may invest up to 35%
of its total assets in equity securities of companies that are larger or smaller
than mid cap companies, as well as in bonds and money market instruments. The
fund may invest up to 35% of its total assets in U.S. dollar denominated equity
securities of foreign issuers that are traded on recognized U.S. exchanges or in
the U.S. over-the-counter market.

Mid Cap Fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to

<PAGE>

qualified broker-dealers or institutional investors in an amount up to 33 1/3%
of its total assets. The fund may borrow from banks or through reverse
repurchase agreements for temporary or emergency purposes, but not in excess of
10% of its total assets. The fund may invest in the securities of other
investment companies and may sell short 'against the box.'

THE FUNDS' INVESTMENTS, RELATED RISKS AND LIMITATIONS

The following supplements the information contained in the Prospectus and
above concerning the funds' investments, related risks and limitations. Except
as otherwise indicated in the Prospectus or this SAI, the funds have established
no policy limitations on their ability to use the investments or techniques
discussed in these documents.

EQUITY SECURITIES. Equity securities include common stocks, most preferred
stocks and securities that are convertible into them, including common stock
purchase warrants and rights, equity interests in trusts, partnerships, joint
ventures or similar enterprises and depositary receipts. Common stocks, the most
familiar type, represent an equity (ownership) interest in a corporation.

Preferred stock has certain fixed income features, like a bond, but actually
it is equity that is senior to a company's common stock. Convertible bonds may
include debentures and notes that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. Some preferred stock
also may be converted into or exchanged for common stock. Depositary receipts
typically are issued by banks or trust companies and evidence ownership of
underlying equity securities.

While past performance does not guarantee future results, equity securities
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. Common stocks generally represent the riskiest investment in a
company. It is possible that a fund may experience a substantial or complete
loss on an individual equity investment. While this is possible with bonds, it
is less likely.

BONDS. Bonds are fixed or variable rate debt obligations, including bills,
notes, debentures, money market instruments and similar instruments and
securities. Mortgage- and asset-backed securities are types of bonds, and
certain types of income-producing, non-convertible preferred stocks may be
treated as bonds for investment purposes. Bonds generally are used by
corporations and governments to borrow money from investors. The issuer pays the
investor a fixed or variable rate of interest and normally must repay the amount
borrowed on or before maturity. Many preferred stocks and some bonds are
'perpetual' in that they have no maturity date.

Bonds are subject to interest rate risk and credit risk. Interest rate risk
is the risk that interest rates will rise and that, as a result, bond prices
will fall, lowering the value of a fund's investments in bonds. In general,
bonds having longer durations are more sensitive to interest rate changes than
are bonds with shorter durations. Credit risk is the risk that an issuer may be
unable or unwilling to pay interest and/or principal on the bond. Credit risk
can be affected by many factors, including adverse changes in the issuer's own
financial condition or in economic conditions.

CONVERTIBLE SECURITIES. A convertible security is a bond, preferred stock or
other security that may be converted into or exchanged for a prescribed amount
of common stock of the same or a different issuer within a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest or dividends until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than common
stocks, but lower yields than comparable non-convertible securities, (2) are
less subject to fluctuation in value than the underlying stock because they have
fixed income characteristics and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases. While
no securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer's common stock. However,
the extent to which such risk is reduced depends in large measure upon the
degree to which the convertible security sells above its value as a fixed income
security.

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

WARRANTS. Warrants are securities permitting, but not obligating, holders to
subscribe for other securities. Warrants do not carry with them the right to
dividends or voting rights with respect to the securities that they entitle
their holder to purchase, and they do not represent any rights in the assets of
the issuer. As a result, warrants may be considered more speculative than
certain other types of investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities, and a warrant
ceases to have value if it is not exercised prior to its expiration date.

CREDIT RATINGS; NON-INVESTMENT GRADE BONDS. Moody's, S&P and other rating
agencies are private services that provide ratings of the credit quality of debt
obligations and certain other securities. A description of the ratings assigned
to corporate bonds by Moody's and S&P is included in the Appendix to this SAI.
Credit ratings attempt to evaluate the safety of principal and interest
payments, but they do not evaluate the volatility of a debt security's value or
its liquidity and do not guarantee the performance of the issuer. 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. There is a risk that rating agencies may
downgrade the rating of a bond. The funds may use these ratings in determining
whether to purchase, sell or hold a security. It should be emphasized, however,
that ratings are general and are not absolute standards of quality.
Consequently, securities with the same maturity, interest rate and rating may
have different market prices.

In addition to ratings assigned to individual bond issues, the applicable
sub-adviser will analyze interest rate trends and developments that may affect
individual issuers, including factors such as liquidity, profitability and asset
quality. The yields on bonds are dependent on a variety of factors, including
general money market conditions, general conditions in the bond market, the
financial condition of the issuer, the size of the offering, the maturity of the
obligation and its rating. There is a wide variation in the quality of bonds,
both within a particular classification and between classifications. An issuer's
obligations under its bonds are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of bond holders or
other creditors of an issuer; litigation or other conditions may also adversely
affect the power or ability of issuers to meet their obligations for the payment
of interest and principal on their bonds.

Investment grade bonds are rated in one of the four highest rating
categories by Moody's or S&P, comparably rated by another rating agency or, if
unrated, determined by a sub-adviser to be of comparable quality. Moody's
considers bonds rated Baa (its lowest investment grade rating) to have
speculative characteristics. This means that 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 bonds.

Non-investment grade bonds (commonly known as 'junk bonds') are rated Ba or
lower by Moody's, BB or lower by S&P, comparably rated by another rating agency
or, if unrated, determined by a sub-adviser to be of comparable quality. A
fund's investments in non-investment grade bonds entail greater risk than its
investments in higher rated bonds. Non-investment grade bonds, which are
sometimes referred to as 'high yield' bonds, are considered predominantly
speculative with respect to the issuer's ability to pay interest and repay
principal and may involve significant risk exposure to adverse conditions.
Non-investment grade bonds generally offer a higher current yield than that
available for investment grade issues; however, they involve greater risks, in
that they are especially sensitive to adverse changes in general economic
conditions and in the industries in which the issuers are engaged, to changes in
the financial condition of the issuers and to price fluctuations in response to
changes in interest rates. During periods of economic downturn or rising
interest rates, highly leveraged issuers may experience financial stress which
could adversely affect their ability to make payments of interest and principal
and increase the possibility of default. In addition, such issuers may not have
more traditional methods of financing available to them and may be unable to
repay debt at maturity by refinancing. The risk of loss due to default by such
issuers is significantly greater because such securities

<PAGE>

frequently are unsecured by collateral and will not receive payment until more
senior claims are paid in full.

The market for non-investment grade bonds, especially those of foreign
issuers, has expanded rapidly in recent years, which has been a period of
generally expanding growth and lower inflation. These securities will be
susceptible to greater risk when economic growth slows or reverses and when
inflation increases or deflation occurs. In the past, many lower rated bonds
experienced substantial price declines reflecting an expectation that many
issuers of such securities might experience financial difficulties. As a result,
the yields on lower rated bonds rose dramatically. However, such higher yields
did not reflect the value of the income stream that holders of such securities
expected, but rather the risk that holders of such securities could lose a
substantial portion of their value as a result of the issuers' financial
restructurings or defaults. There can be no assurance that such declines will
not recur.

The market for non-investment grade bonds generally is thinner and less
active than that for higher quality securities, which may limit a fund's ability
to sell such securities at fair value in response to changes in the economy or
financial markets. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may also decrease the values and liquidity of
non-investment grade securities, especially in a thinly traded market.

U.S. GOVERNMENT SECURITIES. U.S. government securities include direct
obligations of the U.S. Treasury (such as Treasury bills, notes or bonds) and
obligations issued or guaranteed as to principal and interest (but not as to
market value) by the U.S. government, its agencies or its instrumentalities.
U.S. government securities include mortgage-backed securities issued or
guaranteed by government agencies or government-sponsored enterprises. Other
U.S. government securities may be backed by the full faith and credit of the
U.S. government or supported primarily or solely by the creditworthiness of the
government-related issuer or, in the case of mortgage-backed securities, by
pools of assets.

U.S. government securities also include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury,
which are traded independently under the Separate Trading of Registered Interest
and Principal of Securities ('STRIPS') program. Under the STRIPS program, the
principal and interest components are individually numbered and separately
issued by the U.S. Treasury.

Treasury inflation-protected securities ('TIPS') (also known as
'inflation-indexed securities') are Treasury bonds on which the principal value
is adjusted daily in accordance with changes in the Consumer Price Index.
Interest on TIPS is payable semi-annually on the adjusted principal value. The
principal value of TIPS would decline during periods of deflation, but the
principal amount payable at maturity would not be less than the original par
amount. If inflation is lower than expected while a fund holds TIPS, the fund
may earn less on the TIPS than it would on conventional Treasury bonds. Any
increase in the value of TIPS is taxable in the year the increase occurs, even
though holders do not receive cash representing the increase at that time. See
'Taxes -- Other Information,' below.

INVESTING IN FOREIGN SECURITIES. The funds may invest in U.S.
dollar-denominated equity securities of foreign issuers that are traded on
recognized U.S. exchanges or in the U.S. over-the-counter market. Securities of
foreign issuers may not be registered with the Securities and Exchange
Commission ('SEC'), and the issuers thereof may not be subject to its reporting
requirements. Accordingly, there may be less publicly available information
concerning foreign issuers of securities held by the funds than is available
concerning U.S. companies. Foreign companies are not generally subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory requirements comparable to those applicable to U.S. companies.

The funds may invest in foreign securities by purchasing American Depositary
Receipts ('ADRs'). ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities. They generally are in
registered form, are denominated in U.S. dollars and are designed for use in the
U.S. securities markets. For purposes of each fund's investment policies, ADRs
generally are deemed to have the same classification as the underlying
securities they represent. Thus, an ADR representing ownership of common stock
will be treated as common stock.

ADRs are publicly traded on exchanges or over-the-counter in the United
States and are issued through 'sponsored' or 'unsponsored' arrangements. In a
sponsored ADR arrangement, the foreign

<PAGE>

issuer assumes the obligation to pay some or all of the depositary's transaction
fees, whereas under an unsponsored arrangement, the foreign issuer assumes no
obligations and the depositary's transaction fees are paid directly by the ADR
holders. In addition, less information is available in the United States about
an unsponsored ADR than about a sponsored ADR.

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

ILLIQUID SECURITIES. The term 'illiquid securities' means securities that
cannot be disposed of within seven days in the ordinary course of business at
approximately the amount at which a fund has valued the securities and includes,
among other things, purchased over-the-counter options, repurchase agreements
maturing in more than seven days and restricted securities other than those the
applicable sub-adviser has determined are liquid pursuant to guidelines
established by each fund's board. The assets used as cover for over-the-counter
options written by the funds will be considered illiquid unless the
over-the-counter options are sold to qualified dealers who agree that the funds
may repurchase any over-the-counter options they write at a maximum price to be
calculated by a formula set forth in the option agreements. The cover for an
over-the-counter option written subject to this procedure would be considered
illiquid only to the extent that the maximum repurchase price under the formula
exceeds the intrinsic value of the option. A fund may not be able readily to
liquidate its investments in illiquid securities and may have to sell other
investments if necessary to raise cash to meet its obligations. The lack of a
liquid secondary market for illiquid securities may make it more difficult for a
fund to assign a value to those securities for purposes of valuing its portfolio
and calculating its net asset value.

Restricted securities are not registered under the Securities Act of 1933,
as amended ('Securities Act'), and may be sold only in privately negotiated or
other exempted transactions or after a Securities Act registration statement has
become effective. Where registration is required, a fund may be obligated to pay
all or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time a fund may be permitted to
sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a less
favorable price than prevailed when it decided to sell.

Not all restricted securities are illiquid. A large institutional market has
developed for many U.S. and foreign securities that are not registered under the
Securities Act. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend either on an
efficient institutional market in which such unregistered securities can be
readily resold or on an issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal restrictions on resale
to the general public or certain institutions is not dispositive of the
liquidity of such investments.

Institutional markets for restricted securities also have developed as a
result of Rule 144A under the Securities Act, which establishes a 'safe harbor'
from the registration requirements of the Securities Act for resales of certain
securities to qualified institutional buyers. Such markets include automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc. An insufficient number of
qualified institutional buyers interested in purchasing Rule 144A-eligible
restricted securities held by a fund, however, could affect adversely the
marketability of the securities, and the fund might be unable to dispose of them
promptly or at favorable prices.

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

<PAGE>

Each sub-adviser also monitors the holdings of illiquid securities in the
portion of a fund's investments that it manages. If a fund's holdings of
illiquid securities exceeds its limitation on investments in illiquid securities
for any reason (such as a particular security becoming illiquid, changes in the
relative market values of liquid and illiquid portfolio securities or
shareholder redemptions), the applicable sub-adviser and Mitchell Hutchins will
consider what action would be in the best interests of a fund and its
shareholders. Such action may include engaging in an orderly disposition of
securities to reduce the fund's holdings of illiquid securities. However, a fund
is not required to dispose of illiquid securities under these circumstances.)

REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a
fund purchases securities or other obligations from a bank or securities dealer
(or its affiliate) and simultaneously commits to resell them to the counterparty
at an agreed-upon date or upon demand and at a price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased obligations.
A fund maintains custody of the underlying obligations prior to their
repurchase, either through its regular custodian or through a special
'tri-party' custodian or sub-custodian that maintains separate accounts for both
the fund and its counterparty. Thus, the obligation of the counterparty to pay
the repurchase price on the date agreed to or upon demand is, in effect, secured
by such obligations.

Repurchase agreements carry certain risks not associated with direct
investments in securities, including a possible decline in the market value of
the underlying obligations. If their value becomes less than the repurchase
price, plus any agreed-upon additional amount, the counterparty must provide
additional collateral so that at all times the collateral is at least equal to
the repurchase price plus any agreed-upon additional amount. The difference
between the total amount to be received upon repurchase of the obligations and
the price that was paid by a fund upon acquisition is accrued as interest and
included in its net investment income. Repurchase agreements involving
obligations other than U.S. government securities (such as commercial paper and
corporate bonds) may be subject to special risks and may not have the benefit of
certain protections in the event of the counterparty's insolvency. If the seller
or guarantor becomes insolvent, the fund may suffer delays, costs and possible
losses in connection with the disposition of collateral. Each fund intends to
enter into repurchase agreements only in transactions with counterparties
believed by Mitchell Hutchins to present minimum credit risks.

REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the
sale of securities held by a fund subject to the fund's agreement to repurchase
the securities at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest. Reverse repurchase agreements are subject to each
fund's limitation on borrowings and may be entered into only with banks or
securities dealers or their affiliates. While a reverse repurchase agreement is
outstanding, a fund will maintain, in a segregated account with its custodian,
cash or liquid securities, marked to market daily, in an amount at least equal
to its obligations under the reverse repurchase agreement. See 'The Funds'
Investments, Related Risks and Limitations -- Segregated Accounts.'

Reverse repurchase agreements involve the risk that the buyer of the
securities sold by a fund might be unable to deliver them when that fund seeks
to repurchase. If the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, the buyer or trustee or receiver may
receive an extension of time to determine whether to enforce a fund's obligation
to repurchase the securities, and the fund's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such decision.

TEMPORARY AND DEFENSIVE INVESTMENTS; MONEY MARKET INVESTMENTS. Each fund may
invest in money market investments for temporary or defensive purposes, to
reinvest cash collateral from its securities lending activities or as part of
its normal investment program. Such investments include, among other things,
(1) securities issued or guaranteed by the U.S. government or one of its
agencies or instrumentalities, (2) debt obligations of banks, savings and loan
institutions, insurance companies and mortgage bankers, (3) commercial paper and
notes, including those with variable and floating rates of interest, (4) debt
obligations of foreign branches of U.S. banks, U.S. branches of foreign banks
and foreign branches of foreign banks, (5) debt obligations issued or guaranteed
by one or more foreign governments or any of their political subdivisions,
agencies or instrumentalities, including obligations of supranational entities,
(6) bonds issued by foreign issuers, (7) repurchase agreements and
(8) securities

<PAGE>

of other investment companies that invest exclusively in money market
instruments and similar private investment vehicles.

INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each fund may invest in
securities of other investment companies, subject to limitations imposed by the
Investment Company Act of 1940, as amended ('Investment Company Act'). Among
other things, these limitations currently restrict a fund's aggregate
investments in other investment companies to no more than 10% of its total
assets. The fund's investment in certain private investment vehicles are not
subject to this restriction. A shares of other investment companies are subject
to the management fees and other expenses of those companies, and the purchase
of shares of some investment companies requires the payment of sales loads and
(in the case of closed-end investment companies) sometimes substantial premiums
above the value of such companies' portfolio securities. At the same time, a
fund would continue to pay its own management fees and expenses with respect to
all its investments, including shares of other investment companies. A fund may
invest in the shares of other investment companies when, in the judgment of the
applicable sub-adviser, the potential benefits of the investment outweigh the
payment of any management fees and expenses and, where applicable, premium or
sales load.

LENDING OF PORTFOLIO SECURITIES. Each fund is authorized to lend its
portfolio securities to broker-dealers or institutional investors that Mitchell
Hutchins deems qualified. Lending securities enables a fund to earn additional
income, but could result in a loss or delay in recovering these securities. The
borrower of a fund's portfolio securities must maintain acceptable collateral
with the fund's custodian in an amount, marked to market daily, at least equal
to the market value of the securities loaned, plus accrued interest and
dividends. Acceptable collateral is limited to cash, U.S. government securities
and irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. Each fund may reinvest any cash collateral in money market
investments or other short-term liquid investments, including other investment
companies. The fund also may reinvest cash collateral in private investment
vehicles similar to money market funds, including one managed by Mitchell
Hutchins. In determining whether to lend securities to a particular
broker-dealer or institutional investor, Mitchell Hutchins will consider, and
during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. Each fund will
retain authority to terminate any of its loans at any time. Each fund may pay
reasonable fees in connection with a loan and may pay the borrower or placing
broker a negotiated portion of the interest earned on the reinvestment of cash
held as collateral. A fund will receive amounts equivalent to any dividends,
interest or other distributions on the securities loaned. Each fund will regain
record ownership of loaned securities to exercise beneficial rights, such as
voting and subscription rights, when regaining such rights is considered to be
in the fund's interest.

Pursuant to procedures adopted by the boards governing each fund's
securities lending program, PaineWebber has been retained to serve as lending
agent for each fund. The boards also have authorized the payment of fees
(including fees calculated as a percentage of invested cash collateral) to
PaineWebber for these services. Each board periodically reviews all portfolio
securities loan transactions for which PaineWebber acted as lending agent.
PaineWebber also has been approved as a borrower under each fund's securities
lending program.

SHORT SALES 'AGAINST THE BOX.' Each fund may engage in short sales of
securities it owns or has the right to acquire at no added cost through
conversion or exchange of other securities it owns (short sales 'against the
box'). To make delivery to the purchaser in a short sale, the executing broker
borrows the securities being sold short on behalf of a fund, and that fund is
obligated to replace the securities borrowed at a date in the future. When a
fund sells short, it establishes a margin account with the broker effecting the
short sale and deposits collateral with the broker. In addition, that fund
maintains with its custodian, in a segregated account, the securities that could
be used to cover the short sale. Each fund incurs transaction costs, including
interest expense, in connection with opening, maintaining and closing short
sales against the box.

A fund might make a short sale 'against the box' to hedge against market
risks when a sub-adviser believes that the price of a security may decline,
thereby causing a decline in the value of a security owned by a fund or a
security convertible into or exchangeable for a security owned by a fund. In
such case, any loss in a fund's long position after the short sale should be
reduced by a gain in the short

<PAGE>

position. Conversely, any gain in the long position should be reduced by a loss
in the short position. The extent to which gains or losses in the long position
are reduced will depend upon the amount of the securities sold short relative to
the amount of securities a fund owns, either directly or indirectly, and in the
case where a fund owns convertible securities, changes in the investment value
or conversion premiums of such securities.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each fund may purchase
securities on a 'when-issued' basis or may purchase or sell securities for
delayed delivery, i.e., for issuance or delivery to or by the fund later than
the normal settlement date for such securities at a stated price and yield. A
fund generally would not pay for such securities or start earning interest on
them until they are received. However, when a fund undertakes a when-issued or
delayed delivery obligation, it immediately assumes the risks of ownership,
including the risks of price fluctuation. Failure of the issuer to deliver a
security purchased by a fund on a when-issued or delayed delivery basis may
result in the fund's incurring or missing an opportunity to make an alternative
investment. Depending on market conditions, a fund's when-issued and delayed
delivery purchase commitments could cause its net asset value per share to be
more volatile, because such securities may increase the amount by which the
fund's total assets, including the value of when-issued and delayed delivery
securities held by that fund, exceeds its net assets.

A security purchased on a when-issued or delayed delivery basis is recorded
as an asset on the commitment date and is subject to changes in market value,
generally based upon changes in the level of interest rates. Thus, fluctuation
in the value of the security from the time of the commitment date will affect a
fund's net asset value. When a fund commits to purchase securities on a
when-issued or delayed delivery basis, its custodian segregates assets to cover
the amount of the commitment. See 'The Funds' Investments, Related Risks and
Limitations -- Segregated Accounts.' A fund's when-issued and delayed delivery
purchase commitments could cause its net asset value per share to be more
volatile. A fund may sell the right to acquire the security prior to delivery if
a sub-adviser deems it advantageous to do so, which may result in a gain or loss
to the fund.

COUNTERPARTIES. The funds may be exposed to the risk of financial failure or
insolvency of another party. To help lessen those risks, each sub-adviser,
subject to the supervision of the applicable board, monitors and evaluates the
creditworthiness of the parties with which a fund does business.

SEGREGATED ACCOUNTS. When a fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis and reverse
repurchase agreements, it will maintain with an approved custodian in a
segregated account cash or liquid securities, marked to market daily, in an
amount at least equal to the fund's obligation or commitment under such
transactions. As described below under 'Strategies Using Derivative
Instruments,' segregated accounts may also be required in connection with
certain transactions involving options, futures and swaps.

INVESTMENT LIMITATIONS OF THE FUNDS

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

Each fund will not:

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

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

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

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

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

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

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

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

NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the appropriate board without
shareholder approval. If a percentage restriction is adhered to at the time of
an investment or transaction, later changes in percentage resulting from a
change in values of portfolio securities or amount of total assets will not be
considered a violation of any of the following limitations.

Each fund will not:

(1) invest more than 10% of its net assets in illiquid securities.

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

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

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

<PAGE>

(5) purchase securities of other investment companies, except to the
extent permitted by the Investment Company Act and except that this
limitation does not apply to securities received or acquired as dividends,
through offers of exchange, or as a result of reorganization, consolidation,
or merger (and except that a fund will not purchase securities of registered
open-end investment companies or registered unit investment trusts in
reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the Investment Company
Act).

STRATEGIES USING DERIVATIVE INSTRUMENTS

GENERAL DESCRIPTION OF DERIVATIVE INSTRUMENTS. Each sub-adviser may use a
variety of financial instruments ('Derivative Instruments'), including certain
options, futures contracts (sometimes referred to as 'futures'), options on
futures contracts and swap transactions. A fund may enter into transactions
involving one or more types of Derivative Instruments under which the full value
of its portfolio is at risk. Under normal circumstances, however, each fund's
use of these instruments will place at risk a much smaller portion of its
assets. The particular Derivative Instruments that may be used by the funds are
described below.

A fund might not use any Derivative Instruments or derivative strategies,
and there can be no assurance that using any strategy will succeed. If a
sub-adviser is incorrect in its judgment on market values, interest rates or
other economic factors in using a Derivative Instrument or strategy, a fund may
have lower net income and a net loss on the investment.

Options on Equity and Debt Securities -- A call option is a short-term
contract pursuant to which the purchaser of the option, in return for a premium,
has the right to buy the security underlying the option at a specified price at
any time during the term of the option or at specified times or at the
expiration of the option, depending on the type of option involved. The writer
of the call option, who receives the premium, has the obligation, upon exercise
of the option during the option term, to deliver the underlying security against
payment of the exercise price. A put option is a similar contract that gives its
purchaser, in return for a premium, the right to sell the underlying security at
a specified price during the option term or at specified times or at the
expiration of the option, depending on the type of option involved. The writer
of the put option, who receives the premium, has the obligation, upon exercise
of the option during the option term, to buy the underlying security at the
exercise price.

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

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

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

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

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market price of the futures contract exceeds, in the case of a call, or is less
than, in the case of a put, the exercise price of the option on the future. The
writer of an option, upon exercise, will assume a short position in the case of
a call and a long position in the case of a put.

GENERAL DESCRIPTION OF STRATEGIES USING DERIVATIVE INSTRUMENTS. A fund may
use Derivative Instruments to attempt to hedge its portfolio and also to attempt
to enhance income or return or realize gains or to manage the duration of its
bond investments. For example, a fund may use Derivative Instruments to
stimulate full investment by the fund while retaining a cash balance for fund
management purposes (such as to provide liquidity to meet anticipated
shareholder sales of fund shares and for fund operating expenses), to reduce
transaction costs and to facilitate trading.

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

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

A fund may purchase and write (sell) straddles on securities or indices of
securities. A long straddle is a combination of a call and a put option
purchased on the same security or on the same futures contract, where the
exercise price of the put is equal to the exercise price of the call. A fund
might enter into a long straddle when a sub-adviser believes it likely that the
prices of the securities will be more volatile during the term of the option
than the option pricing implies. A short straddle is a combination of a call and
a put written on the same security where the exercise price of the put is equal
to the exercise price of the call. A fund might enter into a short straddle when
a sub-adviser believes it unlikely that the prices of the securities will be as
volatile during the term of the option as the option pricing implies.

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

Income strategies using Derivative Instruments may include the writing of
covered options to obtain the related option premiums. Return or gain strategies
may include using Derivative Instruments to increase or decrease a fund's
exposure to different asset classes without buying or selling the underlying
instruments. A fund also may use derivatives to simulate full investment by the
fund while maintaining a cash balance for fund management purposes (such as to
provide liquidity to meet anticipated shareholder sales of fund shares and for
fund operating expenses).

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

<PAGE>

In addition to the products, strategies and risks described below and in the
Prospectus, a sub-adviser may discover additional opportunities in connection
with Derivative Instruments and with hedging, income, return and gain
strategies. These new opportunities may become available as regulatory
authorities broaden the range of permitted transactions and as new Derivative
Instruments and techniques are developed. Each sub-adviser may use these
opportunities for a fund to the extent that they are consistent with the fund's
investment objective and permitted by its investment limitations and applicable
regulatory authorities. The funds' Prospectus or this SAI will be supplemented
to the extent that new products or techniques involve materially different risks
than those described below or in the Prospectus.

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

(1) Successful use of most Derivative Instruments depends upon the ability
of a sub-adviser to predict movements of the overall securities or interest rate
markets, which requires different skills than predicting changes in the prices
of individual securities. While each sub-adviser is experienced in the use of
Derivative Instruments, there can be no assurance that any particular strategy
adopted will succeed.

(2) There might be imperfect correlation, or even no correlation, between
price movements of a Derivative Instrument and price movements of the
investments that are being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value of
the hedged investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors affecting the markets in which Derivative
Instruments are traded, rather than the value of the investments being hedged.
The effectiveness of hedges using Derivative Instruments on indices will depend
on the degree of correlation between price movements in the index and price
movements in the securities being hedged.

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

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

COVER FOR STRATEGIES USING DERIVATIVE INSTRUMENTS. Transactions using
Derivative Instruments, other than purchased options, expose a fund to an
obligation to another party. A fund will not enter into any such transactions
unless it owns either (1) an offsetting ('covered') position in securities or
other options or futures contracts or (2) cash or liquid securities with a value
sufficient at all times to cover its potential obligations to the extent not
covered as provided in (1) above. Each fund will comply with SEC guidelines
regarding cover for such transactions and will, if the guidelines so require,
set aside cash or liquid securities in a segregated account with its custodian
in the prescribed amount.

<PAGE>

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

OPTIONS. The funds may purchase put and call options, and write (sell)
covered put or call options on securities in which they invest and related
indices. The purchase of call options may serve as a long hedge, and the
purchase of put options may serve as a short hedge. A fund may also use options
to attempt to enhance return or realize gains by increasing or reducing its
exposure to an asset class without purchasing or selling the underlying
securities. Writing covered put or call options can enable a fund to enhance
income by reason of the premiums paid by the purchasers of such options. Writing
covered call options serves as a limited short hedge, because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security appreciates to a price
higher than the exercise price of the call option, it can be expected that the
option will be exercised and the affected fund will be obligated to sell the
security at less than its market value. Writing covered put options serves as a
limited long hedge, because increases in the value of the hedged investment
would be offset to the extent of the premium received for writing the option.
However, if the security depreciates to a price lower than the exercise price of
the put option, it can be expected that the put option will be exercised and the
fund will be obligated to purchase the security at more than its market value.
The securities or other assets used as cover for over-the-counter options
written by a fund would be considered illiquid to the extent described under
'The Funds' Investments, Related Risks and Limitations -- Illiquid Securities.'

The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options normally have expiration dates
of up to nine months. Generally, over-the-counter options on bonds are
European-style options. This means that the option can only be exercised
immediately prior to its expiration. This is in contract to American-style
options that may be exercised at any time. There are also other types of options
that may be exercised on certain specified dates before expiration. Options that
expire unexercised have no value.

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

The funds may purchase and write both exchange-traded and over-the-counter
options. Currently, many options on equity securities (stocks) are
exchange-traded. Exchange markets for options on bonds exist but are relatively
new, and these instruments are primarily traded on the over-the-counter market.
Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed that, in
effect, guarantees completion of every exchange-traded option transaction. In
contrast, over-the-counter options are contracts between a fund and its
counterparty (usually a securities dealer or a bank) with no clearing
organization guarantee. Thus, when a fund purchases or writes an
over-the-counter option, it relies on the counterparty to make or take delivery
of the underlying investment upon exercise of the option. Failure by the
counterparty to do so would result in the loss of any premium paid by the fund
as well as the loss of any expected benefit of the transaction.

The funds' ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The funds intend to
purchase or write only those exchange-traded options for which there appears to
be a liquid secondary market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
over-the-counter options only by negotiating directly with the counterparty, or
by a transaction in the secondary market if any such market exists. Although the
funds will enter into over-the-counter options only with counterparties that are
expected to be capable of entering into closing transactions with a fund, there
is no assurance

<PAGE>

that a fund will in fact be able to close out an over-the-counter option
position at a favorable price prior to expiration. In the event of insolvency of
the counterparty, a fund might be unable to close out an over-the-counter option
position at any time prior to its expiration.

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

A fund may purchase and write put and call options on indices in much the
same manner as the more traditional options discussed above, except the index
options may serve as a hedge against overall fluctuations in a securities market
(or market sector) rather than anticipated increases or decreases in the value
of a particular security.

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

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

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

(3) The aggregate premiums paid on all options (including options on
securities and stock or bond indices and options on futures contracts)
purchased by a fund that are held at any time will not exceed 20% of its net
assets.

FUTURES. The funds may purchase and sell securities index futures contracts
and interest rate future contracts. The funds may purchase put and call options,
and write covered put and call options, on futures in which it is allowed to
invest. The purchase of futures or call options thereon can serve as a long
hedge, and the sale of futures or the purchase of put options thereon can serve
as a short hedge. Writing covered call options on futures contracts can serve as
a limited short hedge, and writing covered put options on futures contracts can
serve as a limited long hedge, using a strategy similar to that used for writing
covered options on securities or indices. In addition, a fund may purchase or
sell futures contracts or purchase options thereon to increase or reduce its
exposure to an asset class without purchasing or selling the underlying
securities, either as a hedge or to enhance return or realize gains.

Futures strategies also can be used to manage the average duration of a
fund's bond portfolio. If a sub-adviser wishes to shorten the average duration
of a fund's bond portfolio, the fund may sell a futures contract or a call
option thereon, or purchase a put option on that futures contract. If a sub-
adviser wishes to lengthen the average duration of a fund's bond portfolio, the
fund may buy a futures contract or a call option thereon, or sell a put option
thereon.

A fund may also write put options on futures contracts while at the same
time purchasing call options on the same futures contracts in order
synthetically to create a long futures contract position. Such options would
have the same strike prices and expiration dates. A fund will engage in this
strategy only when it is more advantageous to a fund than is purchasing the
futures contract.

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

<PAGE>

level of its initial margin payment, and initial margin requirements might be
increased generally in the future by regulatory action.

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

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

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

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

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

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

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

(2) The aggregate premiums paid on all options (including options on
securities, foreign currencies and securities indices and options on futures
contracts) purchased by each fund that are held at any time will not exceed
20% of its net assets.

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

<PAGE>

SWAP TRANSACTIONS. Each fund may enter into swap transactions, which include
swaps, caps, floors and collars relating to interest rates, securities or other
instruments. Interest rate swaps involve an agreement between two parties to
exchange payments that are based, for example, on variable and fixed rates of
interest and that are calculated on the basis of a specified amount of principal
(the 'notional principal amount') for a specified period of time. Interest rate
cap and floor transactions involve an agreement between two parties in which the
first party agrees to make payments to the counterparty when a designated market
interest rate goes above (in the case of a cap) or below (in the case of a
floor) a designated level on predetermined dates or during a specified time
period. Interest rate collar transactions involve an agreement between two
parties in which payments are made when a designated market interest rate either
goes above a designated ceiling level or goes below a designated floor level on
predetermined dates or during a specified time period. Equity swaps or other
swaps relating to securities or other instruments are also similar, but they are
based on changes in the value of the underlying securities or instruments. For
example, an equity swap might involve an exchange of the value of a particular
security or securities index in a certain notional amount for the value of
another security or index or for the value of interest on that notional amount
at a specified fixed or variable rate.

A fund may enter into interest rate swap transactions to preserve a return
or spread on a particular investment or portion of its bond portfolio or to
protect against any increase in the price of securities it anticipates
purchasing at a later date. A fund may use interest rate swaps, caps, floors and
collars as a hedge on either an asset-based or liability-based basis, depending
on whether it is hedging its assets or its liabilities. Interest rate swap
transactions are subject to risks comparable to those described above with
respect to other derivatives strategies.

A fund will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out, with the fund receiving or paying, as the case may be,
only the net amount of the two payments. Since segregated accounts will be
established with respect to such transactions, each sub-adviser believes such
obligations do not constitute senior securities and, accordingly, will not treat
them as being subject to the fund's borrowing restrictions. The net amount of
the excess, if any, of the fund's obligations over its entitlements with respect
to each swap will be accrued on a daily basis, and appropriate fund assets
having an aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account as described above in 'Investment Policies
and Restrictions -- Segregated Accounts.' The fund also will establish and
maintain such segregated accounts with respect to its total obligations under
any swaps that are not entered into on a net basis.

A fund will enter into interest rate swap transactions only with banks and
recognized securities dealers or their respective affiliates believed by the
applicable sub-adviser to present minimal credit risk in accordance with
guidelines established by the fund's board. If there is a default by the other
party to such a transaction, the fund will have to rely on its contractual
remedies (which may be limited by bankruptcy, insolvency or similar laws)
pursuant to the agreements related to the transaction.

<PAGE>

ORGANIZATION OF TRUSTS; TRUSTEES AND OFFICERS;
PRINCIPAL HOLDERS MANAGEMENT OWNERSHIP OF SECURITIES

Each Trust was formed as a business trust under the laws of the Commonwealth
of Massachusetts. America Fund and Olympus Fund were formed on October 31, 1986.
Managed Assets Trust was formed on August 9, 1991. Each Trust has one series.
Each Trust is governed by a board of trustees, which is authorized to establish
additional series and to issue an unlimited number of shares of beneficial
interest of each existing or future series, par value $0.001 per share. The
board of each Trust oversees its operations.

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

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
Margo N. Alexander*; 53 Trustee and President Mrs. Alexander is Chairman (since March
1999), and a director of Mitchell
Hutchins (since January 1995), and an
executive vice president and a director
of PaineWebber (since March 1984). She
was chief executive officer of Mitchell
Hutchins from January 1995 to October
2000. Mrs. Alexander is president and a
director or trustee of 30 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.

Richard Q. Armstrong; 65 Trustee Mr. Armstrong is chairman and principal
One Old Church Road of R.Q.A. Enterprises (management
Unit #6 consulting firm) (since April 1991 and
Greenwich, CT 06830 principal occupation since March 1995).
Mr. Armstrong was chairman of the board,
chief executive officer and co-owner of
Adirondack Beverages (producer and
distributor of soft drinks and
sparkling/still waters) (October
1993-March 1995). He was a partner of
The New England Consulting Group
(management consulting firm) (December
1992-September 1993). He was managing
director of LVMH U.S. Corporation (U.S.
subsidiary of the French luxury goods
conglomerate, Louis Vuitton Moet
Hennessey Corporation) (1987-1991) and
chairman of its wine and spirits
subsidiary, Schieffelin & Somerset
Company (1987-1991). Mr. Armstrong is a
director or trustee of 29 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.**'D'; Trustee and Chairman of Mr. Bewkes is a director of Paine Webber
74 the Board of Trustees Group Inc. ('PW Group') (holding company
of PaineWebber and Mitchell Hutchins).
Prior to December 1995, he was a
consultant to PW Group. Prior to 1988,
he was chairman of the board, president
and chief executive officer of American
Bakeries Company. Mr. Bewkes is a
director of Interstate Bakeries
Corporation. Mr. Bewkes is a director or
trustee of 40 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

Richard R. Burt; 55 Trustee Mr. Burt is chairman of IEP Advisors,
1275 Pennsylvania Ave, N.W. LLP (international investments and
Washington, DC 20004 consulting firm) (since March 1994) and
a partner of McKinsey & Company
(management consulting firm) (since
1991). He is also a director of Archer-
Daniels-Midland Co. (agricultural
commodities), Hollinger International
Co. (publishing), Homestake Mining Corp.
(gold mining), six investment companies
in the Deutsche Bank family of funds,
nine investment companies in the Flag
Investors family of funds, The Central
European Fund, Inc. and The Germany
Fund, Inc., vice chairman of Anchor
Gaming (provides technology to gaming
and wagering industry) (since July 1999)
and chairman of Weirton Steel Corp.
(makes and finishes steel products)
(since April 1996). He was the chief
negotiator in the Strategic Arms
Reduction Talks with the former Soviet
Union (1989-1991) and the U.S.
Ambassador to the Federal Republic of
Germany (1985-1989). Mr. Burt is a
director or trustee of 29 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
Meyer Feldberg; 58 Trustee Mr. Feldberg is Dean and Professor of
Columbia University Management of the Graduate School of
101 Uris Hall Business, Columbia University. Prior to
New York, NY 10027 1989, he was president of the Illinois
Institute of Technology. Dean Feldberg
is also a director of Primedia, Inc.
(publishing), Federated Department
Stores, Inc. (operator of department
stores) and Revlon, Inc. (cosmetics).
Dean Feldberg is a director or trustee
of 37 investment companies for which
Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment
adviser.

George W. Gowen; 71 Trustee Mr. Gowen is a partner in the law firm
666 Third Avenue of Dunnington, Bartholow & Miller. Prior
New York, NY 10017 to May 1994, he was a partner in the law
firm of Fryer, Ross & Gowen. Mr. Gowen
is a director or trustee of 37
investment companies for which Mitchell
Hutchins, Paine Webber or one of their
affiliates serves as investment adviser.

Frederic V. Malek; 63 Trustee Mr. Malek is chairman of Thayer Capital
1455 Pennsylvania Ave, N.W. Partners (merchant bank) and chairman of
Suite 350 of Thayer Hotel Investors II and Lodging
Washington, DC 20004 Opportunities Fund (hotel investment
partnerships). From January 1992 to
November 1992, he was campaign manager
of Bush-Quayle '92. From 1990 to 1992,
he was vice chairman and, from 1989 to
1990, he was president of Northwest
Airlines Inc. and NWA Inc. (holding
company of Northwest Airlines Inc.).
Prior to 1989, he was employed by the
Marriott Corporation (hotels,
restaurants, airline catering and
contract feeding), where he most
recently was an executive vice president
and president of Marriott Hotels and
Resorts. Mr. Malek is also a director of
Aegis Communications, Inc.
(tele-services), American Management
Systems, Inc. (management consulting and
computer related services), Automatic
Data Processing, Inc. (computing
services), CB Richard Ellis, Inc. (real
estate services), FPL Group, Inc.
(electric services), Global Vacation
Group (packaged vacations), HCR/Manor
Care, Inc. (health care), SAGA Systems,
Inc. (software company) and Northwest
Airlines Inc. Mr. Malek is a director or
trustee of 29 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
Carl W. Schafer; 64 Trustee Mr. Schafer is president of the Atlantic
66 Witherspoon Street, #1100 Foundation (charitable foundation
Princeton, NJ 08542 supporting mainly oceanographic
exploration and research). He is a
director of Labor Ready, Inc. (temporary
employment), Roadway Express, Inc.
(trucking), The Guardian Group of Mutual
Funds, the Harding, Loevner Funds,
E.I.I. Realty Trust (investment
company), Evans Systems, Inc. (motor
fuels, convenience store and diversified
company), Electronic Clearing House,
Inc., (financial transactions
processing), Frontier Oil Corporation
and Nutraceutix, Inc. (biotechnology
company). Prior to January 1993, he was
chairman of the Investment Advisory
Committee of the Howard Hughes Medical
Institute. Mr. Schafer is a director or
trustee of 29 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

Brian M. Storms*'D'; 46 Trustee Mr. Storms is chief executive officer
(since October 2000), president and
chief operating officer of Mitchell
Hutchins (since March 1999). Mr. Storms
was president of Prudential Investments
(1996-1999). Prior to joining
Prudential, he was a managing director
at Fidelity Investments. Mr. Storms is a
director or trustee of 30 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.

Amy Doberman**; 38 Vice President Ms. Doberman is a senior vice president
and general counsel of Mitchell
Hutchins. From December 1996 through
July 2000, she was general counsel of
Aeltus Investment Management, Inc. Prior
to working at Aeltus, Ms. Doberman was a
Division of Investment Management
Assistant Chief Counsel at the SEC.
Ms. Doberman is a vice president of 29
investment companies and a vice
president and secretary of one
investment company for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
John J. Lee***; 32 Vice President and Mr. Lee is a vice president and a
Assistant Treasurer manager of the mutual fund finance
department of Mitchell Hutchins. Prior
to September 1997, he was an audit
manager in the financial services
practice of Ernst & Young LLP. Mr. Lee
is a vice president and assistant
treasurer of 30 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

Kevin J. Mahoney***; 35 Vice President and Mr. Mahoney is a first vice president
Assistant Treasurer and a senior manager of the mutual fund
finance department of Mitchell Hutchins.
From August 1996 through March 1999, he
was the manager of the mutual fund
internal control group of Salomon Smith
Barney. Prior to August 1996, he was an
associate and assistant treasurer for
BlackRock Financial Management L.P.
Mr. Mahoney is a vice president and
assistant treasurer of 30 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.

Ann E. Moran***; 43 Vice President and Ms. Moran is a vice president and a
Assistant Treasurer manager of the mutual fund finance
department of Mitchell Hutchins. Ms.
Moran is a vice president and assistant
treasurer of 30 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.

Dianne E. O'Donnell**; 48 Vice President and Ms. O'Donnell is a senior vice president
Secretary and deputy general counsel of Mitchell
Hutchins. Ms. O'Donnell is a vice
president and secretary of 29 investment
companies and a vice president and
assistant secretary of one investment
company for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.

Paul H. Schubert***; 37 Vice President and Mr. Schubert is a senior vice president
Treasurer and director of the mutual fund finance
department of Mitchell Hutchins.
Mr. Schubert is a vice president and
treasurer of 30 investment companies for
which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as
investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
Barney A. Taglialatela***; 39 Vice President and Mr. Taglialatela is a vice president and
Assistant Treasurer a manager of the mutual fund finance
department of Mitchell Hutchins.
Mr. Taglialatela is a vice president and
assistant treasurer of 30 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.

Keith A. Weller**; 39 Vice President and Mr. Weller is a first vice president and
Assistant Secretary associate general counsel of Mitchell
Hutchins. Mr. Weller is a vice president
and assistant secretary of 30 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates
serves as investment adviser.
</TABLE>

---------

* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.

** This person's business address is 1285 Avenue of the Americas, New York, New
York 10019-6028.

*** This person's business address is Newport Center III, 499 Washington Blvd.,
14th Floor, Jersey City, New Jersey 07310-1998.

'D' Mrs. Alexander, Mr. Bewkes and Mr. Storms are 'interested persons' of each
fund as defined in the Investment Company Act by virtue of their positions
with Mitchell Hutchins, PaineWebber, and/or PW Group.

Board members are compensated as follows:

OLYMPUS FUND AND AMERICA FUND pay each board member who is not an
'interested person' of the Trust $1,500 annually per series. Each Trust
presently has one series and thus pays each such board member $1,500
annually, plus any additional amounts due for board or committee meetings.

MANAGED ASSETS TRUST pays each board members who are not 'interested
persons' of the Trust $1,000 annually for its sole series, plus any
additional amounts due for board or committee meetings.

Each Trust pays up to $150 per series for attending each board meeting and
each separate meeting of a board committee. Each chairman of the audit and
contract review committees of individual funds within the PaineWebber fund
complex receives additional compensation, aggregating $15,000 annually, from the
relevant funds. All board members are reimbursed for any expenses incurred in
attending meetings. Board members and officers own in the aggregate less than 1%
of the outstanding shares of any class of each fund. Because PaineWebber and
Mitchell Hutchins perform substantially all the services necessary for the
operation of the Trusts and each fund, the Trusts require no employees. No
officer, director or employee of Mitchell Hutchins or PaineWebber presently
receives any compensation from the Trust for acting as a board member or
officer.

The table below includes certain information relating to the compensation of
each Trust's current board members from the Trust and the compensation of those
board members from all PaineWebber funds during the periods indicated.

<PAGE>

COMPENSATION TABLE'D'

<TABLE>
<CAPTION>
AGGREGATE AGGREGATE AGGREGATE TOTAL
COMPENSATION COMPENSATION COMPENSATION COMPENSATION
FROM AMERICA FROM MANAGED FROM OLYMPUS FROM THE FUND
NAME OF PERSON, POSITION FUND(1) ASSETS TRUST(1) FUND* COMPLEX**
------------------------ ------- --------------- ----- ---------
<S> <C> <C> <C> <C>
Richard Q. Armstrong, Trustee........... $-- $-- $-- $--
Richard R. Burt, Trustee................ $-- $-- $-- $--
Meyer Feldberg, Trustee................. $-- $-- $-- $--
George W. Gowen, Trustee................ $-- $-- $-- $--
Frederic V. Malek, Trustee.............. $-- $-- $-- $--
Carl W. Schafer, Trustee................ $-- $-- $-- $--
</TABLE>

---------

'D' Only independent board members are compensated by the PaineWebber funds and
identified above; board members who are 'interested persons,' as defined by
the Investment Company Act, do not receive compensation from the
PaineWebber funds.

* Represents fees paid to each board member from the Trust indicated for the
fiscal year ended August 31, 2000.

** Represents total compensation paid during the calendar year ended
December 31, 1999, to each board member by 31 investment companies (34 in the
case of Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber
or one of their affiliates served as investment adviser. No fund within the
PaineWebber fund complex has a bonus, pension, profit sharing or retirement
plan.

PRINCIPAL HOLDERS AND MANAGEMENT OWNERSHIP OF SECURITIES

As of November 30, 2000, trustees and officers owned in the aggregate less
than 1% of the outstanding shares of any class of each fund.

As of November 30, 2000, the following shareholders were shown in the Fund's
records as owning 5% or more of any class of a Fund's shares:

<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF SHARES
NAME AND ADDRESS* BENEFICIALLY OWNED AS OF NOVEMBER 30, 2000
----------------- ------------------------------------------
<S> <C>
</TABLE>

---------

* The shareholder listed may be contacted c/o Mitchell Hutchins Asset
Management Inc., 51 West 52nd Street, New York, NY 10019-6114.

<PAGE>

INVESTMENT MANAGEMENT, AMINISTRATION AND
DISTRIBUTION ARRANGEMENTS

INVESTMENT MANAGEMENT AND ADMINISTRATION ARRANGEMENTS. Mitchell Hutchins
acts as the investment manager and administrator for each fund pursuant to
separate interim investment management and administration contracts dated
October 10, 2000 (each a 'Management Contract') with each Trust. Under the
Management Contracts, the funds pay fees (expressed as a percentage of the
fund's average daily net assets) to Mitchell Hutchins for these services at the
annual contract rates of 0.75% for Growth Fund, 0.70% for Growth and Income Fund
and 1.00% for Mid Cap Fund. All fees paid under the Management Contracts are
computed daily and paid monthly.

During the periods indicated, Mitchell Hutchins earned (or accrued) fees
under prior investment advisory and administration contracts relating to each
fund in the amounts set forth below:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Growth Fund............................................ $ $ 3,177,112 $2,858,153
Growth and Income Fund................................. $ $10,130,336 $8,823,952
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FIVE MONTH PERIOD FISCAL YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998 MARCH 31, 1998
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Mid Cap Fund.................... $ $1,733,828 $964,741 $2,680,122
</TABLE>

Prior to May 1, 1998, Denver Investment Advisors, LLC served as investment
sub-adviser for Mid Cap Fund pursuant to a separate contract with Mitchell
Hutchins dated March 21, 1995. Under that contract and a substantially identical
prior contract, for the one month ended May 1, 1998 and the fiscal year ended
March 31, 1998, Mitchell Hutchins (not the fund) paid Denver Investment Advisors
LLC sub-advisory fees in the amount of $110,392 and $1,340,049, respectively.

Under the terms of the applicable Management Contract, each fund bears all
expenses incurred in its operation that are not specifically assumed by Mitchell
Hutchins. General expenses of a Trust not readily identifiable as belonging to a
specific series of the Trust are allocated among series by or under the
direction of the Trust's board in such manner as the board deems fair and
equitable. Expenses borne by each fund include the following: (1) the cost
(including brokerage commissions, if any) of securities purchased or sold by the
fund and any losses incurred in connection therewith; (2) fees payable to and
expenses incurred on behalf of the fund by Mitchell Hutchins; (3) organizational
expenses; (4) filing fees and expenses relating to the registration and
qualification of the fund's shares under federal and state securities laws and
maintenance of such registrations and qualifications; (5) fees and salaries
payable to board members who are not interested persons of the applicable Trust
or Mitchell Hutchins; (6) all expenses incurred in connection with the board
members' services, including travel expenses; (7) taxes (including any income or
franchise taxes) and governmental fees; (8) costs of any liability,
uncollectible items of deposit and other insurance or fidelity bonds; (9) any
costs, expenses or losses arising out of a liability of or claim for damages or
other relief asserted against the fund for violation of any law; (10) legal,
accounting and auditing expenses, including legal fees of special counsel for
the independent board members; (11) charges of custodians, transfer agents and
other agents; (12) costs of preparing share certificates; (13) expenses of
setting in type and printing prospectuses and supplements thereto, statements of
additional information and supplements thereto, reports and proxy materials for
existing shareholders and costs of mailing such materials to existing
shareholders; (14) any extraordinary expenses (including fees and disbursements
of counsel) incurred by the fund; (15) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; (16) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the board and any committees thereof; (17) the cost of
investment company literature and other publications provided to trustees and
officers; and (18) costs of mailing, stationery and communications equipment.

Under each Management Contract, Mitchell Hutchins will not be liable for any
error of judgment or mistake of law or for any loss suffered by a fund in
connection with the performance of the Management Contract, except a loss
resulting from willful misfeasance, bad faith or gross negligence on

<PAGE>

the part of Mitchell Hutchins in the performance of its duties or from reckless
disregard of its duties and obligations thereunder. The current Management
Contract for each fund may be terminated without penalty on 10 days' written
notice to Mitchell Hutchins by the board of the fund or by vote of a majority of
the outstanding voting securities of the fund and will terminate 150 days after
October 10, 2000 (on March 9, 2000) unless it has by then been approved by a
majority of the outstanding voting securities of the fund.

The Management Contracts authorize Mitchell Hutchins to retain one or more
sub-advisers for the management of a fund's investment portfolio and, as
described below, Mitchell Hutchins has entered into one or more interim
sub-advisory contracts (each a 'Sub-Advisory Contract') for each fund. Mitchell
Hutchins is responsible for monitoring the services furnished pursuant to the
Sub-Advisory Contracts and making recommendations to the applicable board with
respect to the retention or replacement of sub-advisers and renewal of
Sub-Advisory Contracts.

Under each Sub-Advisory Contract, the sub-adviser will not be liable for any
error or judgment or mistake of law or for any loss suffered by a fund, its
shareholders or Mitchell Hutchins in connection with the performance of the
contract, except a loss resulting from willful misfeasance, bad faith, or gross
negligence on the part of the sub-adviser in the performance of its duties or
from reckless disregard of its duties and obligations thereunder.

Each Sub-Advisory Contract terminates automatically 150 days after
October 10, 2000 (on March 9, 2000) and is terminable at any time without
penalty on 10 days' written notice to Mitchell Hutchins by the board of the fund
or by vote of a majority of the fund's outstanding voting securities and may be
terminated by the sub-adviser upon not more than 60 days' written notice to
Mitchell Hutchins. A Sub-Advisory Contract may be terminated by Mitchell
Hutchins (1) upon material breach by the sub-adviser of its representations and
warranties, which breach shall not be cured within a 20 day period after notice
of such breach; or (2) if the sub-adviser becomes unable to discharge its duties
and obligations under the Sub-Advisory Contract.

For Growth Fund, Mitchell Hutchins has entered into separate Sub-Advisory
Contracts with Alliance Capital Management L.P. ('Alliance Capital') and State
Street Global Advisors ('SSgA'). Mitchell Hutchins (not the fund) pays Alliance
a fee in the annual amount of 0.30% and SSgA a fee at the annual rate of 0.15%
of the fund's average daily net assets that it manages. Prior to October 10,
2000, Mitchell Hutchins managed the fund's assets.

SSgA is the investment management division of State Street Bank and Trust
Company, which is a wholly owned subsidiary of State Street Corporation, a
publicly held bank holding company. Alliance Capital Management Corporation
('ACMC') is a general partner of Alliance Capital and an indirect wholly owned
subsidiary of AXA Financial, Inc. ('AXA Financial'), a Delaware corporation
whose shares are traded on the New York Stock Exchange, Inc. As of June 30,
2000, AXA Financial and its subsidiaries were the beneficial owners of an
approximately 62.5% partnership interest in Alliance Capital, and Alliance
Capital Management Holding L.P. ('Alliance Holding') owned an approximately 35%
partnership interest in Alliance Capital. Equity interests in Alliance Holding
are traded on the New York Stock Exchange in the form of units. Approximately
97.9% of Alliance Holding's units are owned by the public and management or
employees of Alliance Capital and approximately 2.1% are owned by certain wholly
owned subsidiaries of AXA Financial. The general partner of Alliance Holding is
ACMC. As of March 1, 2000, AXA, a French insurance holding company, owned
approximately 60.3% of the issued and outstanding shares of the common stock of
AXA Financial.

For Growth and Income Fund, Mitchell Hutchins has entered into separate
Sub-Advisory Contracts with Institutional Capital Corporation ('ICAP'), Westwood
Management Corporation ('Westwood') and State Street Global Advisors ('SSgA').
Mitchell Hutchins (not the fund) pays each investment adviser a fee at the
annual rate of 0.30% (0.15% for SSgA) of the fund's average daily net assets
that it manages. Prior to October 10, 2000, Mitchell Hutchins managed the fund's
assets. Robert H. Lyon, who serves as president, chief investment officer and a
director of ICAP owns a 51% controlling interest in ICAP. Westwood is a wholly
owned subsidiary of Southwest Securities Group, Inc., a Dallas-based securities
firm. SSgA is the investment management division of State Street Bank and Trust
Company, which is a wholly owned subsidiary of State Street Corporation, a
publicly held bank holding company.

<PAGE>

For Mid Cap Fund, Mitchell Hutchins has entered into a Sub-Advisory Contract
with Delaware Management Company. Mitchell Hutchins (not the fund) pays fees to
Delaware Management Company for its services under the Sub-Advisory Contract at
the annual rate of 0.40% of the fund's average daily net assets. Delaware
Management Company assumed its fund responsibilities on October 10, 2000. Prior
to October 10, 2000, Mitchell Hutchins managed the fund's assets. Delaware
Management Company is a series of Delaware Management Business Trust, a Delaware
business trust. It is a member of Delaware Investments, a subsidiary of Lincoln
National Corporation ('Lincoln National'). Lincoln National is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.

Prior to August 1, 1997, PaineWebber provided certain services to each fund
not otherwise provided by its transfer agent. Pursuant to an agreement between
PaineWebber and each fund relating to those services, PaineWebber earned (or
accrued) the amounts set forth below during the period indicated:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MARCH 31, 1998
--------------
<S> <C>
Mid Cap Fund................................................ $28,077
</TABLE>

Subsequent to July 31, 1997, PFPC (not the funds) pays PaineWebber for
certain transfer agency-related services that PFPC has delegated to PaineWebber.

SECURITIES LENDING. During the periods indicated, each fund paid (or
accrued) the following fees to PaineWebber for its services as securities
lending agent:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------
FUND 2000 1999 1998
---- ---- ---- ----
<S> <C> <C> <C>
Growth Fund................................................. $ $48,764 $82,147
Growth and Income Fund...................................... 13,888 57,530
</TABLE>

NET ASSETS. The following table shows the approximate net assets as of
November 30, 2000, sorted by category of investment objective, of the investment
companies as to which Mitchell Hutchins serves as adviser or sub-adviser. An
investment company may fall into more than one of the categories below.

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

PERSONAL TRADING POLICIES. The funds and Mitchell Hutchins each have adopted
a code of ethics under rule 17j-1 of the Investment Company Act, which permits
personnel covered by the rule to invest in securities that may be purchased or
held by a fund but prohibits fraudulent, deceptive or manipulative conduct in
connection with that personal investing. Each sub-adviser also has adopted a
code of ethics under rule 17j-1.

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

<PAGE>

'Exclusive Dealer Agreements') PaineWebber and its correspondent firms sell the
Funds' shares. Mitchell Hutchins is located at 51 West 52nd Street, New York,
New York 10019-6114 and PaineWebber is located at 1285 Avenue of the Americas,
New York, New York 10019-6028.

Under separate plans of distribution pertaining to the Class A, Class B and
Class C shares adopted by each Trust in the manner prescribed under Rule 12b-1
under the Investment Company Act (each, respectively, a 'Class A Plan,' 'Class B
Plan' and 'Class C Plan,' and, collectively, 'Plans'), each fund pays Mitchell
Hutchins a service fee, accrued daily and payable monthly, at the annual rate of
0.25% of the average daily net assets for each class, except that the Class A
Plans for Growth Fund and Growth and Income Fund provide that the service fee
paid with respect to shares sold prior to December 2, 1988 ('Old Shares') is
paid at the annual rate of 0.15% of the fund's net assets represented by such
Old Shares. Shares acquired through new purchases, reinvestment of dividends and
other distributions and exchanges on/or after December 2, 1988 are not
considered 'Old Shares' for this purpose. Under the Class B Plan and the Class C
Plan, each funds also pays Mitchell Hutchins a distribution fee, accrued daily
and payable monthly, at the annual rate of 0.75% of the average daily net assets
of the Class B shares and Class C shares, respectively. There is no distribution
plan with respect to the funds' Class Y shares and the funds pay no service or
distribution fees with respect to their Class Y shares.

Mitchell Hutchins uses the service fees under the Plans for Class A, B and C
shares primarily to pay PaineWebber for shareholder servicing, currently at the
annual rate of 0.25% of the aggregate investment amounts maintained in each fund
by PaineWebber clients. PaineWebber then compensates its Financial Advisors 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 Financial Advisors when Class B and Class C shares
are bought by investors, as well as on an ongoing basis. Mitchell Hutchins
receives no special compensation from any of the funds or investors at the time
Class B or C shares are bought.

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 Class A, Class B and
Class C shares specify that each fund must pay service and distribution fees to
Mitchell Hutchins for its service- and distribution-related 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
each fund reviews the Plans and Mitchell Hutchins' corresponding expenses for
each class separately from the Plans and expenses of the other classes.

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

<PAGE>

selection and nomination of trustees who are not 'interested persons' of a Trust
shall be committed to the discretion of the trustees who are not 'interested
persons' of the respective Trust.

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

For each fund's fiscal year ended August 31, 2000, the fund paid (or
accrued) the following fees to Mitchell Hutchins under the Plans:

<TABLE>
<CAPTION>
GROWTH AND
GROWTH FUND INCOME FUND MID CAP FUND
----------- ----------- ------------
<S> <C> <C> <C>
Class A....................................... $ $ $
Class B....................................... $ $ $
Class C....................................... $ $ $
</TABLE>

Mitchell Hutchins estimates that it and its parent corporation, PaineWebber,
incurred the following shareholder service-related and distribution-related
expenses with respect to each fund during the fund's August 31, 2000 fiscal
year, as shown below:

CLASS A

<TABLE>
<CAPTION>
GROWTH AND
GROWTH FUND INCOME FUND MID CAP FUND
----------- ----------- ------------
<S> <C> <C> <C>
Marketing and advertising..................... $ $ $
Amortization of commissions................... 0 0 0
Printing of prospectuses and statements of
additional information to other than current
shareholders................................
Branch network costs allocated and interest
expense.....................................
Service fees paid to PaineWebber financial
advisors....................................
</TABLE>

CLASS B

<TABLE>
<CAPTION>
GROWTH AND
GROWTH FUND INCOME FUND MID CAP FUND
----------- ----------- ------------
<S> <C> <C> <C>
Marketing and advertising..................... $ $ $
Amortization of commissions...................
Printing of prospectuses and statements of
additional information to other than current
shareholders................................
Branch network costs allocated and interest
expense.....................................
Service fees paid to PaineWebber financial
advisors....................................
</TABLE>

<PAGE>

CLASS C

<TABLE>
<CAPTION>
GROWTH AND
GROWTH FUND INCOME FUND MID CAP FUND
----------- ----------- ------------
<S> <C> <C> <C>
Marketing and advertising..................... $ $ $
Amortization of commissions...................
Printing of prospectuses and statements of
additional information to other than current
shareholders................................
Branch network costs allocated and interest
expense.....................................
Service fees paid to PaineWebber financial
advisors....................................
</TABLE>

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

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

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

In approving the Class B Plan, each board considered all the features of the
distribution system, including (1) the conditions under which contingent
deferred sales charges would be imposed and the amount of such charges, (2) the
advantage to investors in having no initial sales charges deducted from fund
purchase payments and instead having the entire amount of their purchase
payments immediately invested in fund shares, (3) Mitchell Hutchins' belief that
the ability of PaineWebber investment executives and correspondent firms to
receive sales commissions when Class B shares are sold and continuing service
fees thereafter while their customers invest their entire purchase payments
immediately to Class B shares would prove attractive to the investment
executives and correspondent firms, resulting in greater growth of the fund than
might otherwise be the case, (4) the advantages to the shareholders of economics
of scale resulting from growth in the fund's assets and potential continued
growth, (5) the services provided to the fund and its shareholders by Mitchell
Hutchins and (6) the services provided by PaineWebber pursuant to its Exclusive
Dealer Agreement with Mitchell Hutchins and (7) Mitchell Hutchins' shareholder
service- and distribution-related expenses and costs. The trustees also
recognized that Mitchell Hutchins' willingness to compensate PaineWebber and its
investment executives, without the concomitant receipt by Mitchell Hutchins of
initial sales charges, was conditioned upon its expectation of being compensated
under the Class B Plan.

In approving the Class C Plan, each board considered all the features of the
distribution system, including (1) the advantage to investors in having no
initial sales charges deducted from fund purchase payments and instead having
the entire amount of an investor's purchase payments immediately

<PAGE>

invested in fund shares, (2) the advantage to investors in being free from
contingent deferred sales charges upon redemption for shares held more than one
year and paying for distribution on an ongoing basis, (3) Mitchell Hutchins'
belief that the ability of PaineWebber investment executives and correspondent
firms to receive sales compensation for their sales of Class C shares on an
ongoing basis, along with continuing service fees, while their customers invest
their entire purchase payments immediately in Class C shares and generally do
not face contingent deferred sales charges, would prove attractive to the
investment executives and correspondent firms, resulting in greater growth to
the fund than might otherwise be the case, (4) the advantages to the
shareholders of economies of scale resulting from growth in the fund's assets
and potential continued growth, (5) the services provided to the fund and its
shareholders by Mitchell Hutchins, (6) the services provided by PaineWebber
pursuant to its Exclusive Dealer Agreement with Mitchell Hutchins and (7)
Mitchell Hutchins' shareholder service-and distribution-related expenses and
costs. The trustees also recognized that Mitchell Hutchins' willingness to
compensate PaineWebber and its investment executives without the concomitant
receipt by Mitchell Hutchins of initial sales charges or contingent deferred
sales charges upon redemption, was conditioned upon its expectation of being
compensated under the Class C Plan.

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

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

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
GROWTH FUND
Earned...................................................... $ $222,025 $ 77,935
Retained.................................................... 15,108 5,776

GROWTH AND INCOME FUND
Earned...................................................... 554,856 3,377,803
Retained.................................................... 26,318 200,804
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FIVE MONTH PERIOD FISCAL YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998 MARCH 31, 1998
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
MID CAP FUND
Earned............................ $ $26,484 $42,878 $79,840
Retained.......................... 2,128 3,039 4,826
</TABLE>

Mitchell Hutchins earned and retained the following contingent deferred
sales charges paid upon certain redemptions of Class A, Class B and Class C
shares for each fund's August 31, 2000 fiscal year:

<PAGE>

PORTFOLIO TRANSACTIONS

Subject to policies established by each board, each sub-adviser is
responsible for the execution of the funds' portfolio transactions and the
allocation of brokerage transactions with respect to the fund assets that it
manages. In executing portfolio transactions, each sub-adviser seeks to obtain
the best net results for a fund, taking into account such factors as the price
(including the applicable brokerage commission or dealer spread), size of order,
difficulty of execution and operational facilities of the firm involved. While
each sub-adviser generally seeks reasonably competitive commission rates,
payment of the lowest commission is not necessarily consistent with obtaining
the best net results. Prices paid to dealers in principal transactions generally
include a 'spread,' which is the difference between the prices at which the
dealer is willing to purchase and sell a specific security at the time. The
funds may invest in securities traded in the over-the-counter market and will
engage primarily in transactions directly with the dealers who make markets in
such securities, unless a better price or execution could be obtained by using a
broker. During the periods indicated, the funds paid the brokerage commissions
set forth below:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Growth Fund.............................................. $ $ 306,183 $ 455,002
Growth and Income Fund................................... $ $1,833,422 $1,782,530
</TABLE>

The funds have no obligation to deal with any broker or group of brokers in
the execution of portfolio transactions. The funds contemplate that, consistent
with the policy of obtaining the best net results, brokerage transactions may be
conducted through PaineWebber or its affiliates or through brokerage affiliates
of a sub-adviser. Each board has adopted procedures in conformity with
Rule 17e-1 under the Investment Company Act to ensure that all brokerage
commissions paid to PaineWebber or brokerage affiliates of a sub-adviser are
reasonable and fair. Specific provisions in the Advisory Contracts and each
Sub-Advisory Contract authorize Mitchell Hutchins and the sub-advisers and any
of their affiliates that is a member of a national securities exchange to effect
portfolio transactions for the funds on such exchange and to retain compensation
in connection with such transactions. Any such transactions will be effected and
related compensation paid only in accordance with applicable SEC regulations.
During the periods indicated, the funds paid to PaineWebber the brokerage
commissions set forth below:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED AUGUST 31,
------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Growth Fund................................................. $ $ 34,416 $ 43,380
Growth and Income Fund...................................... $ $124,174 $ 51,462
</TABLE>

The amounts paid by the funds to PaineWebber in brokerage commissions for
their most recent fiscal year represent (1) for Growth Fund, % of the total
brokerage commission paid and % of the total dollar amount of transactions
involving the payment of brokerage commissions; (2) for Growth and Income Fund,
% of the total brokerage commission paid and % of the total dollar amount of
transactions involving the payment of brokerage commissions; and (3) for Mid Cap
Fund, % of the total brokerage commission paid and % of the total dollar
amount of transactions involving the payment of brokerage commissions.

Transaction in futures contracts are executed through futures commission
merchants ('FCMs'), who receive brokerage commissions for their services. The
funds' procedures in selecting FCMs to

<PAGE>

execute their transactions in futures contracts, including procedures permitting
the use of PaineWebber, are similar to those in effect with respect to brokerage
transactions in securities.

In selecting brokers, each sub-adviser will consider the full range and
quality of a broker's services. Consistent with the interests of the funds and
subject to the review of each board a sub-adviser may cause a fund to purchase
and sell portfolio securities through brokers who provide the sub-adviser with
brokerage or research services. The funds may pay those brokers a higher
commission than may be charged by other brokers, provided that the sub-adviser
determines in good faith that the commission is reasonable in terms either of
that particular transaction or of the overall responsibility of the sub-adviser
to that fund and its other clients.

Research services obtained from brokers may include written reports, pricing
and appraisal services, analysis of issues raised in proxy statements,
educational seminars, subscriptions, portfolio attribution and monitoring
services, and computer hardware, software and access charges which are directly
related to investment research. Research services may be received in the form of
written reports, online services, telephone contacts and personal meetings with
securities analysts, economists, corporate and industry spokespersons and
government representatives.

During each fund's 2000 fiscal year, Mitchell Hutchins directed the
portfolio transactions indicated below to brokers chosen because they provide
research and analysis, for which the funds paid the brokerage commissions
indicated below:

<TABLE>
<CAPTION>
BROKERAGE
AMOUNT OF PORTFOLIO COMMISSIONS
TRANSACTIONS PAID
------------ ----
<S> <C> <C>
Growth Fund................................................. $ $
Growth and Income Fund...................................... $ $
Mid Cap Fund................................................ $ $
</TABLE>

For purchases or sales with broker-dealer firms which act as principal, each
sub-adviser seeks best execution. Although a sub-adviser may receive certain
research or execution services in connection with these transactions, it will
not purchase securities at a higher price or sell securities at a lower price
than would otherwise be paid if no weight were attributed to the services
provided by the executing dealer. Each sub-adviser may engage in agency
transactions in over-the-counter equity and debt securities in return for
research and execution services. These transactions are entered into only in
compliance with procedures ensuring that the transaction (including commissions)
is at least as favorable as it would have been if effected directly with a
market-maker that did not provide research or execution services.

Research services and information received from brokers or dealers are
supplemental to a sub-adviser is own research efforts and, when utilized, are
subject to internal analysis before being incorporated into its investment
processes. Information and research services furnished by brokers or dealers
through which or with which the funds effect securities transactions may be used
by a sub-adviser in advising other funds or accounts and, conversely, research
services furnished to a sub-adviser by brokers or dealers in connection with
other funds or accounts that it advises may be used in advising a fund.

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

The funds will not purchase securities that are offered in underwritings in
which PaineWebber is a member of the underwriting or selling group, except
pursuant to procedures adopted by each board pursuant to Rule 10f-3 under the
Investment Company Act. Among other things, these procedures require that the
spread or commission paid in connection with such a purchase be reasonable and
fair,

<PAGE>

the purchase be at not more than the public offering price prior to the end of
the first business day after the date of the public offering and that
PaineWebber or any affiliate thereof not participate in or benefit from the sale
to the funds.

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

For the periods shown, the funds' portfolio turnover rates were:

<TABLE>
<CAPTION>
PORTFOLIO
TURNOVER RATE
-------------
<S> <C>
GROWTH FUND
Fiscal Year Ended August 31, 2000........................... %
Fiscal Year Ended August 31, 1999........................... 38%

GROWTH AND INCOME FUND
Fiscal Year Ended August 31, 2000........................... %
Fiscal Year Ended August 31, 1999........................... 57%

MID CAP FUND
Fiscal Year Ended August 31, 2000........................... %
Fiscal Year Ended August 31, 1999........................... 79%
</TABLE>

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

WAIVERS OF SALES CHARGES/CONTINGENT DEFERRED SALES CHARGES -- CLASS A
SHARES. The following additional sales charge waivers are available for Class A
shares if you:

Purchase shares through a variable annuity offered only to qualified plans.
For investments made pursuant to this waiver, Mitchell Hutchins may make
payments out of its own resources to PaineWebber and to the variable
annuity's sponsor, adviser or distributor in a total amount not to exceed
l% of the amount invested;

Acquire shares through an investment program that is not sponsored by
PaineWebber or its affiliates and that charges participants a fee for
program services, provided that the program sponsor has entered into a
written agreement with PaineWebber permitting the sale of shares at net
asset value to that program. For investments made pursuant to this waiver,
Mitchell Hutchins may make a payment to PaineWebber out of its own
resources in an amount not to exceed 1% of the amount invested. For
subsequent investments or exchanges made to implement a rebalancing feature
of such an investment program, the minimum subsequent investment
requirement is also waived;

Acquire shares in connection with a reorganization pursuant to which a fund
acquires substantially all of the assets and liabilities of another fund in
exchange solely for shares of the acquiring fund; or

Acquire shares in connection with the disposition of proceeds from the sale
of shares of Managed High Yield Plus Fund Inc. that were acquired during
that fund's initial public offering of shares and that meet certain other
conditions described in its prospectus.

In addition, reduced sales charges on Class A shares are available through
the combined purchase plan or through rights of accumulation described below.
Class A shares purchases of $1 million or more are not subject to an initial
sales charge; however, if a shareholder sells these shares within one year after
purchase, a contingent deferred sales charge of 1% of the offering price or the
net asset value of the shares at the time of sale by the shareholder, whichever
is less, is imposed.

<PAGE>

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

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

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

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

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

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

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

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

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

(h) individual accounts related together under one registered investment
adviser having full discretion and control over the accounts. The registered
investment adviser must communicate at least quarterly through a newsletter
or investment update establishing a relationship with all of the accounts.

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

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

WAIVERS OF CONTINGENT DEFERRED SALES CHARGES -- CLASS B SHARES. 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. Among other circumstances, the
contingent deferred sales charge on Class B shares is waived where a total
or partial redemption is

<PAGE>

made within one year following the death of the shareholder. The contingent
deferred sales charge waiver is available where the decedent is either the
sole shareholder or owns the shares with his or her spouse as a joint tenant
with right of survivorship. This waiver applies only to redemption of shares
held at the time of death.

PURCHASES AND SALES OF CLASS Y SHARES THROUGH THE PACE'sm' MULTI ADVISOR
PROGRAM. An investor who participates in the PACE'sm' Multi Advisor Program
is eligible to purchase Class Y shares. The PACE'sm' Multi Advisor Program
is an advisory program sponsored by PaineWebber that provides comprehensive
investment services, including investor profiling, a personalized asset
allocation strategy using an appropriate combination of funds, and a
quarterly investment performance review. Participation in the PACE'sm' Multi
Advisor Program is subject to payment of an advisory fee at the effective
maximum annual rate of 1.5% of assets. Employees of PaineWebber and its
affiliates are entitled to a waiver of this fee. Please contact your
PaineWebber Financial Advisor or PaineWebber's correspondent firms for more
information concerning mutual funds that are available through the PACE'sm'
Multi Advisor Program.

PURCHASES OF CLASS A SHARES THROUGH THE PAINEWEBBER INSIGHTONE'sm'
PROGRAM. Investors who purchase shares through the PaineWebber
InsightOne'sm' Program are eligible to purchase Class A shares without a
sales load. The PaineWebber InsightOne'sm' Program offers a nondiscretionary
brokerage account to investors for an asset-based fee at an annual rate of
up to 1.50% of the assets in the account. Account holders may purchase or
sell certain investment products without paying commissions or other
markups/markdowns.

PURCHASES AND SALES OF CLASS Y SHARES FOR PARTICIPANTS IN PW 401(K) PLUS
PLAN. The trustee of the PW 401(k) Plus Plan, a defined contribution plan
sponsored by PW Group, buys and sells Class Y shares of the funds that are
included as investment options under the Plan to implement the investment
choices of individual participants with respect to their Plan contributions.
Individual Plan participants should consult the Summary Plan Description and
other plan material of the PW 401(k) Plus Plan (collectively, 'Plan
Documents') for a description of the procedures and limitations applicable
to making and changing investment choices. Copies of the Plan Documents are
available from the Benefits Connection, 100 Halfday Road, Lincolnshire, IL
60069 or by calling 1-888-Pwebber (1-888-793-2237). As described in the Plan
Documents, the price at which Class Y shares are bought and sold by the
trustee of PW 401(k) Plus Plan might be more or less than the price per
share at the time the participants made their investment choices.

ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION. As discussed in the
Prospectus, eligible shares of the funds may be exchanged for shares of the
corresponding class of most other PaineWebber mutual funds. Class Y shares
are not eligible for exchange. Shareholders will receive at least 60 days'
notice of any termination or material modification of the exchange offer,
except no notice need be given if, under extraordinary circumstances, either
redemptions are suspended under the circumstances described below or a fund
temporarily delays or ceases the sales of its shares because it is unable to
invest amounts effectively in accordance with the fund's investment
objective, policies and restrictions.

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

The funds may suspend redemption privileges or postpone the date of
payment during any period (1) when the New York Stock Exchange is closed or
trading on the New York Stock Exchange is restricted as determined by the
SEC, (2) when an emergency exists, as defined by the SEC, that makes it not
reasonably practicable for a fund to dispose of securities owned by it or
fairly to determine the value of its assets or (3) as the SEC may otherwise
permit. The redemption

<PAGE>

price may be more or less than the shareholder's cost, depending on the
market value of a fund's portfolio at the time.

SERVICE ORGANIZATIONS. A fund may authorize service organizations, and
their agents, to accept on its behalf purchase and redemption orders that
are in 'good form' in accordance with the policies of the service
organizations. A fund will be deemed to have received these purchase and
redemption orders when a service organization or its agent accepts them.
Like all customer orders, these orders will be priced based on the fund's
net asset value next computed after receipt of the order by the service
organizations or their agents. Service organizations may include retirement
plan service providers who aggregate purchase and redemption instructions
received from numerous retirement plans or plan participants.

AUTOMATIC INVESTMENT PLAN. PaineWebber offers an Automatic Investment
Plan with a minimum initial investment of $1,000 through which a fund will
deduct $50 or more on a monthly, quarterly, semi-annual or annual basis from
the investor's bank account to invest directly in the fund. Participation in
the Automatic Investment Plan enables an investor to use the technique of
'dollar cost averaging.' When an investor invests the same dollar amount
each month under the Plan, the investor will purchase more shares when a
fund's net asset value per share is low and fewer shares when the net asset
value per share is high. Using this technique, an investor's average
purchase price per share over any given period will be lower than if the
investor purchased a fixed number of shares on a monthly basis during the
period. Of course, investing through the automatic investment plan does not
assure a profit or protect against loss in declining markets. Additionally,
because the automatic investment plan involves continuous investing
regardless of price levels, an investor should consider his or her financial
ability to continue purchases through periods of both low and high price
levels.

SYSTEMATIC WITHDRAWAL PLAN. The Systematic Withdrawal Plan allows
investors to set up monthly, quarterly (March, June, September and
December), semi-annual (June and December) or annual (December) withdrawals
from their PaineWebber Mutual Fund accounts. Minimum balances and
withdrawals vary according to the class of shares:

Class A and Class C shares. Minimum value of fund shares in $5,000;
minimum withdrawals of $100.

Class B shares. Minimum value of fund shares is $10,000; minimum
monthly, quarterly, and semi-annual and annual withdrawals of $100,
$200, $300 and $400, respectively.

Withdrawals under the Systematic Withdrawal Plan will not be subject to a
contingent deferred sales charge. An investor may withdraw no more than 12% of
the value of the fund account when the investor signed up for the Plan (for
Class B shares, annually; for Class A and Class C shares, during the first year
under the Plan). Shareholders who elect to receive dividends or other
distributions in cash may not participate in this Plan.

An investor's participation in the systematic withdrawal plan will terminate
automatically if the 'Initial Account Balance' (a term that means the value of
the fund account at the time the investor elects to participate in the
systematic withdrawal plan) less aggregate redemptions made other than pursuant
to the systematic withdrawal plan is less than the minimum values specified
above. Purchases of additional shares of a fund concurrent with withdrawals are
ordinarily disadvantageous to shareholders because of tax liabilities and, for
Class A shares, initial sales charges. On or about the 20th of a month for
monthly, quarterly, semi-annual and annual plans, PaineWebber will arrange for
redemption by the funds of sufficient fund shares to provide the withdrawal
payments specified by participants in the funds' systematic withdrawal plan. The
payments generally are mailed approximately five Business Days (defined under
'Valuation of Shares') after the redemption date. Withdrawal payments should not
be considered dividends, but redemption proceeds. If periodic withdrawals
continually exceed reinvested dividends and other distributions, a shareholder's
investment may be correspondingly reduced. A shareholder may change the amount
of the systematic withdrawal or terminate participation in the systematic
withdrawal plan at any time without charge or penalty by written instructions
with signatures guaranteed to PaineWebber or PFPC Inc. ('Transfer Agent').
Instructions to participate in the plan, change the withdrawal amount or
terminate participation in the

<PAGE>

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

INDIVIDUAL RETIREMENT ACCOUNTS. Self-directed IRAs are available through
PaineWebber in which purchases of PaineWebber mutual 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.

PAINEWEBBER RMA RESOURCE ACCUMULATION PLAN'sm';
PAINEWEBBER RESOURCE MANAGEMENT ACCOUNT'r' (RMA)'r'

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

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

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

PERIODIC INVESTING AND DOLLAR COST AVERAGING. Periodic investing in the PW
Funds or other mutual funds, whether through the Plan or otherwise, helps
investors establish and maintain a disciplined approach to accumulating assets
over time, de-emphasizing the importance of timing the market's highs and lows.
Periodic investing also permits an investor to take advantage of 'dollar cost
averaging.' By investing a fixed amount in mutual fund shares at established
intervals, an investor purchases more shares when the price is lower and fewer
shares when the price is higher, thereby increasing his or her earning
potential. Of course, dollar cost averaging does not guarantee a profit or
protect against a loss in a declining market, and an investor should consider
his or her financial ability to continue investing through periods of both low
and high share prices. However, over time, dollar cost averaging generally
results in a lower average original investment cost than if an investor invested
a larger dollar amount in a mutual fund at one time. In deciding whether to use
dollar cost averaging, an investor should also consider whether a large, single
investment would qualify for sales load reductions.

PAINEWEBBER'S RESOURCE MANAGEMENT ACCOUNT. In order to enroll in the Plan,
an investor must have opened an RMA account with PaineWebber or one of its
correspondent firms. The RMA account

<PAGE>

is PaineWebber's comprehensive asset management account and offers investors a
number of features, including the following:

monthly Premier account statements that itemize all account activity,
including investment transactions, checking activity and Platinum
MasterCard'r' transactions during the period, and provide unrealized and
realized gain and loss estimates for most securities held in the account;

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

automatic 'sweep' of uninvested cash into the RMA accountholder's choice of
one of the six RMA money market funds-RMA Money Market Portfolio, RMA U.S.
Government Portfolio, RMA Tax-Free Fund, RMA California Municipal Money
Fund, RMA New Jersey Municipal Money Fund and RMA New York Municipal Money
Fund. An investment in a money market fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
although a money market fund seeks to preserve the value of your investment
at $1.00 per share, it is possible to lose money by investing in a money
market fund.

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

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

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

unlimited electronic funds transfers and bill payment services for an
additional fee;

expanded account protection for the net equity securities balance in the
event of the liquidation of PaineWebber. This protection does not apply to
shares of funds that are held at PFPC and not through PaineWebber; and

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

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

CONVERSION OF CLASS B SHARES

Class B shares of a fund will automatically convert to Class A shares of
that fund, based on the relative net asset values per share of the two classes,
as of the close of business on the first Business Day (as defined under
'Valuation of Shares') of the month in which the sixth anniversary of the
initial issuance of such Class B shares occurs. For the purpose of calculating
the holding period required for conversion of Class B shares, the date of
initial issuance shall mean (1) the date on which such Class B shares were
issued, or (2) for Class B shares obtained through an exchange, or a series of
exchanges, the date on which the original Class B shares were issued. For
purposes of conversion to Class A shares, Class B shares purchased through the
reinvestment of dividends and other distributions paid in respect of Class B
shares will be held in a separate sub-account. Each time any Class B shares in
the shareholder's regular account (other than those in the sub-account) convert
to Class A shares, a pro rata portion of the Class B shares in the sub-account
will also convert to Class A shares. The portion will be determined by the ratio
that the shareholder's Class B shares converting to Class A shares bears to the
shareholder's total Class B shares not acquired through dividends and other
distributions.

The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A and Class B shares will not result in
'preferential dividends' under the Internal Revenue Code and that the conversion
of

<PAGE>

shares does not constitute a taxable event. If the conversion feature ceased to
be available, the Class B shares would not be converted and would continue to be
subject to the higher ongoing expenses of the Class B shares beyond six years
from the date of purchase. Mitchell Hutchins has no reason to believe that this
condition for the availability of the conversion feature will not continue to be
met.

VALUATION OF SHARES

Each fund determines its net asset value per share separately for each class
of shares, normally as of the close of regular trading (usually 4:00 p.m.,
Eastern time) on the New York Stock Exchange on each Business Day, which is
defined as each Monday through Friday when the New York Stock Exchange is open.
Prices will be calculated earlier when the New York Stock Exchange closes early
because trading has been halted for the day. Currently the New York Stock
Exchange is closed on the observance of the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Securities that are listed on U.S. stock exchanges are valued at the last
sale price on the day the securities are valued or, lacking any sales on such
day, at the last available bid price. In cases where securities are traded on
more than one exchange, the securities are generally valued on the exchange
considered by Mitchell Hutchins as the primary market. Securities traded in the
over-the-counter market and listed on the Nasdaq Stock Market ('Nasdaq') are
valued at the last trade price on Nasdaq prior to valuation; other
over-the-counter securities are valued at the last bid price available prior to
valuation (other than short-term investments that mature in 60 days or less
which are valued as described further below). Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the applicable board. It
should be recognized that judgment often plays a greater role in valuing thinly
traded securities and lower rated bonds than is the case with respect to
securities for which a broader range of dealer quotations and last-sale
information is available. The amortized cost method of valuation generally is
used to value debt obligations with 60 days or less remaining until maturity,
unless the applicable board determines that this does not represent fair value.

PERFORMANCE INFORMATION

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

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

<TABLE>
<S> <C> <C>
P(1 + T)'pp'n = ERV

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

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or 'T' in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
period. In calculating the ending redeemable value, for Class A shares, the
maximum 4.5% sales charge is deducted from the initial $1,000 payment and, for
Class B and Class C shares, the applicable contingent deferred sales charge
imposed on a redemption of Class B or Class C shares held for the period is
deducted. All dividends and other distributions are assumed to have been
reinvested at net asset value.

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

<PAGE>

calculate Non-Standardized Return for specified periods of time by assuming an
investment of $1,000 in fund shares and assuming the reinvestment of all
dividends and other distributions. The rate of return is determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the initial value. Neither initial nor contingent
deferred sales charges are taken into account in calculating Non-Standardized
Return; the inclusion of those charges would reduce the return.

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

The following tables show performance information for each class of the
funds' shares outstanding for the periods indicated. All returns for periods of
more than one year are expressed as an average return.

GROWTH FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended August 31, 2000:
Standardized Return*........................ % % % %
Non-Standardized............................ % % % %

Five Years ended August 31, 2000:
Standardized Return*........................ % % % %
Non-Standardized............................ % % % %

Ten years ended August 31, 2000:
Standardized Return*........................ % N/A N/A N/A
Non-Standardized............................ % N/A N/A N/A

Inception** to August 31, 2000:
Standardized Return*........................ % % % %
Non-Standardized............................ % % % %
</TABLE>

GROWTH AND INCOME FUND

Five Years ended August 31, 2000:
Standardized Return*........................ % % % %
Non-Standardized............................ % % % %

Ten years ended August 31, 2000:
Standardized Return*........................ % N/A N/A N/A
Non-Standardized............................ % N/A N/A N/A

Inception** to August 31, 2000:
Standardized Return*........................ % % % %
Non-Standardized............................ % % % %
</TABLE>

<PAGE>

MID CAP FUND

Five Years ended August 31, 2000:
Standardized Return*........................ % % % %
Non-Standardized............................ % % % %

Inception** to August 31, 2000:
Standardized Return*........................ % % %
Non-Standardized............................ % % %
</TABLE>

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

* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5%. All Standardized Return figures for
Class B and Class C shares reflect deduction of the applicable contingent
deferred sales charges imposed on a redemption of shares held for the period.
Class Y shares do not impose an initial or contingent deferred sales charge;
therefore, Non-Standardized Return is identical to Standardized Return.

** The inception date for each class of shares is as follows:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Growth Fund................................... 03/18/85 07/01/91 07/02/92 08/26/91
Growth and Income Fund........................ 12/20/83 07/01/91 07/02/92 02/12/92
Mid Cap Fund.................................. 04/07/92 04/07/92 07/02/92 03/17/98
</TABLE>

OTHER INFORMATION. In Performance Advertisements, the funds may compare
their Standardized Return and/or their Non-Standardized Return with data
published by Lipper Inc. ('Lipper'), CDA Investment Technologies, Inc. ('CDA'),
Wiesenberger Investment Companies Service ('Wiesenberger'), Investment Company
Data, Inc. ('ICD') or Morningstar Mutual Funds ('Morningstar'), with the
performance of recognized stock and other indices, including (but not limited
to) the Standard & Poor's 500 Composite Stock Price Index ('S&P 500'), the
Standard & Poor's 600 Small-Cap Index, the Standard & Poor's 400 Mid-Cap Index,
the Dow Jones Industrial Average, the International Finance Corporation Global
Total Return Index, the Nasdaq Composite Index, the Russell 2000 Index, the
Russell 1000 Index (including Value and Growth Sub-indexes), the Wilshire 5000
Index, Standard & Poor's Mid Cap Financials Index, Standard & Poor's Super
Composite Financials Index, Standard & Poor's Financial Index, the Lehman Bond
Index, the Lehman Brothers 20+ Year Treasury Bond Index, the Lehman Brothers
Government/Corporate Bond Index, other similar Lehman Brothers indices or
components thereof, 30-year and 10-year U.S. Treasury bonds, the Morgan Stanley
Capital International World Index, and changes in the Consumer Price Index as
published by the U.S. Department of Commerce. The funds also may refer in such
materials to mutual fund performance rankings and other data, such as
comparative asset, expense and fee levels, published by Lipper, CDA,
Wiesenberger, ICD or Morningstar. Performance Advertisements also may refer to
discussions of the funds and comparative mutual fund data and ratings reported
in independent periodicals, including THE WALL STREET JOURNAL, MONEY MAGAZINE,
SMART MONEY, MUTUAL FUNDS, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S,
FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE
KIPLINGER LETTERS. Comparisons in Performance Advertisements may be in graphic
form.

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

<PAGE>

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

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

Chart showing performance of S&P 500, long-term U.S. government bonds.
Treasury Bills and inflation from 1925 through 1998.

<TABLE>
<CAPTION>
LONG-
TERM
COMMON GOV'T TREASURY
YEAR STOCKS BONDS INFLATION/CPI BILLS
---- ------ ----- ------------- --------
<S> <C> <C> <C> <C>
1925 $10,000 $10,000 $10,000 $10,000
1926 $11,162 $10,777 $9,851 $10,327
1927 $15,347 $11,739 $9,646 $10,649
1928 $22,040 $11,751 $9,553 $11,028
1929 $20,185 $12,153 $9,572 $11,552
1930 $15,159 $12,719 $8,994 $11,830
1931 $8,590 $12,044 $8,138 $11,957
1932 $7,886 $14,073 $7,300 $12,072
1933 $12,144 $14,062 $7,337 $12,108
1934 $11,969 $15,472 $7,486 $12,128
1935 $17,674 $16,243 $7,710 $12,148
1936 $23,669 $17,464 $7,803 $12,170
1937 $15,379 $17,504 $8,045 $12,207
1938 $20,165 $18,473 $7,821 $12,205
1939 $20,082 $19,570 $7,784 $12,208
1940 $18,117 $20,761 $7,859 $12,208
1941 $16,017 $20,955 $8,622 $12,216
1942 $19,275 $21,629 $9,423 $12,248
1943 $24,267 $22,080 $9,721 $12,291
1944 $29,060 $22,702 $9,926 $12,332
1945 $39,649 $25,139 $10,149 $12,372
1946 $36,449 $25,113 $11,993 $12,416
1947 $38,529 $24,454 $13,073 $12,478
1948 $40,649 $25,285 $13,426 $12,580
1949 $48,287 $26,916 $13,184 $12,718
1950 $63,601 $26,932 $13,948 $12,870
1951 $78,875 $25,873 $14,767 $13,063
1952 $93,363 $26,173 $14,898 $13,279
1953 $92,439 $27,125 $14,991 $13,521
1954 $141,084 $29,075 $14,916 $13,638
1955 $185,614 $28,699 $14,972 $13,852
1956 $197,783 $27,096 $15,400 $14,193
1957 $176,457 $29,117 $15,866 $14,639
1958 $252,975 $27,342 $16,145 $14,864
1959 $283,219 $26,725 $16,387 $15,303
1960 $284,549 $30,407 $16,629 $15,711
1961 $361,060 $30,703 $16,741 $16,045
1962 $329,545 $32,818 $16,946 $16,483
1963 $404,685 $33,216 $17,225 $16,997
1964 $471,388 $34,381 $17,430 $17,598
1965 $530,081 $34,625 $17,765 $18,289
1966 $476,737 $35,889 $18,361 $19,159
1967 $591,038 $32,594 $18,920 $19,966
1968 $656,415 $32,509 $19,814 $21,005
1969 $600,590 $30,860 $21,024 $22,388
1970 $624,653 $34,596 $22,179 $23,849
1971 $714,058 $39,173 $22,924 $24,895
1972 $849,559 $41,400 $23,706 $25,851
1973 $725,003 $40,942 $25,792 $27,643
1974 $533,110 $42,725 $28,939 $29,855
1975 $731,443 $46,653 $30,969 $31,588
1976 $905,842 $54,470 $32,458 $33,193
1977 $840,766 $54,095 $34,656 $34,893
1978 $895,922 $53,458 $37,784 $37,398
1979 $1,061,126 $52,799 $42,812 $41,279
1980 $1,405,137 $50,715 $48,120 $45,917
1981 $1,336,161 $51,657 $52,421 $52,671
1982 $1,622,226 $72,507 $54,451 $58,224
1983 $1,987,451 $72,979 $56,518 $63,347
1984 $2,111,991 $84,274 $58,753 $69,586
1985 $2,791,166 $110,371 $60,968 $74,960
1986 $3,306,709 $137,446 $61,657 $79,580
1987 $3,479,675 $133,716 $64,376 $83,929
1988 $4,064,583 $146,650 $67,221 $89,257
1989 $5,344,555 $173,215 $70,345 $96,728
1990 $5,174,990 $183,924 $74,640 $104,286
1991 $6,755,922 $219,420 $76,927 $110,121
1992 $7,274,115 $237,092 $79,159 $113,982
1993 $8,000,785 $280,339 $81,334 $117,284
1994 $8,105,379 $258,556 $83,510 $121,862
1995 $11,139,184 $340,435 $85,630 $128,680
1996 $13,709,459 $337,265 $88,475 $135,381
1997 $18,272,762 $390,735 $89,897 $142,496
1998 $23,495,420 $441,777 $91,513 $149,416
</TABLE>

Source: Stocks, Bonds, Bills and Inflation 1999 Yearbook'TM', Ibbotson Assoc.,
Chi., (annual updates work by Roger G. Ibbotson & Rex A. Sinquefield).

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

Over time, stocks have outperformed all other investments by a wide margin,
offering a solid hedge against inflation. From January 1, 1926 to December 31,
1999, stocks beat all other traditional asset classes. A $10,000 investment in
the S&P 500 grew to $28,456,286, significantly more than any other investment.

<PAGE>

TAXES

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

SALE OR EXCHANGE OF FUND SHARES. A shareholder's sale (redemption) of fund
shares may result in a taxable gain or loss, depending on whether the
shareholder receives more or less than his or her adjusted basis for the shares
(which normally includes any initial sales charge paid on Class A shares). An
exchange of any fund's shares for shares of another PaineWebber 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 RULE FOR CLASS A SHAREHOLDERS. A special tax rule applies when a
shareholder sells or exchanges Class A shares of a fund within 90 days of
purchase and subsequently acquires Class A shares of the same or another
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 any
loss would be 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.

CONVERSION OF CLASS B SHARES. No gain or loss will be recognized by a
shareholder as a result of a conversion of Class B shares to Class A shares.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each fund intends to
continue to qualify for treatment as a regulated investment company ('RIC')
under the Internal Revenue Code. To so qualify, each fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income and net short-term
capital gain) ('Distribution Requirement') and must meet several additional
requirements. For each fund, these requirements include the following: (1) the
fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of securities, or other income (including gains
from options or futures) derived with respect to its business of investing in
securities ('Income Requirement'); (2) at the close of each quarter of the
fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities that are limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the fund's total assets and
that does not represent more than 10% of the issuer's outstanding voting
securities; and (3) at the close of each quarter of the fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. government securities or the securities of other RICs) of any
one issuer. If a fund failed to qualify for treatment as a RIC for any taxable
year, (1) it would be taxed as an ordinary corporation on its taxable income for
that year without being able to deduct the distributions it makes to its
shareholders and (2) the shareholders would treat all those distributions,
including distributions of net capital gain (the excess of net long-term capital
gain over net short-term capital loss), as dividends (that is, ordinary income)
to the extent of the fund's earnings and profits. In addition, the fund could be
required to recognize unrealized gains, pay substantial taxes and interest and
make substantial distributions before requalifying for RIC treatment.

OTHER INFORMATION. Dividends and other distributions each fund declares in
October, November or December of any year that are payable to shareholders of
record on a date in any of those months will be deemed to have been paid by the
fund and received by the shareholders on December 31 of that year if the funds
pays the distributions during the following January.

A portion of the dividends (whether paid in cash or additional shares) from
each fund's investment company taxable income may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion for a
fund may not exceed the aggregate dividends received by the fund from U.S.

<PAGE>

corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the federal alternative minimum tax.

If shares of a fund are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
Investors also should be aware that if shares are purchased shortly before the
record date for any dividend or capital gain distribution, the shareholder will
pay full price for the shares and receive some portion of the price back as a
taxable distribution.

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

Each fund may invest in the stock of 'passive foreign investment companies'
('PFICs') if that stock is a permissible investment. A PFIC is any foreign
corporation (with certain exceptions) that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a fund will be subject to
federal income tax on a portion of any 'excess distribution' received on the
stock of a PFIC or of any gain from disposition of that stock (collectively
'PFIC income'), plus interest thereon, even if the fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
will be included in the fund's investment company taxable income and,
accordingly, will not be taxable to it to the extent it distributes that income
to its shareholders.

If a fund invests in a PFIC and elects to treat the PFIC as a 'qualified
electing fund' ('QEF'), then in lieu of the foregoing tax and interest
obligation, the fund will be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain (which it
may have to distribute to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax) even if the QEF does not distribute those earnings
and gain to the fund. In most instances it will be very difficult, if not
impossible, to make this election because of certain of its requirements.

Each fund may elect to 'mark to market' its stock in any PFIC.
'Marking-to-market,' in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of a PFIC's stock over
a fund's adjusted basis therein as of the end of that year. Pursuant to the
election, a fund also would be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included by the fund for
prior taxable years under the election (and under regulations proposed in 1992
that provided a similar election with respect to the stock of certain PFICs). A
fund's adjusted basis in each PFIC's stock with respect to which it has made
this election will be adjusted to reflect the amounts of income included and
deductions taken thereunder.

The use of hedging strategies involving Derivative Instruments, such as
writing (selling) and purchasing options and futures contracts, involves complex
rules that will determine for income tax purposes the amount, character and
timing of recognition of the gains and losses a fund realizes in connection
therewith. Gains from options and futures derived by a fund with respect to its
business of investing in securities will be treated as qualifying income under
the Income Requirement.

Certain futures contracts in which a fund may invest may be subject to
section 1256 of the Internal Revenue Code ('section 1256 contracts'). Any
section 1256 contracts a fund holds at the end of each taxable year generally
must be 'marked-to-market' (that is, treated as having been sold at that time
for their fair market value) for federal income tax purposes, which the result
that unrealized gains or losses will be treated as though they were realized.
Sixty percent of any net gain or loss recognized on these deemed sales, and 60%
of any net realized gain or loss from any actual sales of section 1256
contracts, will be treated as long-term capital gain or loss, and the balance
will be treated as short-term capital gain or loss. These rules may operate to
increase the amount that a fund must distribute to satisfy the Distribution
Requirement (i.e., with respect to the portion treated as short-term capital
gain), which will be taxable to its shareholders as ordinary income, and to
increase the net capital gain a fund recognizes,

<PAGE>

without in either case increasing the cash available to the fund. A fund may
elect not to have the foregoing rules apply to any 'mixed straddle' (that is, a
straddle, clearly identified by the fund in accordance with the regulations, at
least one (but not all) the positions of which are section 1256 contracts),
although doing so may have the effect of increasing the relative proportion of
net short-term capital gain (taxable as ordinary income) and thus increasing the
amount of dividends that must be distributed.

Offsetting positions in any actively traded security, option or futures
contract entered into or held by a fund may constitute a 'straddle' for federal
income tax purposes. Straddles are subject to certain rules that may affect the
amount, character and timing of a fund's gains and losses with respect to
positions of the straddle by requiring, among other things, that (1) loss
realized on disposition of one position of a straddle be deferred to the extent
of any unrealized gain in an offsetting position until the latter position is
disposed of, (2) the fund's holding period in certain straddle positions not
begin until the straddle is terminated (possibly resulting in gain being treated
as short-term rather than long-term capital gain) and (3) losses recognized with
respect to certain straddle positions, that otherwise would constitute
short-term capital losses, be treated as long-term capital losses. Applicable
regulations also provide certain 'wash sale' rules, which apply to transactions
where a position is sold at a loss and a new offsetting position is acquired
within a prescribed period, and 'short sale' rules applicable to straddles.
Different elections are available to the funds, which may mitigate the effects
of the straddle rules, particularly with respect to mixed straddles.

When a covered call option written (sold) by a fund expires, it will realize
a short-term capital gain equal to the amount of the premium it received for
writing the option. When a fund terminates its obligations under such an option
by entering into a closing transaction, it will realize a short-term capital
gain (or loss), depending on whether the cost of the closing transaction is less
(or more) than the premium it received when it wrote the option. When a covered
call option written by a fund is exercised, the fund will be treated as having
sold the underlying security, producing long-term or short-term capital gain or
loss, depending on the holding period of the underlying security and whether the
sum of the option price received on the exercise plus the premium received when
it wrote the option is more or less than the basis of the underlying security.

If a fund has an 'appreciated financial position' -- generally, an interest
(including an interest through an option or futures contract or short sale) with
respect to any stock, debt instrument (other than 'straight debt') or
partnership interest the fair market value of which exceeds its adjusted
basis -- and enters into a 'constructive sale' of the position, the fund will be
treated as having made an actual sale thereof, with the result that gain will be
recognized at that time. A constructive sale generally consists of a short sale,
an offsetting notional principal contract or a futures contract entered into by
a fund or a related person with respect to the same or substantially identical
property. In addition, if the appreciated financial position is itself a short
sale or such a contract, acquisition of the underlying property or substantially
identical property will be deemed a constructive sale. The foregoing will not
apply, however, to a fund's transaction during any taxable year that otherwise
would be treated as a constructive sale if the transaction is closed within 30
days after the end of that year and the fund holds the appreciated financial
position unhedged for 60 days after that closing (i.e., at no time during that
60-day period is the fund's risk of loss regarding that position reduced by
reason of certain specified transactions with respect to substantially identical
or related property, such as having an option to sell, being contractually
obligated to sell, making a short sale or granting an option to buy
substantially identical stock or securities).

The foregoing is only a general summary of some of the important federal tax
considerations generally affecting the funds and their shareholders. No attempt
is made to present a complete explanation of the federal tax treatment of the
funds' activities, and this discussion is not intended as a substitute for
careful tax planning. Accordingly, potential investors are urged to consult
their own tax advisers for more detailed information and for information
regarding any state, local or foreign taxes applicable to the funds and to
dividends and other distributions therefrom.

<PAGE>

OTHER INFORMATION

MASSACHUSETTS BUSINESS TRUSTS. Each Trust is an entity of the type commonly
known as a 'Massachusetts business trust.' Under Massachusetts law, shareholders
of a fund could, under certain circumstances, be held personally liable for the
obligations of the fund or its Trust. However, each Trust's Declaration of Trust
disclaims shareholder liability for acts or obligations of the Trust or the fund
and requires that notice of such disclaimer be given in each note, bond,
contract, instrument, certificate or undertaking made or issued by the board
members or by any officers or officer by or on behalf of the Trust or the fund,
the board members or any of them in connection with the Trust. Each Declaration
of Trust provides for indemnification from the relevant fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the fund itself would be unable to meet its obligations, a possibility that
Mitchell Hutchins believes is remote and not material. Upon payment of any
liability incurred by a shareholder solely by reason of being or having been a
shareholder, the shareholder paying such liability would be entitled to
reimbursement from the general assets of the relevant fund. The board members
intend to conduct each fund's operations in such a way as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the fund.

CLASSES OF SHARES. A share of each class of a fund represents an identical
interest in that fund's investment portfolio and has the same rights, privileges
and preferences. However, each class may differ with respect to sales charges,
if any, distribution and/or service fees, if any, other expenses allocable
exclusively to each class, voting rights on matters exclusively affecting that
class, and its exchange privilege, if any. 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 a 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 and liquidation proceeds on Class A, B, C and Y shares will differ.

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 Securities Trust, which has more than one series) may
elect all of the board members of that fund or Securities Trust. The shares of a
fund will be voted together, except that only the shareholders of a particular
class of a fund may vote on matters affecting only that class, such as the terms
of a Plan as it relates to the class. The shares of each series of Securities
Trust will be voted separately, except when an aggregate vote of all the series
is required by law.

The funds do not hold annual meetings. Shareholders of record of no less
than two-thirds of the outstanding shares of a fund or Securities Trust may
remove a board member through a declaration in writing or by vote cast in person
or by proxy at a meeting called for that purpose. A meeting will be called to
vote on the removal of a board member at the written request of holders of 10%
of the outstanding shares of a fund or Securities Trust.

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

PRIOR NAMES. Prior to April 3, 1995, Growth and Income Fund was known as
'PaineWebber Dividend Growth Fund.' Prior to May 1, 1998, Mid Cap Fund was known
as 'PaineWebber Capital Appreciation Fund.' Prior to November 10, 1995, each
fund's Class C shares were known as 'Class D'

<PAGE>

shares. Prior to November 10, 1995, the Class Y shares of Growth and Income Fund
and Growth Fund were known as Class C shares.

CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT. State Street
Bank and Trust Company, located at 1776 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.

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

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

AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for Growth Fund, Growth and Income Fund and Mid
Cap Fund.

FINANCIAL STATEMENTS

Each fund's Annual Report to Shareholders for its fiscal year ended August
31, 2000 is a separate document supplied with this SAI, and the financial
statements, accompanying notes and report of independent auditors or independent
accountants appearing therein are incorporated herein by this reference.

<PAGE>

APPENDIX

RATINGS INFORMATION

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS

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

Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category, the modifier 2 indicates
a mid-range ranking, and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

DESCRIPTION OF S&P CORPORATE DEBT RATINGS

AAA. An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong; AA. An obligation rated AA differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong; A. An obligation rated A is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than obligations in higher rated categories. However, the
obligor's capacity to meet its financial commitment on the obligation is still
strong; BBB. An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation; BB, B, CCC, CC, C. Obligations rated BB, B, CCC, CC and C are
regarded as having significant speculative characteristics. BB indicates the
least degree of speculation and C the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions; BB. An
obligation rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation; B. An
obligation rated B is more vulnerable to nonpayment

A-1

<PAGE>

than obligations rated BB, but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness to
meet its financial commitment on the obligation; CCC. An obligation rated CCC is
currently vulnerable to nonpayment and is dependent upon favorable business,
financial and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the obligation; CC. An obligation rated CC is currently
highly vulnerable to nonpayment; C. The C rating may be used to cover a
situation where a bankruptcy petition has been filed or similar action has been
taken, but payments on this obligation are being continued; D. An obligation
rated D is in payment default. The D rating category is used when payments on an
obligation are not made on the date due even if the applicable grace period has
not expired, unless S&P believes that such payments will be made during such
grace period. The D rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are
jeopardized.

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

r. This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk -- such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

A-2

<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

INVESTORS SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THE PROSPECTUS AND
THIS STATEMENT OF ADDITIONAL INFORMATION. THE FUNDS AND THEIR DISTRIBUTOR HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INVESTORS WITH INFORMATION THAT IS DIFFERENT.
THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION ARE NOT AN OFFER TO
SELL SHARES OF THE FUNDS IN ANY JURISDICTION WHERE THE FUNDS OR THEIR
DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE SHARES.

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

PaineWebber
Growth Fund

PaineWebber
Growth and Income Fund

PaineWebber
Mid Cap Fund

------------------------------------------
Statement of Additional Information
December 31, 2000
------------------------------------------

<PAGE>

PART C. OTHER INFORMATION

Item 23. Exhibits

<TABLE>

<S> <C>
(1) Amended and Restated Declaration of Trust 1/

(2) Restated By-laws 1/

(3) Instruments defining the rights of holders of the Registrant's share of beneficial interest 2/

(4) (a) Interim Investment Management and Administration Contract (filed herewith)
(b) Interim Sub-Advisory Contract with Alliance Capital Management L.P. (filed herewith)
(c) Interim Sub-Advisory Contract with State Street Global Advisors (filed herewith)

(5) (a) Form of Distribution Contract (filed herewith)
(b) Form of Dealer Agreement (filed herewith)

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

(7) Custodian Agreement 3/

(8) Transfer Agency Agreement 3/

(9) Opinion and consent of counsel (to be filed)

(10) Other opinions, appraisals, rulings and consents: Auditor's consent (to be filed)

(11) Financial statements omitted from prospectus - none

(12) Letter of investment intent 3/

(13) (a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class A shares 3/

(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class B shares 3/

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

(15) (a) Code of Ethics for Registrant, its investment manager and its principal distributor 4/

(b) Code of Ethics for Alliance Capital Management L.P. (filed herewith)

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

1/ Incorporated by reference from Post-Effective Amendment No. 38 to the
registration statement, SEC File No. 2-94983, filed November 25, 1997.

2/ Incorporated by reference from Articles III, VIII, IX, X and XI of
Registrant's Amended and Restated Declaration of Trust and from Articles
II, VII and X of Registrant's Restated By-Laws.

3/ Incorporated by reference from Post-Effective Amendment No. 39 to the
registration statement, SEC File No. 2-94983, filed November 20, 1998.

4/ Incorporated by reference from Post-Effective Amendment No. 29 to the
registration statement of PaineWebber Mutual Fund Trust, SEC File No.
2-98149, filed June 27, 2000.

<PAGE>

Item 24. Persons Controlled by or under Common Control with Registrant

None.

Item 25. Indemnification

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

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

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

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

Section 9 of the Interim Investment Management and Administration
Contract ("Management Contract") with Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins") provides that Mitchell Hutchins shall not be liable for
any error of judgment or mistake of law or for any loss suffered by any series
of the Registrant in connection with the matters to which the Management
Contract relates, except for a loss resulting from the willful misfeasance, bad
faith, or gross negligence of Mitchell Hutchins in the performance of its duties
or from its reckless disregard of its obligations and duties under the
Management Contract. Section 10 of the Management Contract provides that the
Trustees shall not be liable for any obligations of the Trust or any series
under the Management Contract and that Mitchell Hutchins shall look only to the
assets and property of the Registrant in settlement of such right or claim and
not to the assets and property of the Trustees.

Section 6 of each Interim Sub-Advisory Contract contains provisions
similar to Section 9 of the Management Contract, with respect to the applicable
sub-adviser.

Section 9 of the Distribution Contract provides that the Trust will
indemnify Mitchell Hutchins and its officers, directors and controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance

C-2

<PAGE>

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

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

Section 10 of the Distribution Contract contains provisions similar to
Section 10 of the Management Contract, with respect to Mitchell Hutchins and
PaineWebber, as appropriate.

Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended, may be permitted to Trustees, officers and controlling
persons of the Trust, pursuant to the foregoing provisions or otherwise, the
Trust has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust of expenses
incurred or paid by a Trustee, officer or controlling person of the Trust in
connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Trust by such
Trustee, officer or controlling person in connection with the securities being
registered, the Trust will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

Item 26. Business and Other Connections of Investment Adviser

Mitchell Hutchins, a Delaware corporation, is a registered investment
adviser and is a wholly owned subsidiary of PaineWebber which is, in turn, a
wholly owned subsidiary of Paine Webber Group Inc. Mitchell Hutchins is
primarily engaged in the investment advisory business. Information as to the
officers and directors of Mitchell Hutchins is included in its Form ADV as filed
with the Securities and Exchange Commission (registration number 801-13219) and
is incorporated herein by reference.

Alliance Capital Management L.P ("Alliance Capital") serves as a
sub-adviser for PaineWebber Growth Fund. Information on the officers and
directors of Alliance Capital is included in its Form ADV filed with the
Securities and Exchange Commission (registration number 801-32361) and is
incorporated herein by reference.

State Street Global Advisors ("SSgA"), the investment management
division of State Street Bank & Trust Company, serves as a sub-adviser for
PaineWebber Growth Fund.

Item 27. Principal Underwriters

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

ALL AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.

C-3

<PAGE>

MANAGED HIGH YIELD PLUS FUND INC.
MITCHELL HUTCHINS LIR MONEY SERIES
MITCHELL HUTCHINS SECURITIES TRUST
MITCHELL HUTCHINS SERIES TRUST
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INDEX TRUST
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
2002 TARGET TERM TRUST INC.

b) Mitchell Hutchins is the Registrant's principal underwriter.
PaineWebber acts as exclusive dealer of the Registrant's shares. The directors
and officers of Mitchell Hutchins, their principal business addresses and their
positions and offices with Mitchell Hutchins are identified in its Form ADV as
filed with the Securities and Exchange Commission (registration number
801-13219). The directors and officers of PaineWebber, their principal business
addresses and their positions and offices with PaineWebber are identified in its
Form ADV as filed with the Securities and Exchange Commission (registration
number 801-7163). The foregoing information is hereby incorporated herein by
reference. The information set forth below is furnished for those directors and
officers of Mitchell Hutchins or PaineWebber who also serve as trustees or
officers of the Registrant.

<TABLE>
<CAPTION>
Position and Offices With
Name Positions and Offices with Registrant Underwriter or Dealer
---- ------------------------------------- ---------------------
<S> <C> <C>
Margo N. Alexander* Trustee and President Chairman and a Director of Mitchell
Hutchins and an Executive Vice President
and a Director of PaineWebber

Brian M. Storms* Trustee Chief Executive Officer, President and
Chief Operating Officer of Mitchell Hutchins

Amy Doberman** Vice President Senior Vice President and General Counsel
Counsel of Mitchell Hutchins

John J. Lee*** Vice President and Assistant Treasurer Vice President and a Manager of the Mutual Fund
Finance Department of Mitchell Hutchins

Kevin J. Mahoney*** Vice President and Assistant Treasurer First Vice President and a Senior Manager
of the Mutual Fund Finance Department of
Mitchell Hutchins
</TABLE>

C-4

<PAGE>

<TABLE>
<CAPTION>
Position and Offices With
Name Positions and Offices with Registrant Underwriter or Dealer
---- ------------------------------------- ---------------------
<S> <C> <C>
Ann E. Moran*** Vice President and Assistant Treasurer Vice President and a Manager of the Mutual
Fund Finance Department of Mitchell Hutchins

Dianne E. O'Donnell** Vice President and Secretary Senior Vice President and Deputy General
Counsel of Mitchell Hutchins

Paul H. Schubert*** Vice President and Treasurer Senior Vice President and Director of the
Mutual Fund Finance Department of Mitchell Hutchins

Barney A. Taglialatela*** Vice President and Assistant Treasurer Vice President and a Manager of the Mutual
Fund Finance Department of Mitchell Hutchins

Keith A. Weller** Vice President and Assistant Secretary First Vice President and Associate General
Counsel of Mitchell Hutchins
</TABLE>

---------

* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.
** This person's business address is 1285 Avenue of the Americas, New York,
New York, 10019-6028.
*** This person's business address is Newport Center III, 499 Washington Blvd.,
14th Floor, Jersey City, New Jersey 07310-1998.

c) None.

Item 28. Location of Accounts and Records

The books and other documents required by paragraphs (b)(4), (c) and
(d) of Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Registrant's investment adviser and administrator,
Mitchell Hutchins at 1285 Avenue of the Americas, New York, New York 10019-6028
and 51 West 52nd Street, New York, New York 10019-6114. All other accounts,
books and documents required by Rule 31a-1 are maintained in the physical
possession of Registrant's transfer agent and custodians.

Item 29. Management Services

Not applicable.

Item 30. Undertakings

None.

C-5

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 30th day of October, 2000.

PAINEWEBBER OLYMPUS FUND

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

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

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Margo N. Alexander President and Trustee October 30, 2000
------------------------------------ (Chief Executive Officer)
Margo N. Alexander *

/s/ E.Garrett Bewkes, Jr. Trustee and Chairman October 30, 2000
------------------------------------ of the Board of Trustees
E.Garrett Bewkes, Jr. *

/s/ Richard Q. Armstrong Trustee October 30, 2000
------------------------------------
Richard Q. Armstrong *

/s/ Richard R. Burt Trustee October 30, 2000
------------------------------------
Richard R. Burt *

/s/ Meyer Feldberg Trustee October 30, 2000
------------------------------------
Meyer Feldberg *

/s/ George W. Gowen Trustee October 30, 2000
------------------------------------
George W. Gowen *

/s/ Frederic V. Malek Trustee October 30, 2000
------------------------------------
Frederic V. Malek *

/s/ Carl W.Schafer Trustee October 30, 2000
------------------------------------
Carl W.Schafer *

/s/ Brian M. Storms Trustee October 30, 2000
------------------------------------
Brian M. Storms **

/s/ Paul H. Schubert Vice President and Treasurer (Chief October 30, 2000
------------------------------------ Financial and Accounting Officer)
Paul H. Schubert

<PAGE>

SIGNATURES (Continued)

* Signature affixed by Elinor W. Gammon pursuant to powers of attorney dated
May 21, 1996 and incorporated by reference from Post-Effective Amendment
No. 30 to the registration statement of PaineWebber Managed Municipal
Trust, SEC File 2-89016, filed June 27, 1996.

** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
May 14, 1999 and incorporated by reference from Post-Effective Amendment
No. 61 to the registration statement of PaineWebber Managed Investments
Trust, SEC File 2-91362, filed June 1, 1999.

<PAGE>

PAINEWEBBER OLYMPUS FUND

EXHIBIT INDEX

</TABLE>
<TABLE>
<CAPTION>
Exhibit
Number
------
<S> <C>
(1) Amended and Restated Declaration of Trust 1/

(2) Restated By-laws 1/

(3) Instruments defining the rights of holders of the Registrant's share of beneficial interest 2/
-
(4) (a) Interim Investment Management and Administration Contract (filed herewith)

(b) Interim Sub-Advisory Contract with Alliance Capital Management L.P. (filed herewith)

(5) (a) Form of Distribution Contract (filed herewith)

(b) Form of Dealer Agreement (filed herewith)

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

(7) Custodian Agreement 3/

(8) Transfer Agency Agreement 3/

(9) Opinion and consent of counsel (to be filed)

(10) Other opinions, appraisals, rulings and consents: Auditor's consent (to be filed)

(11) Financial statements omitted from prospectus - none

(12) Letter of investment intent 3/

(13) (a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class A shares 3/

(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class B shares 3/

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

(15) (a) Code of Ethics for Registrant, its investment manager and its principal distributor 4/

(b) Code of Ethics for Alliance Capital Management L.P. (filed herewith)

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

1/ Incorporated by reference from Post-Effective Amendment No. 38 to the
registration statement, SEC File No. 2-94983, filed November 25, 1997.

2/ Incorporated by reference from Articles III, VIII, IX, X and XI of
Registrant's Amended and Restated Declaration of Trust and from Articles
II, VII and X of Registrant's Restated By-Laws.

3/ Incorporated by reference from Post-Effective Amendment No. 39 to the
registration statement, SEC File No. 2-94983, filed November 20, 1998.

4/ Incorporated by reference from Post-Effective Amendment No. 29 to the
registration statement of PaineWebber Mutual Fund Trust, SEC File No.
2-98149, filed June 27, 2000.

STATEMENT OF DIFFERENCES
------------------------

The trademark symbol shall be expressed as............................. 'TM'
The copyright symbol shall be expressed as............................. 'c'
The registered trademark symbol shall be expressed as.................. 'r'
The service mark symbol shall be expressed as.......................... 'sm'
The dagger symbol shall be expressed as................................ 'D'
Characters normally expressed as superscript shall be preceded by...... 'pp'