-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AgatlYJ0Q5fZ67pjhp7jLDTLPyf4G1XmwuN/IFovVtZ9dz4+Y6AHzE4b0ueR30Zy 7scVQ54waqAbTpeSd8Uctg== 0000928385-96-000617.txt : 19960523 0000928385-96-000617.hdr.sgml : 19960523 ACCESSION NUMBER: 0000928385-96-000617 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960522 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAINEWEBBER AMERICA FUND /NY/ CENTRAL INDEX KEY: 0000703887 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133175781 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 002-78626 FILM NUMBER: 96571013 BUSINESS ADDRESS: STREET 1: 1285 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127132421 MAIL ADDRESS: STREET 2: 1285 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: PAINE WEBBER GOVERNMENT FUND INC DATE OF NAME CHANGE: 19890402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAINEWEBBER OLYMPUS FUND/NY CENTRAL INDEX KEY: 0000759729 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 002-94983 FILM NUMBER: 96571014 BUSINESS ADDRESS: STREET 1: 1285 AVE OF THE AMERICAS STREET 2: 14TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127134000 MAIL ADDRESS: STREET 1: 1285 AVENUE OF THE AMERICAS STREET 2: 14TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER OLYMPUS FUND DATE OF NAME CHANGE: 19901021 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GROWTH FUND INC DATE OF NAME CHANGE: 19890402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAINEWEBBER SECURITIES TRUST CENTRAL INDEX KEY: 0000894632 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133694299 STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-55374 FILM NUMBER: 96571015 BUSINESS ADDRESS: STREET 1: 1285 AVENUE OF THE AMERICAS STREET 2: 14TH FLOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127131249 MAIL ADDRESS: STREET 1: 1285 AVENUE OF THE AMERICAS STREET 2: 14TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 497 1 PAINE WEBBER GROWTH AND INCOME FUND - -------------------------------------------------------------------------------- PaineWebber Growth and Income Fund PaineWebber Growth Fund PaineWebber Small Cap Value Fund 1285 Avenue of the Americas, New York, New York 10019 Prospectus -- May 1, 1996 - -------------------------------------------------------------------------------- PaineWebber Stock Funds are designed for investors generally seeking capital appreciation by investing principally in equity securities. PaineWebber Growth and Income Fund seeks to provide both capital growth and current income by in- vesting in dividend-paying equity securities believed to have potential for rapid earnings growth. PaineWebber Growth Fund seeks long-term capital appreci- ation by investing in equity securities of companies with substantial potential for capital growth. PaineWebber Small Cap Value Fund seeks long-term capital appreciation by investing primarily in equity securities of small capitaliza- tion companies. This Prospectus concisely sets forth information that an investor should know about the Funds before investing. Please read it carefully and retain a copy of this Prospectus for future reference. A Statement of Additional Information dated May 1, 1996 has been filed with the Securities and Exchange Commission and is legally part of this Prospectus. The Statement of Additional Information can be obtained without charge, and further inquiries can be made, by contacting an individual Fund, your PaineWebber in- vestment executive, PaineWebber's correspondent firms or by calling toll-free 1-800-647-1568. - -------------------------------------------------------------------------------- THE PAINEWEBBER FAMILY OF MUTUAL FUNDS The PaineWebber Family of Mutual Funds consists of six broad categories, which are presented here. Generally, investors seeking to maximize return must assume greater risk. Growth and Income Fund, Growth Fund and Small Cap Value Fund are all in the STOCK category. . Asset Allocation Funds for long-term growth and . Money Market Fund for income by investing in stocks and bonds. income and stability by investing in high- quality, short-term investments. . Stock Funds for long-term growth by investing mainly in stocks. . Global Funds for long-term growth by investing . Bond Funds for income mainly in foreign stocks or high current income by investing mainly in by investing mainly in global debt instruments. bonds. . Tax-Free Bond Funds for income exempt from federal income taxes and, in some cases, state and local income taxes, by investing in municipal bonds. A complete listing of the PaineWebber Family of Mutual Funds is found on the back cover of this prospectus. - -------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTA- TIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR THEIR DISTRIBU- TOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------------------------------------------------------------------- Prospectus Page 1 - -------------------------------------------------------------------------------- ------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Table of Contents - --------------------------------------------------------------------------------
Page ---- The Funds at a Glance...................................................... 3 Expense Table.............................................................. 6 Financial Highlights....................................................... 8 Investment Objective and Policies.......................................... 18 Investment Philosophy & Process............................................ 18 Performance................................................................ 20 The Funds' Investments..................................................... 23 Flexible Pricing SM........................................................ 25 How to Buy Shares.......................................................... 28 How to Sell Shares......................................................... 29 Other Services............................................................. 29 Management................................................................. 30 Determining the Shares' Net Asset Value.................................... 32 Dividends & Taxes.......................................................... 32 General Information........................................................ 33
---------- - -------------------------------------------------------------------------------- Prospectus Page 2 - ------------------------------------------------------------------------------- ------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund The Funds at a Glance - ------------------------------------------------------------------------------- The Funds offered by this Prospectus are not intended to provide a complete or balanced investment program, but one or more of them may be appropriate as a component of an investor's overall portfolio. Some common reasons to invest in these Funds are to finance college educations, plan for retirement or diversify a portfolio. When selling shares, investors should be aware that they may get more or less for their shares than they originally paid for them. As with any mutual fund, there is no assurance that the Funds will achieve their goals. GROWTH AND INCOME FUND GOAL: To increase the value of your investment by investing primarily in dividend-paying equity securities with the potential for rapid earnings growth. INVESTMENT OBJECTIVE: Current income and capital growth. RISKS: Equity securities historically have shown greater growth potential than other types of securities, but they have also shown greater volatility. Because the Fund invests primarily in equity securities, its price will rise and fall. The Fund may invest in U.S. dollar-denominated securities of foreign companies, which involves more risk than investing in the securities of U.S. companies. The Fund may also invest up to 10% of its total assets in high yield, high risk convertible bonds, which are considered predominantly speculative and may involve major risk exposure to adverse conditions. The Fund may use derivatives, such as options and futures, in its hedging activities, which may involve special risks. Investors may lose money by investing in the Fund; the investment is not guaranteed. SIZE: On February 29, 1996, the Fund had over $599 million in assets. GROWTH FUND GOAL: To increase the value of your investment by investing primarily in equity securities of companies with substantial potential for capital growth. INVESTMENT OBJECTIVE: Long-term capital appreciation. RISKS: Equity securities historically have shown greater growth potential than other types of securities, but they have also shown greater volatility. Because the Fund invests primarily in equity securities, its price will rise and fall. The Fund may invest in U.S. dollar-denominated securities of foreign companies, which involves more risk than investing in the securities of U.S. companies. The Fund may also invest up to 10% of its total net assets in high yield, high risk bonds and convertible securities, which are considered predominantly speculative and involve major risk exposure to adverse conditions. The Fund may use derivatives, such as options and futures, in its hedging activities, which may involve special risks. Investors may lose money by investing in the Fund; the investment is not guaranteed. SIZE: On February 29, 1996, the Fund had over $403 million in assets. SMALL CAP VALUE FUND GOAL: To increase the value of your investment by investing primarily in equity securities of small capitalization ("small cap") companies. INVESTMENT OBJECTIVE: Long-term capital appreciation. RISKS: Equity securities historically have shown greater growth potential than other types of securities, but they have also shown greater volatility. Because the Fund invests primarily in equity securities, its price will rise and fall. The Fund may invest in U.S. dollar-denominated securities of foreign companies, which involves more risk than investing in the securities of U.S. companies. Small cap companies typically are subject to a greater degree of change in earnings and business prospects than are larger, more established companies. In addition, equity securities of small cap companies may be less liquid and more volatile than those of larger companies. The Fund may also invest up to 10% of its total assets in high yield, high risk convertible bonds, which are predominantly speculative and may involve major risk exposure to adverse conditions. The Fund may use derivatives, such as options and futures, in its hedging activities, which may involve special risks. Investors may lose money by investing in the Fund; the investment is not guaranteed. ---------- - -------------------------------------------------------------------------------- Prospectus Page 3 - ------------------------------------------------------------------------------- ------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund The Funds at a Glance (Continued) - ------------------------------------------------------------------------------- SIZE: On February 29, 1996, the Fund had over $71 million in assets. MANAGEMENT Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), an asset management subsidiary of PaineWebber Incorporated ("PaineWebber"), is the investment adviser and administrator of Growth Fund, Growth and Income Fund and Small Cap Value Fund (each a "Fund" and, collectively, the "Funds"). MINIMUM INVESTMENT To open an account, investors need $1,000; to add to an account, investors need only $100. WHO SHOULD INVEST GROWTH AND INCOME FUND is designed for investors seeking capital growth and current income through investment in growth-oriented, dividend-paying equity securities of U.S. companies and foreign companies that are traded in the United States. Growth and Income Fund invests primarily in equity securities of larger growth companies and smaller issuers with the potential for rapid earnings growth that pay dividends. In addition, Growth and Income Fund can invest in high yield, high risk convertible bonds. These investments offer the potential for greater returns, but also entail a substantial degree of volatility and risk. Accordingly, Growth and Income Fund is designed for investors who are able to bear the risks that come with investments in the stocks and bonds of such companies. GROWTH FUND is for investors who want long-term capital appreciation through investment primarily in growth-oriented equity securities of U.S. companies and foreign companies that are traded in the United States. Growth Fund invests in equity securities of both larger growth companies and smaller issuers with greater appreciation potential. In addition, Growth Fund can invest in high yield, high risk bonds. These investments offer the potential for greater returns, but also entail a substantial degree of volatility and risk. Accordingly, Growth Fund is designed for investors who are able to bear the risks that come with investments in the stocks and bonds of such companies. SMALL CAP VALUE FUND invests primarily in equity securities of small cap U.S. companies and foreign companies that are traded in the U.S., and is designed for investors who are seeking long-term capital appreciation. Several statistical studies have been published indicating that the historical long- term returns of small cap equity securities have been higher than those of large cap equity securities. Equity securities of small cap companies generally exhibit greater market volatility than is the case with equity securities of larger companies, or equity securities in general. In addition, Small Cap Value Fund can invest in high yield, high risk convertible bonds. These investments offer the potential for greater returns, but also entail a substantial degree of volatility and risk. Accordingly, Small Cap Value Fund is designed for investors who are able to bear the risks and fluctuations associated with investment in smaller companies. HOW TO PURCHASE SHARES OF THE FUNDS Investors may select among these classes of shares: CLASS A SHARES The price is the net asset value plus the initial sales charge (the maximum is 4.5% of the public offering price). Although investors pay an initial sales charge when they buy Class A shares, the ongoing expenses for this Class are lower than the ongoing expenses of Class B and Class C shares. CLASS B SHARES The price is the net asset value. Investors do not pay an initial sales charge when they buy Class B shares. As a result, 100% of their purchase is immediately invested. However, Class B shares have higher ongoing expenses than Class A shares. Depending upon how long they own the shares, investors may have to pay a sales charge when they sell Class B shares. This is ---------- - -------------------------------------------------------------------------------- Prospectus Page 4 - -------------------------------------------------------------------------------- ------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund The Funds at a Glance (Continued) - -------------------------------------------------------------------------------- called a "contingent deferred sales charge" and applies when investors sell their Class B shares within six years. After six years, Class B shares convert to Class A shares, which have lower ongoing expenses and no contingent deferred sales charge. CLASS C SHARES The price is the net asset value. Investors do not pay an initial sales charge when they buy Class C shares. As a result, 100% of their purchase is immediately invested. However, Class C shares have higher ongoing expenses than Class A shares. A contingent deferred sales charge of 1% is charged on shares sold within one year of the purchase date. Class C shares never convert to any other Class of shares. ---------- - -------------------------------------------------------------------------------- Prospectus Page 5 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Expense Table - ------------------------------------------------------------------------------- The following tables are intended to assist investors in understanding the expenses associated with investing in Class A, B and C shares of the Funds. Expenses shown below represent those incurred for the most recent fiscal year.
CLASS A CLASS B CLASS C SHAREHOLDER TRANSACTION EXPENSES ------- ------- ------- Maximum Sales Charge on Purchases of Shares (as a % of offering price)...................................... 4.50% None None Sales Charge on Reinvested Dividends (as a % of offering price)...................................... None None None Maximum Contingent Deferred Sales Charge (as a % of net asset value at the time of purchase or sale, whichever is less)................................... None 5% 1% Exchange Fee.......................................... $5.00 $5.00 $5.00 ANNUAL FUND OPERATING EXPENSES (as a % of average net assets) GROWTH AND INCOME FUND Management Fees....................................... 0.70% 0.70% 0.70% 12b-1 Fees............................................ 0.23 1.00 1.00 Other Expenses........................................ 0.26 0.27 0.28 ----- ----- ----- Total Operating Expenses.............................. 1.19% 1.97% 1.98% ===== ===== ===== GROWTH FUND(A) Management Fees....................................... 0.75% 0.75% 0.75% 12b-1 Fees............................................ 0.23 1.00 1.00 Other Expenses........................................ 0.24 0.25 0.24 ----- ----- ----- Total Operating Expenses.............................. 1.22% 2.00% 1.99% ===== ===== ===== SMALL CAP VALUE FUND Management Fees....................................... 1.00% 1.00% 1.00% 12b-1 Fees............................................ 0.25 1.00 1.00 Other Expenses........................................ 0.73 0.74 0.73 ----- ----- ----- Total Operating Expenses.............................. 1.98% 2.74% 2.73% ===== ===== =====
- ------- (a) Does not include 0.06% in non-recurring reorganization expenses which were incurred during the fiscal year ended August 31, 1995. If those expenses were included, "Other expenses" for the Class A, B and C shares would be 0.30%, 0.31% and 0.30%, respectively, and "Total operating expenses" would be 1.28%, 2.06% and 2.05%, respectively. - -------------------------------------------------------------------------------- CLASS A SHARES: Sales charge waivers and a reduced sales charge purchase plan are available. Purchases of $1 million or more are not subject to a sales charge. However, if such shares are sold within one year after purchase, a contingent deferred sales charge of 1% is imposed on the net asset value of the shares at the time of purchase or sale, whichever is less. CLASS B SHARES: Sales charge waivers are available. The maximum 5% contingent deferred sales charge applies to sales of shares during the first year after purchase. The charge generally declines by 1% annually, reaching zero after six years. CLASS C SHARES: If shares are sold within one year after purchase, a contingent deferred sales charge of 1% of the net asset value of the shares at the time of purchase or sale, whichever is less, is imposed. - -------------------------------------------------------------------------------- 12b-1 distribution fees are asset-based sales charges. Long-term Class B and Class C shareholders may pay more in direct and indirect sales charges (including 12b-1 distribution fees) than the economic equivalent of the maximum front-end sales charge permitted by the National Association of Securities Dealers, Inc. 12b-1 fees have two components, as follows:
CLASS A CLASS B CLASS C ------- ------- ------- GROWTH FUND/GROWTH AND INCOME FUND 12b-1 service fees...................................... 0.23% 0.25% 0.25% 12b-1 distribution fees................................. 0.00 0.75 0.75 SMALL CAP VALUE 12b-1 service fees...................................... 0.25% 0.25% 0.25% 12b-1 distribution fees................................. 0.00 0.75 0.75
The 12b-1 fees for Class A shares of Growth and Income Fund and Growth Fund reflect a blended annual rate of the Fund's average daily net assets of 0.25% and 0.15% representing shares sold on or after December 2, 1988 and shares sold prior to that date, respectively. For more information, see "Management" and "Flexible Pricing SM." - ------------------------------------------------------------------------------- Prospectus Page 6 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Expense Table (Continued) - ------------------------------------------------------------------------------- EXAMPLES OF EFFECT OF FUND EXPENSES The following examples should assist investors in understanding various costs and expenses incurred as shareholders of a Fund. The assumed 5% annual return shown in the examples is required by regulations of the Securities and Exchange Commission ("SEC") applicable to all mutual funds. THESE EXAMPLES SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES OF A FUND MAY BE MORE OR LESS THAN THOSE SHOWN. An investor would pay the following expenses, directly or indirectly, on a $1,000 investment in the Fund, assuming a 5% annual return:
GROWTH AND INCOME FUND EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------- ------ ------- ------- -------- Class A........................................ $57 $ 81 $107 $183 Class B (Assuming sale of all shares at end of period)....................................... $70 $ 92 $126 $191 Class B (Assuming no sale of shares)........... $20 $ 62 $106 $191 Class C (Assuming sale of all shares at end of period)....................................... $30 $ 62 $107 $231 Class C (Assuming no sale of shares)........... $20 $ 62 $107 $231 GROWTH FUND EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------- ------ ------- ------- -------- Class A........................................ $57 $ 82 $109 $186 Class B (Assuming sale of all shares at end of period)....................................... $70 $ 93 $128 $194 Class B (Assuming no sale of shares)........... $20 $ 63 $108 $194 Class C (Assuming sale of all shares at end of period)....................................... $30 $ 62 $107 $232 Class C (Assuming no sale of shares)........... $20 $ 62 $107 $232 SMALL CAP VALUE FUND EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------- ------ ------- ------- -------- Class A........................................ $64 $104 $147 $265 Class B (Assuming sale of all shares at end of period)....................................... $78 $115 $165 $272 Class B (Assuming no sale of shares)........... $28 $ 85 $145 $272 Class C (Assuming sale of all shares at end of period)....................................... $38 $ 85 $144 $306 Class C (Assuming no sale of shares)........... $28 $ 85 $144 $306
- -------------------------------------------------------------------------------- ASSUMPTIONS MADE IN THE EXAMPLES . ALL CLASSES: Reinvestment of all dividends and distributions; percentage amounts listed under "Annual Fund Operating Expenses" remain the same for years shown. . CLASS A SHARES: Deduction of the maximum 4.5% initial sales charge at the time of purchase. . CLASS B SHARES: Deduction of the maximum applicable contingent deferred sales charge at the time of redemption, which declines over a period of six years. Ten-year figures assume that Class B shares convert to Class A shares at the end of the sixth year. . CLASS C SHARES: Deduction of a 1% contingent deferred sales charge for sales of shares within one year of purchase. - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Prospectus Page 7 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Financial Highlights - ------------------------------------------------------------------------------- GROWTH AND INCOME FUND The following tables provide investors with data and ratios for one Class A, Class B and Class C share for each of the periods shown. This information is supplemented by the financial statements and accompanying notes appearing in Growth and Income Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995 and the report of Ernst & Young LLP, independent auditors, appearing in the Fund's Annual Report to Shareholders. Both are incorporated by reference into the Statement of Additional Information. The financial statements and notes, as well as the information for each of the five years in the period ended August 31, 1995 appearing in the following tables, have been audited by Ernst & Young LLP. Further information about the Fund's performance is also included in the Annual Report to Shareholders, which may be obtained without charge by calling 1-800-647-1568. Information shown below for periods prior to the year ended August 31, 1991 has also been audited by Ernst & Young LLP, whose reports thereon were unqualified.
GROWTH AND INCOME FUND ----------------------------------------------------------------------------- CLASS A ----------------------------------------------------------------------------- FOR THE YEARS ENDED AUGUST 31, ----------------------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 1989 1988 -------- -------- -------- -------- -------- ------- ------- ------- Net asset value, beginning of period.... $ 20.43 $ 20.86 $ 20.48 $ 19.26 $ 15.87 $ 16.50 $ 13.32 $ 18.06 -------- -------- -------- -------- -------- ------- ------- ------- Net investment income... 0.24 0.28 0.28 0.24 0.19 0.51 0.49 0.60 Net realized and unrealized gains (losses) from investment transactions........... 3.18 (0.41) 0.37 1.25 3.50 (0.61) 3.17 (2.36) -------- -------- -------- -------- -------- ------- ------- ------- Total increase/decrease from investment operations............. 3.42 (0.13) 0.65 1.49 3.69 (0.10) 3.66 (1.76) -------- -------- -------- -------- -------- ------- ------- ------- Dividends from net investment income...... (0.12) (0.27) (0.27) (0.27) (0.30) (0.53) (0.48) (0.88) Distributions from realized gains on investments............ (1.21) (0.03) -- -- -- -- -- (2.10) -------- -------- -------- -------- -------- ------- ------- ------- Total dividends and distributions.......... (1.33) (0.30) (0.27) (0.27) (0.30) (0.53) (0.48) (2.98) -------- -------- -------- -------- -------- ------- ------- ------- Net asset value, end of period................. $ 22.52 $ 20.43 $ 20.86 $ 20.48 $ 19.26 $ 15.87 $ 16.50 $ 13.32 ======== ======== ======== ======== ======== ======= ======= ======= Total investment return(1).............. 18.30% (0.58)% 3.15% 7.78% 23.62% (0.72)% 28.03% (10.73)% ======== ======== ======== ======== ======== ======= ======= ======= Ratios/Supplemental data: Net assets, end of period (000's)......... $187,057 $222,432 $359,073 $358,643 $232,555 $58,649 $61,617 $62,917 Expenses to average net assets**............... 1.19% 1.20% 1.13% 1.22% 1.42% 1.41% 1.41% 1.26% Net investment income to average net assets**... 1.07% 1.29% 1.33% 1.26% 1.79% 3.11% 3.26% 4.24% Portfolio turnover...... 111.27% 94.32% 36.52% 15.57% 52.00% 32.10% 79.08% 88.95%
- ------- * Annualized. ** During certain periods presented, PaineWebber/Mitchell Hutchins waived fees or reimbursed the Fund for portions of its operating expenses. If such waivers or reimbursements had not been made for the Class A shares, the annualized ratio of expenses to average net assets and the annualized ratio of net investment income to average net assets would have been 1.65% and 3.02%, respectively, for the year ended August 31, 1989 and 1.36% and 4.14%, respectively, for the year ended August 31, 1988. For the year ended August 31, 1986, amounts reimbursed had no significant impact on the ratios presented above. + Commencement of offering of shares. (1) Total return is calculated assuming a $1,000 investment on the first day of each period reported, reinvestment of all dividends and capital gain distributions at net asset value on the payable date, and a sale at net asset value on the last day of each period reported. The figures do not include sales charges; results would be lower if sales charges were in- cluded. Total return information for periods less than one year is not annualized. (2) Formerly Class D shares. ---------- - -------------------------------------------------------------------------------- Prospectus Page 8 - -------------------------------------------------------------------------------- ------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Financial Highlights (Continued) - --------------------------------------------------------------------------------
GROWTH AND INCOME FUND - -------------------------------------------------------------------------------------------------------------- CLASS A CLASS B CLASS C(2) - ----------------- --------------------------------------------------- -------------------------------------- FOR THE FOR THE PERIOD PERIOD JULY 1, FOR THE YEARS ENDED JULY 2, FOR THE YEARS ENDED AUGUST 31, 1991+ TO AUGUST 31, 1992+ TO - ---------------------------------------------------------- AUGUST 31, -------------------------- AUGUST 31, 1987 1986 1995 1994 1993 1992 1991 1995 1994 1993 1992 - -------- ------- -------- -------- -------- -------- ---------- ------- ------- ------- ---------- $ 17.41 $ 14.18 $ 20.37 $ 20.78 $ 20.41 $ 19.23 $ 18.04 $ 20.42 $ 20.83 $ 20.47 $ 20.95 - -------- ------- -------- -------- -------- -------- ------- ------- ------- ------- ------- 0.68 0.85 0.06 0.10 0.12 0.13 0.02 0.06 0.11 0.11 0.02 1.79 3.36 3.18 (0.37) 0.36 1.20 1.17 3.19 (0.38) 0.37 (0.44) - -------- ------- -------- -------- -------- -------- ------- ------- ------- ------- ------- 2.47 4.21 3.24 (0.27) 0.48 1.33 1.19 3.25 (0.27) 0.48 (0.42) - -------- ------- -------- -------- -------- -------- ------- ------- ------- ------- ------- (0.76) (0.61) (0.03) (0.11) (0.11) (0.15) -- (0.03) (0.11) (0.12) (0.06) (1.06) (0.37) (1.21) (0.03) -- -- -- (1.21) (0.03) -- -- - -------- ------- -------- -------- -------- -------- ------- ------- ------- ------- ------- (1.82) (0.98) (1.24) (0.14) (0.11) (0.15) -- (1.24) (0.14) (0.12) (0.06) - -------- ------- -------- -------- -------- -------- ------- ------- ------- ------- ------- $ 18.06 $ 17.41 $ 22.37 $ 20.37 $ 20.78 $ 20.41 $ 19.23 $ 22.43 $ 20.42 $ 20.83 $ 20.47 ======== ======= ======== ======== ======== ======== ======= ======= ======= ======= ======= 16.25% 31.05% 17.38% (1.31)% 2.34% 6.99% 6.60% 17.37% (1.29)% 2.35% 2.85% ======== ======= ======== ======== ======== ======== ======= ======= ======= ======= ======= $107,778 $98,226 $247,543 $289,290 $461,389 $386,275 $57,539 $30,468 $37,287 $61,869 $13,019 1.15% 1.15% 1.97% 1.97% 1.90% 1.97% 2.10%* 1.98% 1.94% 1.87% 1.73%* 4.14% 5.32% 0.29% 0.51% 0.57% 4.90% 1.18%* 0.28% 0.54% 0.61% 0.94%* 131.70% 83.48% 111.27% 94.32% 36.52% 15.57% 52.00% 111.27% 94.32% 36.52% 15.57%
---------- - -------------------------------------------------------------------------------- Prospectus Page 9 - -------------------------------------------------------------------------------- ------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund [INTENTIONALLY LEFT BLANK] ----------- - -------------------------------------------------------------------------------- Prospectus Page 10 - ------------------------------------------------------------------------------- ------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Financial Highlights (Continued) - ------------------------------------------------------------------------------- GROWTH FUND The following tables provide investors with data and ratios for one Class A, Class B and Class C share for each of the periods shown. This information is supplemented by the financial statements and accompanying notes appearing in Growth Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995 and the report of Ernst & Young LLP, independent auditors, appearing in the Fund's Annual Report to Shareholders. Both are incorporated by reference into the Statement of Additional Information. The financial statements and notes, as well as the information for each of the five years in the period ended August 31, 1995 appearing in the following tables, have been audited by Ernst & Young LLP. Further information about the Fund's performance is also included in the Annual Report to Shareholders, which may be obtained without charge by calling 1-800-647-1568. Information shown below for periods prior to the year ended August 31, 1991 has also been audited by Ernst & Young LLP, whose reports thereon were unqualified. ---------- - -------------------------------------------------------------------------------- Prospectus Page 11 - ------------------------------------------------------------------------------- ------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Financial Highlights (Continued) - -------------------------------------------------------------------------------
GROWTH FUND ------------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------------- FOR THE YEARS ENDED AUGUST 31, ------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 1989 1988 -------- -------- -------- -------- ------- ------- ------- ------- Net asset value, beginning of period.... $ 20.04 $ 20.60 $ 16.78 $ 17.50 $ 13.43 $ 15.57 $ 11.21 $ 15.30 -------- -------- -------- -------- ------- ------- ------- ------- Net investment income (loss)................. 0.01 -- 0.07 -- 0.02 0.17 0.06 0.13 Net realized and unrealized gains (losses) from investment transactions........... 2.25 0.51 4.37 (0.11) 4.68 (1.16) 4.40 (2.73) -------- -------- -------- -------- ------- ------- ------- ------- Net increase/decrease from investment operations............. 2.26 0.51 4.44 (0.11) 4.70 (0.99) 4.46 (2.60) -------- -------- -------- -------- ------- ------- ------- ------- Dividends from net investment income...... -- -- -- (0.01) (0.17) -- (0.10) (0.08) Distributions from realized gains on investments............ (0.03) (1.07) (0.62) (0.60) (0.46) (1.15) -- (1.41) -------- -------- -------- -------- ------- ------- ------- ------- Total dividends and other distributions.... (0.03) (1.07) (0.62) (0.61) (0.63) (1.15) (0.10) (1.49) -------- -------- -------- -------- ------- ------- ------- ------- Net asset value, end of period................. $ 22.27 $ 20.04 $ 20.60 $ 16.78 $ 17.50 $ 13.43 $ 15.57 $ 11.21 ======== ======== ======== ======== ======= ======= ======= ======= Total investment return(1).............. 11.28% 2.33% 26.97% (0.85)% 37.02% (7.05)% 40.10% (15.37)% ======== ======== ======== ======== ======= ======= ======= ======= Ratios/Supplemental data: Net assets, end of period (000's)......... $183,958 $141,342 $130,353 $102,640 $96,796 $72,805 $71,681 $70,551 Expenses to average net assets**............... 1.28%(3) 1.21% 1.22% 1.43% 1.56% 1.59% 1.37% 1.22% Net investment income (loss) to average net assets**............... 0.19%(3) 0.06% 0.38% 0.00% 0.10% 2.96% 0.14% 0.82% Portfolio turnover...... 36.10% 24.41% 35.81% 32.49% 28.59% 39.16% 43.68% 59.07%
- ------- * Annualized. ** During certain periods presented, PaineWebber/Mitchell Hutchins waived fees or reimbursed the Fund for portions of its operating expenses. If such waivers or reimbursements had not been made for the Class A shares, the annualized ratio of expenses to average net assets and the annualized ratio of net investment income (loss) to average net assets would have been 1.76% and (0.25)%, respectively, for the year ended August 31, 1989, 1.41% and 0.63%, respectively, for the year ended August 31, 1988 and 1.25% and 1.29%, respectively, for the year ended August 31, 1986. For the year ended August 31, 1986, amounts reimbursed had no significant impact on the ratios presented above. + Commencement of offering of shares. (1) Total return is calculated assuming a $1,000 investment on the first day of each period reported, reinvestment of all dividends and capital gain distributions at net asset value on the payable date, and a sale at net asset value on the last day of each period reported. The figures do not include sales charges; results would be lower if sales charges were in- cluded. Total return information for periods less than one year is not annualized. (2) Formerly Class D shares. (3) These ratios include non-recurring reorganization expenses of 0.06%. ---------- - -------------------------------------------------------------------------------- Prospectus Page 12 - -------------------------------------------------------------------------------- ------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Financial Highlights (Continued) - --------------------------------------------------------------------------------
GROWTH FUND - ----------------------------------------------------------------------------------------------------------------------- CLASS A CLASS B CLASS C(2) - ------------------ ------------------------------------------------------ ------------------------------------------- FOR THE FOR THE PERIOD PERIOD JULY 1, FOR THE YEARS ENDED JULY 2, FOR THE YEARS ENDED AUGUST 31, 1991+ TO AUGUST 31, 1992+ TO - ------------------------------------------------------------- AUGUST 31, ------------------------------ AUGUST 31, 1987 1986 1995 1994 1993 1992 1991 1995 1994 1993 1992 - -------- -------- -------- ------- ------- ------- ---------- ------- ------- ------- ---------- $ 12.52 $ 9.70 $ 19.53 $ 20.25 $ 16.64 $ 17.48 $15.63 $ 19.67 $ 20.38 $ 16.75 $17.04 - -------- -------- -------- ------- ------- ------- ------ ------- ------- ------- ------ 0.03 0.16 (0.02) (0.06) (0.05) (0.06) (0.02) (0.10) (0.08) (0.06) (0.01) 3.26 2.79 2.05 0.41 4.28 (0.18) 1.87 2.14 0.44 4.31 (0.28) - -------- -------- -------- ------- ------- ------- ------ ------- ------- ------- ------ 3.29 2.95 2.03 0.35 4.23 (0.24) 1.85 2.04 0.36 4.25 (0.29) - -------- -------- -------- ------- ------- ------- ------ ------- ------- ------- ------ (0.20) (0.13) -- -- -- -- -- -- -- -- -- (0.31) -- (0.03) (1.07) (0.62) (0.60) -- (0.03) (1.07) (0.62) -- - -------- -------- -------- ------- ------- ------- ------ ------- ------- ------- ------ (0.51) (0.13) (0.03) (1.07) (0.62) (0.60) -- (0.03) (1.07) (0.62) -- - -------- -------- -------- ------- ------- ------- ------ ------- ------- ------- ------ $ 15.30 $ 12.52 $ 21.53 $ 19.53 $ 20.25 $ 16.64 $17.48 $ 21.68 $ 19.67 $ 20.38 $16.75 ======== ======== ======== ======= ======= ======= ====== ======= ======= ======= ====== 27.78% 30.83% 10.40% 1.55% 25.91% (1.58)% 11.84% 10.37% 1.59% 25.86% (2.95)% ======== ======== ======== ======= ======= ======= ====== ======= ======= ======= ====== $140,523 $124,182 $152,357 $97,272 $60,280 $35,867 $3,804 $30,608 $28,561 $16,474 $2,275 1.13% 1.23% 2.06%(3) 2.00% 2.02% 2.20% 2.24%* 2.05%(3) 1.98% 2.06% 1.98%* 0.25% 1.31% (0.60)%(3) (0.66)% (0.46)% (0.70)% (0.81)%* (0.57)%(3) (0.65)% (0.69)% (0.65)%* 66.15% 71.64% 36.10% 24.41% 35.81% 32.49% 28.59% 36.10% 24.41% 35.81% 32.49%
---------- - -------------------------------------------------------------------------------- Prospectus Page 13 - -------------------------------------------------------------------------------- ------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund [INTENTIONALLY LEFT BLANK] ----------- - -------------------------------------------------------------------------------- Prospectus Page 14 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Financial Highlights (Continued) - ------------------------------------------------------------------------------- SMALL CAP VALUE FUND The following table provides investors with data and ratios for one Class A, Class B and Class C share for each of the periods shown. This information is supplemented by the financial statements and accompanying notes appearing in Small Cap Value Fund's Annual Report to Shareholders for the fiscal year ended July 31, 1995 and the report of Price Waterhouse LLP, independent accountants, appearing in the Fund's Annual Report to Shareholders. Both are incorporated by reference into the Statement of Additional Information. The financial statements and notes, as well as the information appearing below, have been audited by Price Waterhouse LLP. The financial statements and notes and the financial information in the following table, as they relate to the six months ended January 31, 1996, have been taken from the records of the Fund without examination by the independent accountants, who do not express an opinion thereon. Further information about the Fund's performance is also included in the Annual Report to Shareholders, which may be obtained without charge by calling 1-800-647-1568. - -------------------------------------------------------------------------------- Prospectus Page 15 - -------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Financial Highlights (Continued) - --------------------------------------------------------------------------------
SMALL CAP VALUE FUND --------------------------------------------- CLASS A --------------------------------------------- FOR THE FOR THE PERIOD SIX MONTHS FOR THE FEBRUARY 1, FOR THE ENDED YEAR 1994 YEAR JANUARY 31, ENDED THROUGH ENDED 1996 JULY 31, JULY 31, JANUARY 31, (UNAUDITED) 1995 1994 1994 ----------- -------- ----------- ----------- Net asset value, beginning of period........................... $11.30 $10.27 $10.61 $10.00 ------- ------- ------- ------- Income from investment operations: Net investment income (loss).... 0.02 0.05 0.02 0.13 Net realized and unrealized gains (losses) from investment transactions................... 0.23 1.50 (0.36) 0.62 ------- ------- ------- ------- Total income (loss) from investment operations............ 0.25 1.55 (0.34) 0.75 ------- ------- ------- ------- Dividends and distributions to shareholders from: Net investment income............ -- -- -- (0.12) Net realized gains on investment transactions.................... (0.83) (0.52) -- (0.02) ------- ------- ------- ------- Total dividends and distributions. (0.83) (0.52) -- (0.14) ------- ------- ------- ------- Net asset value, end of period.... $10.72 $11.30 $10.27 $10.61 ======= ======= ======= ======= Total investment return(1)........ 2.20% 15.80% (3.20)% 7.58% ======= ======= ======= ======= Ratios/Supplemental data: Net assets, end of period (000's) ................................. $19,640 $20,494 $22,848 $25,226 Expenses to average net assets.... 1.90%* 1.98% 1.91%* 1.75% Net investment income (loss) to average net assets............... 0.49%* 0.41% 0.41%* 1.41% Portfolio turnover................ 7% 19% 20% 98%
- ------- * Annualized. (1) Total investment return is calculated assuming a $1,000 investment on the first day of each period reported, reinvestment of all dividends and other distributions at net asset value on the payable date, and a sale at net asset value on the last day of each period reported. The figures do not include sales charges; results would be lower if sales charges were included. Total return information for periods less than one year is not annualized. (2) Formerly Class D shares. - -------------------------------------------------------------------------------- Prospectus Page 16 - -------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Financial Highlights (Continued) - --------------------------------------------------------------------------------
SMALL CAP VALUE FUND - ------------------------------------------------------------------------------------------------- CLASS B CLASS C(2) - ------------------------------------------------ ------------------------------------------------ FOR THE FOR THE FOR THE PERIOD FOR THE PERIOD SIX MONTHS FOR THE FEBRUARY 1, SIX MONTHS FOR THE FEBRUARY 1, ENDED YEAR 1994 FOR THE ENDED YEAR 1994 FOR THE JANUARY 31, ENDED THROUGH YEAR ENDED JANUARY 31, ENDED THROUGH YEAR ENDED 1996 JULY 31, JULY 31, JANUARY 31, 1996 JULY 31, JULY 31, JANUARY 31, (UNAUDITED) 1995 1994 1994 (UNAUDITED) 1995 1994 1994 - ----------- -------- ----------- ----------- ----------- -------- ----------- ----------- $11.15 $10.22 $10.60 $10.00 $11.14 $10.22 $10.59 $10.00 ------- ------- ------- ------- ------- ------- ------- ------- (0.02) (0.04) (0.02) 0.06 (0.02) (0.05) (0.02) 0.06 0.23 1.49 (0.36) 0.62 0.23 1.49 (0.35) 0.62 ------- ------- ------- ------- ------- ------- ------- ------- 0.21 1.45 (0.38) 0.68 0.21 1.44 (0.37) 0.68 ------- ------- ------- ------- ------- ------- ------- ------- -- -- -- (0.06) -- -- -- (0.07) (0.83) (0.52) -- (0.02) (0.83) (0.52) -- (0.02) ------- ------- ------- ------- ------- ------- ------- ------- (0.83) (0.52) -- (0.08) (0.83) (0.52) -- (0.09) ------- ------- ------- ------- ------- ------- ------- ------- $10.53 $11.15 $10.22 $10.60 $10.52 $11.14 $10.22 $10.59 ======= ======= ======= ======= ======= ======= ======= ======= 1.87% 14.86% (3.58)% 6.81% 1.87% 14.76 % (3.49)% 6.77% ======= ======= ======= ======= ======= ======= ======= ======= $40,876 $46,142 $52,624 $59,993 $11,603 $13,263 $16,285 $20,941 2.67%* 2.74% 2.69%* 2.50% 2.69%* 2.73% 2.69%* 2.50% (0.28)%* (0.35)% (0.37)%* 0.67% (0.31)%* (0.34)% (0.36)%* 0.64% 7% 19% 20% 98% 7% 19% 20% 98%
- -------------------------------------------------------------------------------- Prospectus Page 17 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Investment Objective & Policies - ------------------------------------------------------------------------------- The Funds' investment objectives may not be changed without shareholder approval. Their other investment policies, except where noted, are not fundamental and may be changed by the Funds' boards of trustees. GROWTH AND INCOME FUND The investment objective of Growth and Income Fund is current income and capital growth. The Fund seeks to achieve this objective by investing primarily in dividend-paying equity securities believed by Mitchell Hutchins to have the potential for rapid earnings growth. Normally, Growth and Income Fund invests at least 65% of its total assets in such equity securities. The Fund may invest up to 35% of its total assets in equity securities not meeting these selection criteria, as well as in U.S. government bonds, corporate bonds and money market instruments, including up to 10% in convertible bonds rated below investment grade. Up to 25% of the Fund's total assets may be invested in U.S. dollar-denominated equity securities and bonds of foreign issuers that are traded on recognized U.S. exchanges or in the U.S. over-the-counter ("OTC") market. GROWTH FUND The investment objective of Growth Fund is long-term capital appreciation. Growth Fund seeks to achieve this objective by investing primarily in equity securities issued by companies that, in the judgment of Mitchell Hutchins, have substantial potential for capital growth. Under normal circumstances, at least 65% of the Fund's total assets are invested in equity securities. The Fund may invest up to 35% of its total assets in U.S. government bonds and in corporate bonds (including up to 10% in bonds and convertible securities rated below investment grade). Up to 25% of the Fund's total assets may be invested in U.S. dollar-denominated equity securities and bonds of foreign issuers that are traded on recognized U.S. exchanges or in the U.S. OTC market. SMALL CAP VALUE FUND The investment objective of Small Cap Value Fund is long-term capital appreciation. Under normal circumstances, at least 65% of the Fund's total assets are invested in equity securities of small cap companies, which are defined as companies having market capitalizations of up to $1 billion. Small Cap Value Fund may invest up to 35% of its total assets in equity securities of companies that are larger than small cap companies, as well as in U.S. government bonds, corporate bonds and money market instruments, including up to 10% of total assets in convertible bonds rated below investment grade. Up to 25% of the Fund's total assets may be invested in U.S. dollar-denominated equity securities of foreign issuers traded on recognized U.S. exchanges or in the U.S. OTC market. * * * * As with any mutual fund, there can be no assurance that any of these Funds will achieve its investment objective. Each Fund's net asset value fluctuates based upon changes in the value of its portfolio securities. - ------------------------------------------------------------------------------- Investment Philosophy & Process - ------------------------------------------------------------------------------- GROWTH AND INCOME FUND In seeking to balance capital growth with current income, Mitchell Hutchins follows a disciplined investment process that relies on the Mitchell Hutchins Equity Research Team and the Mitchell Hutchins Factor Valuation Model. In order to fulfill the income component, the Fund invests at least 65% of its total assets in dividend-paying stocks. The Model screens a universe of small to large capitalization companies from ten different business sectors to identify undervalued companies with strong earnings momentum, that rank well in three measures: - -------------------------------------------------------------------------------- Prospectus Page 18 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund . VALUE: projected dividends, cash flow, earnings and book value; . MOMENTUM: earnings and price to identify companies that could surprise on the upside; and . ECONOMIC SENSITIVITY: to forecast how different equity securities and industries may perform under various economic scenarios. The equity securities ranking in the top 20% of the Model's universe are screened twice a month. Then the Team takes a closer look at those equity securities that rank higher based on value and momentum. The Equity Research Team applies traditional analysis and may speak to the management of these companies, as well as those of their competitors. Based on the Team's findings in the context of Mitchell Hutchins' economic forecast, the Fund decides whether to purchase or sell equity securities. In seeking capital appreciation, the Fund would also invest in bonds when, for instance, Mitchell Hutchins anticipates that market interest rates may decline or credit factors or ratings affecting particular issuers may improve. GROWTH FUND In selecting equity securities with the potential for above-average growth in earnings, cash flow and/or book value that are selling at a reasonable value relative to that growth, Mitchell Hutchins follows a disciplined investment process that relies on the Mitchell Hutchins Equity Research Team and combines a "bottom-up," stock-by-stock approach with the Mitchell Hutchins Factor Valuation Model. The Fund can invest in companies of large market capitalizations, medium-sized companies and smaller companies that are aggressively expanding their businesses. This flexibility allows the Fund to invest more of its assets in companies that have greater earnings growth potential regardless of their market capitalizations. When investing in small cap companies, the Team places more emphasis on the trading volume of the company's stock. The Model screens a universe of small to large capitalization companies from ten different business sectors to identify undervalued companies with strong earnings momentum, that ranked well in three measures: . VALUE: projected dividends, cash flow, earnings and book value; . MOMENTUM: earnings and price to identify companies that could surprise on the upside; and . ECONOMIC SENSITIVITY: to forecast how different equity securities and industries may perform under various economic scenarios. The equity securities ranking in the top 20% of the Model's universe are screened twice a month. Then the Team takes a closer look at those equity securities that rank higher based on earnings growth and applies traditional analysis. The Team may speak to the management of these companies, as well as those of their competitors. Based on the Team's findings in the context of Mitchell Hutchins' economic forecast, the Fund decides whether to purchase or sell equity securities. In seeking capital appreciation, the Fund would also invest in bonds when, for instance, Mitchell Hutchins anticipates that market interest rates may decline or that credit factors or ratings affecting particular issuers may improve. SMALL CAP VALUE FUND In selecting small cap equity securities with the potential for capital appreciation, Mitchell Hutchins follows a disciplined investment process that relies on the Mitchell Hutchins Factor Valuation Model and the Mitchell Hutchins Equity Research Team. The Model screens a universe of small to large capitalization companies from ten different business sectors to identify undervalued companies with strong earnings momentum, that ranked well in three measures: . VALUE: projected dividends, cash flow, earnings and book value; . MOMENTUM: earnings and price to identify companies that could surprise on the upside; and . ECONOMIC SENSITIVITY: to forecast how different equity securities and industries may perform under various economic scenarios. Through this screening process, the Model identifies the equity securities of small cap companies ranking in the top 20% of the universe. Then the Mitchell Hutchins Equity Research Team applies traditional analysis on the equity securities of these small cap companies. The Team may speak to the management of these companies, as well as to those of their competitors. Based on the Team's findings in the context of Mitchell Hutchins' economic forecast, the Fund decides whether to purchase or sell equity securities. In seeking capital appreciation, the Fund would also invest in bonds when, for instance, Mitchell Hutchins anticipates that market interest rates may decline or credit factors or ratings affecting particular issuers may improve. - -------------------------------------------------------------------------------- Prospectus Page 19 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Performance - ------------------------------------------------------------------------------- These charts show the total returns for the Funds; 1995 returns represent the calendar year ended December 31, 1995. Sales charges have not been deducted from total returns. Returns would be lower if sales charges were deducted. Past results are not a guarantee of future results. Total returns both before and after deducting the maximum sales charges are shown below in the tables that follow the performance charts. GROWTH AND INCOME FUND [GRAPH APPEARS HERE] As Class A shares commenced operations on December 20, 1983, the 1983 return represents the period from December 20, 1983 through December 31, 1983. The inception date of Class B shares is July 1, 1991; thus, the 1991 return represents the period from July 1, 1991 through December 31, 1991. The inception date of Class C shares is July 2, 1992; thus, the 1992 return represents the period from July 2, 1992 through December 31, 1992. AVERAGE ANNUAL RETURNS As of August 31, 1995
CLASS A SHARES CLASS B SHARES CLASS C SHARES -------------- -------------- -------------- Inception Date.................... 12/20/83 7/1/91 7/2/92 ONE YEAR Before deducting maximum sales charges......................... 18.30% 17.38% 17.37% After deducting maximum sales charges......................... 12.99% 12.38% 16.37% FIVE YEARS (OR LIFE OF CLASS) Before deducting maximum sales charges......................... 10.07% 7.49% 6.47% After deducting maximum sales charges......................... 9.06% 7.11% 6.47% TEN YEARS Before deducting maximum sales charges......................... 10.82% N/A N/A After deducting maximum sales charges......................... 10.31% N/A N/A
- -------------------------------------------------------------------------------- Prospectus Page 20 - -------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund GROWTH FUND [GRAPH APPEARS HERE] As Class A shares commenced operations on March 18, 1985, the 1985 return represents the period from March 18, 1985 through December 31, 1985. The inception date of Class B shares is July 1, 1991; thus, the 1991 return represents the period from July 1, 1991 through December 31, 1991. The inception date of Class C shares is July 2, 1992; thus, the 1992 return represents the period from July 2, 1992 through December 31, 1992. AVERAGE ANNUAL RETURNS As of August 31, 1995
CLASS A SHARES CLASS B SHARES CLASS C SHARES -------------- -------------- -------------- Inception Date.................... 3/18/85 7/1/91 7/2/92 ONE YEAR Before deducting maximum sales charges......................... 11.28% 10.40% 10.37% After deducting maximum sales charges......................... 6.30% 5.40% 9.37% FIVE YEARS (OR LIFE OF CLASS) Before deducting maximum sales charges......................... 14.45% 11.14% 10.89% After deducting maximum sales charges......................... 13.40% 10.80% 10.89% TEN YEARS Before deducting maximum sales charges......................... 13.08% N/A N/A After deducting maximum sales charges......................... 12.56% N/A N/A
- -------------------------------------------------------------------------------- Prospectus Page 21 - -------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund ---------- SMALL CAP VALUE FUND [GRAPH APPEARS HERE] As Class A, Class B and Class C shares commenced operations on February 1, 1993, the 1993 return represents the period from February 1, 1993 through December 31, 1993. AVERAGE ANNUAL RETURNS As of July 31, 1995
CLASS A SHARES CLASS B SHARES CLASS C SHARES -------------- -------------- -------------- Inception Date.................... 2/1/93 2/1/93 2/1/93 ONE YEAR Before deducting maximum sales charges......................... 15.80% 14.86% 14.76% After deducting maximum sales charges......................... 10.63% 9.86% 13.76% LIFE Before deducting maximum sales charges......................... 7.79% 6.96% 6.95% After deducting maximum sales charges......................... 5.82% 5.50% 6.95%
PERFORMANCE INFORMATION The Funds perform a standardized computation of annualized total return and may show this return in advertisements or promotional materials. Standardized return shows the change in value of an investment in the Funds as a steady compound annual rate of return. Actual year-by-year returns fluctuate and may be higher or lower than standardized return. Standardized return for Class A shares of the Funds reflects deduction of the Funds' maximum initial sales charge of 4.5% at the time of purchase, and standardized return for the Class B and Class C shares of the Funds reflects deduction of the applicable contingent deferred sales charge imposed on a sale of shares held for the period. One-, five- and ten-year periods will be shown, unless the Fund or Class has been in existence for a shorter period. Total return calculations assume reinvestment of dividends and other distributions. The Funds may use other total return presentations in conjunction with standardized return. These may cover the same or different periods as those used for standardized return and may include cumulative returns, average annual rates, actual year-by-year rates or any combination thereof. Non-standardized return does not reflect initial or contingent deferred sales charges and would be lower if such charges were included. Total return information reflects past performance and does not necessarily indicate future results. The investment return and principal value of shares of the Funds will fluctuate. The amount investors receive when selling shares may be more or less than what they paid. Further information about the Funds' performance is contained in the Funds' Annual Reports, which may be obtained without charge by contacting each Fund, your PaineWebber investment executive or PaineWebber's correspondent firms or by calling toll-free 1-800-647-1568. - -------------------------------------------------------------------------------- Prospectus Page 22 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund The Funds' Investments - ------------------------------------------------------------------------------- EQUITY SECURITIES include common stocks, preferred stocks and securities that are convertible into them, including convertible debentures and notes and common stock purchase warrants and rights. Common stocks, the most familiar type, represent an equity (ownership) interest in a corporation. While past performance does not guarantee future results, common stocks historically have provided the greatest long-term growth potential in a company. However, their prices generally fluctuate more than other securities, and reflect changes in a company's financial condition and in overall market and economic conditions. Preferred stock has certain fixed-income features, like a bond, but is actually equity in a company, like common stock. Convertible securities may include debentures, notes and preferred equity securities, which are convertible into common stock. BONDS (including notes and debentures) are used by corporations and governments to borrow money from investors. The issuer pays the investor a fixed or variable rate of interest and must repay the amount borrowed at maturity. Bonds have varying degrees of investment risk and varying levels of sensitivity to changes in interest rates. RISKS Each Fund predominantly invests its assets in equity securities. Following is a discussion of these risks and other risks that are common to each Fund: EQUITY SECURITIES. Equity securities historically have shown greater growth potential than other types of securities. Common stocks generally represent the riskiest investment in a company. It is possible that investors may lose their entire investment. FOREIGN SECURITIES. Each Fund may invest a portion of its assets in U.S. dollar-denominated securities of foreign companies that are traded on recognized U.S. exchanges or in the U.S. OTC market. Investing in the securities of foreign companies involves more risks than investing in securities of U.S. companies. Their value is subject to economic and political developments in the countries where the companies operate and to changes in foreign currency values. Values may also be affected by foreign tax laws, changes in foreign economic or monetary policies, exchange control regulations and regulations involving prohibitions on the repatriation of foreign currencies. In general, less information may be available about foreign companies than about U.S. companies, and foreign companies are generally not subject to the same accounting, auditing and financial reporting standards as are U.S. companies. BOND RATINGS. Investment grade bonds are those rated within the four highest categories by Standard & Poor's, a division of The McGraw Hill Companies ("S&P"), or Moody's Investors Service, Inc. ("Moody's"). Moody's fourth highest category (Baa) includes securities which, in its opinion, have speculative features. For example, changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case for higher-rated debt instruments. The Funds may also invest in securities that are comparably rated by another ratings agency and in unrated securities if they are deemed to be of comparable quality. Credit ratings attempt to evaluate the safety of principal and interest payments and do not evaluate the volatility of the bond's value or its liquidity. There is a risk that bonds will be downgraded by rating agencies. The rating agencies may fail to make timely changes in credit ratings in response to subsequent events, so that an issuer's current financial condition may be better or worse than the rating indicates. INTEREST RATE AND CREDIT RISKS. Interest rate risk is the risk that interest rates will rise and bond prices will fall, lowering the value of a Fund's bond investments. Long-term bonds are generally more sensitive to interest rate changes than short-term bonds. Adverse changes in economic conditions can affect an issuer's ability to pay principal and interest. - -------------------------------------------------------------------------------- Prospectus Page 23 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund NON-INVESTMENT GRADE (LOWER-RATED) BOND RATINGS. Lower-rated bonds are deemed by the ratings agencies to be predominantly speculative regarding the issuer's ability to pay principal and interest and may involve major risk exposure to adverse economic conditions. They are also known as "junk bonds." During an economic downturn or period of rising interest rates, issuers of these securities may experience financial stress that adversely affects their ability to pay interest and principal and may increase the possibility of default. Lower-rated bonds are frequently unsecured by collateral and will not receive payment until more senior claims are paid in full. The market for lower-rated bonds is thinner and less active, which may limit the Funds' ability to sell such bonds at a fair value in response to changes in the economy or financial markets. Growth and Income Fund can invest up to 10% of total assets in convertible securities rated as low as B by S&P or Moody's or comparably rated by another ratings agency. Growth Fund can invest up to 10% of total assets in bonds and convertible securities rated as low as B+ by S&P, B1 by Moody's or comparably rated by another ratings agency. Small Cap Value Fund can invest up to 10% of total assets in convertible securities rated as low as B by S&P or Moody's or comparably rated by another ratings agency. In addition to these general risks, Small Cap Value Fund is also subject to the following risk consideration: SMALL CAP COMPANIES. Small cap companies may be more vulnerable than larger companies to adverse business or economic developments. Small cap companies may also have limited product lines, markets or financial resources, and may be dependent on a relatively small management group. Securities of such companies may be less liquid and more volatile than securities of larger companies or the market averages in general and, therefore, may involve greater risk than investing in larger companies. In addition, small cap companies may not be well-known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects. INVESTMENT TECHNIQUES AND STRATEGIES HEDGING STRATEGIES. Each Fund may use certain strategies designed to adjust the overall risk of its investment portfolio. These "hedging" strategies involve derivative contracts, including options (on securities, futures and stock indexes) and futures contracts (on stock indexes and interest rates). In addition, new financial products and risk management techniques continue to be developed and may be used if consistent with the Funds' investment objectives and policies. The Statement of Additional Information for the Funds contains further information on these strategies. The Funds might not use any hedging strategies, and there can be no assurance that any strategy used will succeed. If Mitchell Hutchins is incorrect in its judgment on market values, interest rates or other economic factors in using a hedging strategy, a Fund may have lower net income and a net loss on the investment. Each of these strategies involves certain risks, which include: . the fact that the skills needed to use hedging instruments are different from those needed to select securities for the Funds, . the possibility of imperfect correlation, or even no correlation, between price movements of hedging instruments and price movements of the securities being hedged, . possible constraints placed on a Fund's ability to purchase or sell portfolio investments at advantageous times due to the need for the Fund to maintain "cover" or to segregate securities, and . the possibility that the Fund is unable to close out or liquidate its hedged position. LENDING PORTFOLIO SECURITIES. Each Fund may lend its securities to qualified broker-dealers or institutional investors in an amount up to 33 1/3% of that Fund's total assets taken at market value. Lending securities enables a Fund to earn additional income, but could result in a loss or delay in recovering these securities. DEFENSIVE POSITIONS. When Mitchell Hutchins believes that unusual circumstances warrant a defensive posture, each Fund may temporarily commit all or any portion of its assets to cash or money market instruments, including repurchase agreements. In a typical repurchase agreement, a Fund buys a security and simultaneously agrees to sell it back at an agreed-upon price and time, usually no more than seven days after purchase. - -------------------------------------------------------------------------------- Prospectus Page 24 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund OTHER INFORMATION. Growth and Income Fund and Growth Fund each may invest up to 10% of its net assets, and Small Cap Value Fund up to 15% of its net assets, in illiquid securities. These include certain cover for OTC options and securities whose disposition is restricted under the federal securities laws. The Funds do not consider securities that are eligible for resale pursuant to SEC Rule 144A to be illiquid securities if Mitchell Hutchins has determined such securities to be liquid, based upon the trading markets for the securities under procedures approved by the boards of trustees. Each Fund may also purchase bonds on a when-issued basis or may purchase or sell securities for delayed delivery. A Fund generally would not pay for such securities or start earning interest on them until they are delivered, but it would immediately assume the risks of ownership, including the risk of price fluctuation. Each Fund may invest up to 35% of its total assets in money market instruments and/or cash for liquidity purposes or pending investment in other securities. Each Fund may borrow up to 10% of its total assets for temporary or emergency purposes. Each Fund may sell securities short "against the box" to defer realization of gains or losses for tax or other purposes. When a security is sold against the box, the seller owns the security. Each Fund may enter into reverse repurchase agreements up to an aggregate value of 5% (10% for Small Cap Value Fund) of its total assets. - ------------------------------------------------------------------------------- Flexible PricingSM ------------------------------------------------------------------------------ Each Fund offers three classes of shares that differ in terms of sales charges and expenses. An investor can select the class that is best suited to his or her investment needs, based upon the holding period and the amount of investment. CLASS A SHARES HOW PRICE IS CALCULATED: The price is the net asset value plus the initial sales charge (the maximum is 4.5% of the public offering price) next calculated after PaineWebber's New York City headquarters or PFPC Inc., the Funds' Transfer Agent ("Transfer Agent") receives the purchase order. Although investors pay an initial sales charge when they buy Class A shares, the ongoing expenses for this class are lower than those of Class B and Class C shares. Class A shares sales charges are calculated as follows:
DISCOUNT TO SELECTED SALES CHARGE AS A PERCENTAGE OF: DEALERS AS PERCENTAGE AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED OF OFFERING PRICE - -------------------- -------------- ------------------- --------------------- 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/)
- ------- (/1/A)contingent deferred sales charge of 1% of the shares' net asset value at the time of purchase or sale, whichever is less, is charged on sales of shares made within one year of the purchase date. Class A shares representing reinvestment of any dividends or other distributions are not subject to the 1% charge. Withdrawals under the Systematic Withdrawal Plan are not subject to this charge. However, investors may not withdraw more than 12% of the value of the Fund account under the Plan in the first year after purchase. This charge does not apply to Class A shares bought before November 10, 1995. (/2/Mitchell)Hutchins pays 1% to PaineWebber. SALES CHARGE REDUCTIONS AND WAIVERS Investors who are purchasing Class A shares in more than one PaineWebber mutual fund may combine those purchases to get a reduced sales charge. Investors who already own Class A shares in one or more PaineWebber mutual funds may combine the amount they are currently purchasing with the value of such previously owned shares to qualify for a reduced sales charge. To determine the sales charge reduction, please refer to the chart above. - -------------------------------------------------------------------------------- Prospectus Page 25 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Investors may also qualify for a reduced sales charge when they combine their purchases with those of: . their spouses, parents or children under age 21; . their Individual Retirement Accounts (IRAs); . certain employee benefit plans, including 401(k) plans; . any company controlled by the investor; . trusts created by the investor; . Uniform Gift to Minors Act/Uniform Transfers to Minors Act accounts created by the investor or group of investors for the benefit of the investors' children; or . accounts with the same adviser. Employers who own Class A shares for one or more of their qualified retirement plans may also qualify for the reduced sales charge. The sales charge will not apply when the investor: . is an employee, director, trustee or officer of PaineWebber, its affiliates or any PaineWebber mutual fund; . is the spouse, parent or child of any of the above, or advisory clients of Mitchell Hutchins; . buys these shares through a PaineWebber investment executive who was formerly employed as a broker with a competing brokerage firm that was registered as a broker-dealer with the SEC and . the investor was the investment executive's client at the competing brokerage firm; . within 90 days of buying Class A shares in a Fund, the investor sells shares of one or more mutual funds that (a) were principally underwritten by the competing brokerage firm or its affiliates and (b) the investor either paid a sales charge to buy those shares, paid a contingent deferred sales charge when selling them or held those shares until the contingent deferred sales charge was waived; and . the amount the investor purchases does not exceed the total amount of money the investor received from the sale of the other mutual fund; . is a certificate holder of unit investment trusts sponsored by PaineWebber and has elected to have dividends and other distributions from that investment automatically invested in Class A shares; . is an employer establishing an employee benefit plan qualified under section 401 or 403(b), or a salary reduction plan qualified under Section 401(k), of the Internal Revenue Code. (This waiver is subject to minium requirements, with respect to the number of employees and investment amount, established by Mitchell Hutchins.) Currently, the plan must have 100 or more eligible employees or the amount invested or to be invested in a Fund or any other PaineWebber fund must total at least $1 million during the subsequent 13- month period; or . acquires Class A shares in connection with a reorganization pursuant to which the Fund acquires substantially all of the assets and liabilities of another investment company in exchange solely for shares of the Fund. For more information on how to get any reduced sales charge, investors should contact a PaineWebber investment executive or a correspondent firm or call 1-800-647-1568. CLASS B SHARES HOW PRICE IS CALCULATED: The price is the net asset value next calculated after PaineWebber's New York City headquarters or the Transfer Agent receives the purchase order. The ongoing expenses investors pay for Class B shares are higher than those of Class A shares. Because investors do not pay an initial sales charge when they buy Class B shares, 100% of their purchase is immediately invested. Depending on how long they own their Fund investment, investors may have to pay a sales charge when they sell their Fund shares. This sales charge is called a "contingent deferred sales charge." The amount of the charge depends on how long the investor owned the shares. The sales charge is calculated by multiplying the net asset value of the shares at the time of their sale or their purchase, whichever is less, by the percentage shown on the following table. Investors who own shares for more than six years do not have to pay a sales charge when selling those shares.
IF THE INVESTOR PERCENTAGE BY WHICH THE SHARES' SELLS SHARES WITHIN: NET ASSET VALUE IS MULTIPLIED: - ----------------------- ------------------------------- 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
- -------------------------------------------------------------------------------- Prospectus Page 26 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund CONVERSION OF CLASS B SHARES Class B shares automatically convert to the appropriate number of Class A shares of equal dollar value after the investor has owned them for six years. Dividends and other distributions paid to the investor by the Fund in the form of additional Class B shares will also convert to Class A shares on a pro-rata basis. This benefits shareholders because Class A shares have lower ongoing expenses than Class B shares. If the investor has exchanged Class B shares between PaineWebber funds, the Fund uses the purchase date at which the initial investment was made to determine the conversion date. MINIMIZING THE CONTINGENT DEFERRED SALES CHARGE When investors sell Class B shares they have owned for less than six years, the Fund automatically will minimize the sales charge by assuming the investors are selling: . First, Class B shares owned through reinvested dividends and capital gain distributions; and . Second, Class B shares held in the portfolio the longest. WAIVERS OF THE CONTINGENT DEFERRED SALES CHARGE The contingent deferred sales charge will not apply to: . redemptions under the Fund's Systematic Withdrawal Plan (investors may not withdraw annually more than 12% of the value of the Fund account under the Plan); . a distribution from an IRA, a self-employed individual retirement plan ("Keogh Plan") or a custodial account under Section 403(b) of the Internal Revenue Code (after the investor reaches age 59 1/2); . a tax-free return of an excess IRA contribution; . a tax-qualified retirement plan distribution following retirement; or . Class B shares sold within one year of an investor's death if the investor owned the shares at the time of death either as the sole shareholder or with his or her spouse as a joint tenant with the right of survivorship. An investor must provide satisfactory information to PaineWebber or the Fund if the investor seeks any of these waivers. CLASS C SHARES HOW PRICE IS CALCULATED: The price of Class C shares is the net asset value next calculated after PaineWebber's New York City headquarters or the Transfer Agent receives the purchase order. Investors do not pay an initial sales charge when they buy Class C shares, but the ongoing expenses of Class C shares are higher than those of Class A shares. Class C shares never convert to any other Class of shares. A contingent deferred sales charge of 1% of the net asset value of the shares at the time of purchase or sale, whichever is less, is charged on sales of shares made within one year of the purchase date. Other PaineWebber mutual funds may impose a different contingent deferred sales charge on Class C shares sold within one year of the purchase date. A sale of Class C shares acquired through an exchange and held less than one year will be subject to the same contingent deferred sales charge that would have been imposed on the Class C shares of the PaineWebber mutual fund originally purchased and then exchanged into Class C shares of the acquired fund. Class C shares representing reinvestment of any dividends or capital gains will not be subject to the 1% charge. Withdrawals under the Systematic Withdrawal Plan also will not be subject to this charge. However, investors may not withdraw more than 12% of the value of the Fund account under the Plan in the first year after purchase. This charge does not apply to Class C shares bought before November 10, 1995. - -------------------------------------------------------------------------------- Prospectus Page 27 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund How to Buy Shares ------------------------------------------------------------------------------ Prices are calculated for each Fund's Class A, Class B and Class C shares once each Business Day, at the close of regular trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time). A "Business Day" is any day, Monday through Friday, on which the New York Stock Exchange is open for business. Shares are purchased at the next share price calculated after the purchase order is received. The Funds and Mitchell Hutchins reserve the right to reject any purchase order and to suspend the offering of Fund shares for a period of time. When placing an order to buy shares, investors should specify which class of shares they want to buy. If investors fail to specify the class, they will automatically receive Class A shares, which include an initial sales charge. PAINEWEBBER CLIENTS Investors who are PaineWebber clients may buy shares through PaineWebber investment executives or its correspondent firms. Investors may buy shares in person, by mail, by telephone or by wire (the minimum wire purchase is $1 million). PaineWebber investment executives and correspondent firms are responsible for promptly sending investors' purchase orders to PaineWebber's New York City headquarters. Investors may pay for their purchases with checks drawn on U.S. banks or with funds they have in their brokerage accounts at PaineWebber or its correspondent firms. Payment is due on the third Business Day after PaineWebber's New York City headquarters receives the purchase order. OTHER INVESTORS Investors who are not PaineWebber clients may purchase Fund shares and set up an account through PFPC Inc., the Funds' Transfer Agent, by completing and signing an account application which you may obtain by calling 1-800-647-1568. The application and check must be mailed to PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington, DE 19899. New investors to PaineWebber may complete and sign an account application and mail it along with a check. Investors may also open an account in person. Investors who already have money invested in a PaineWebber mutual fund, and want to invest in another PaineWebber mutual fund, can: . mail an application with a check; or . open an account by exchanging from another PaineWebber mutual fund. Investors do not have to send an application when making additional investments in the Fund. MINIMUM INVESTMENTS To open an account:......... $1,000 To add to an account:....... $ 100
A Fund may waive or reduce these minimums for: . employees of PaineWebber or its affiliates; or . participants in certain pension plans, retirement accounts or the Fund's automatic investment plan. HOW TO EXCHANGE SHARES As shareholders, investors have the privilege of exchanging Fund shares for the same class of other PaineWebber mutual funds. In classes of shares where no initial sales charge is imposed, a contingent deferred sales charge may apply if the investor sells the shares acquired through the exchange. Exchanges may be subject to minimum investment requirements of the fund into which exchanges are made. A $5 fee is imposed on each exchange. . Investors who purchased their shares through an investment executive at PaineWebber or one of its correspondent firms may exchange their shares by contacting their investment executive in person or by telephone, mail or wire. . Investors who do not have an account with an investment executive at PaineWebber or one of its correspondent firms may exchange their shares by writing a "letter of instruction" to the Transfer Agent. The letter of instruction must include: . the investor's name and address; . the Fund's name; . the Fund account number; - -------------------------------------------------------------------------------- Prospectus Page 28 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund . the dollar amount or number of shares to be sold; and . a guarantee of each registered owner's signature by an eligible institution, such as a commercial bank, trust company or stock exchange member. The letter must be mailed to PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington, DE 19899. No contingent deferred sales charge is imposed when Class B or C shares are exchanged for Class B or C shares of other PaineWebber mutual funds. A Fund will use the purchase date of the initial investment to determine any contingent deferred sales charge due when the shares are sold. Fund shares may be exchanged only after the settlement date has passed and payment for the shares has been made. The exchange privilege is available only in those jurisdictions where the sale of the Fund shares to be acquired is authorized. This exchange privilege may be modified or terminated at any time and, when required by SEC rules, upon a 60-day notice. See the back cover of this prospectus for a listing of other PaineWebber mutual funds. - ------------------------------------------------------------------------------- How To Sell Shares ----------------------------------------------------------------------------- Investors can sell (redeem) shares at any time. Shares will be sold at the share price for that class as next calculated after the order is received and accepted (less any applicable contingent deferred sales charge). Share prices are normally calculated at the close of regular trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time). Investors who own more than one class of shares should specify which class they are selling. If they do not, the Fund will assume they are first selling their Class A shares, then Class C, and last, Class B. If a shareholder wants to sell shares that were purchased recently, the Fund may delay payment until it verifies that good payment was received. In the case of purchases by check, this can take up to 15 days. Investors who have an account with PaineWebber or one of PaineWebber's correspondent firms can sell their shares by contacting their investment executive. Investors who do not have an account and have bought their shares through PFPC Inc., the Funds' Transfer Agent, may sell shares by writing a "letter of instruction," as detailed in "How to Exchange Shares." Because the Funds incur certain fixed costs in maintaining shareholder accounts, each Fund reserves the right to purchase back all Fund shares in any shareholder account with a net asset value of less than $500. If the Fund elects to do so, it will notify the shareholder of the opportunity to increase the amount invested to $500 or more within 60 days of the notice. The Fund will not purchase back accounts that fall below $500 solely due to a reduction in net asset value per share. REINSTATEMENT PRIVILEGE Shareholders who sell their Class A shares may reinstate their Fund account without a sales charge up to the dollar amount sold by purchasing the Fund's Class A shares within 365 days after the sale. To take advantage of this reinstatement privilege, shareholders must notify their investment executive at PaineWebber or one of its correspondent firms at the time of purchase. - ------------------------------------------------------------------------------- Other Services - ------------------------------------------------------------------------------- Investors should consult their investment executives at PaineWebber or one of its correspondent firms to learn more about the following services: AUTOMATIC INVESTMENT PLAN Investing on a regular basis helps investors meet their financial goals. PaineWebber offers an Automatic - -------------------------------------------------------------------------------- Prospectus Page 29 - -------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Investment Plan with a minimum initial investment of $1,000 through which the Fund will deduct $50 or more each month from the investor's bank account to invest directly in the Fund. In addition to providing a convenient and disciplined manner of investing, participation in the Automatic Investment Plan enables the investor to use the technique of "dollar cost averaging." SYSTEMATIC WITHDRAWAL PLAN The Systematic Withdrawal Plan allows investors to set up monthly, quarterly (March, June, September and December) or semi-annual (June and December) withdrawals from their Fund accounts. Minimum balances and withdrawals vary according to the class of shares: . CLASS A AND CLASS C SHARES. Minimum value of Fund shares is $5,000; minimum withdrawals of $100. . CLASS B SHARES. Minimum value of Fund shares is $20,000; minimum monthly, quarterly and semi-annual withdrawals of $200, $400 and $600, respectively. Withdrawals under the Systematic Withdrawal Plan will not be subject to a contingent deferred sales charge. Investors may not withdraw annually more than 12% of the value of the Fund account when the investor signed up for the Plan. Shareholders who elect to receive dividends or other distributions in cash may not participate in the Plan. INDIVIDUAL RETIREMENT ACCOUNTS Self-Directed IRAs are available through PaineWebber in which purchases of PaineWebber funds and other investments may be made. Investors considering establishing an IRA should review applicable tax laws and should consult their tax advisers. TRANSFER OF ACCOUNTS If investors holding shares of a Fund in a PaineWebber brokerage account transfer their brokerage accounts to another firm, the Fund shares will be moved to an account with the Transfer Agent. However, if the other firm has entered into a selected dealer agreement with Mitchell Hutchins relating to the Fund, the shareholder may be able to hold Fund shares in an account with the other firm. - -------------------------------------------------------------------------------- Management ------------------------------------------------------------------------------- Each Fund is governed by a board of trustees, which oversees the Fund's operations. It has appointed Mitchell Hutchins as investment adviser and administrator responsible for the Fund's operations (subject to the authority of the board of trustees). Mitchell Hutchins, located at 1285 Avenue of the Americas, New York, New York, 10019, is the asset management subsidiary of PaineWebber, which is wholly owned by Paine Webber Group Inc., a publicly owned financial services holding company. On February 29, 1996, Mitchell Hutchins was adviser or sub-adviser of 32 investment companies with 66 separate portfolios and aggregate assets of approximately $31.2 billion. The boards of trustees have determined that brokerage transactions for the Funds may be conducted through PaineWebber or its affiliates in accordance with procedures adopted by each Fund's board of trustees. ABOUT THE INVESTMENT ADVISER As investment adviser for Growth and Income Fund, Growth Fund and Small Cap Value Fund, Mitchell Hutchins makes and implements all investment decisions and supervises all aspects of each Fund's operations. Mark A. Tincher has been responsible for the day-to-day management of Growth and Income Fund since April 1995. Mr. Tincher is a managing director and chief investment officer of equities of Mitchell Hutchins, responsible for overseeing the management of equity investments. Upon his arrival at Mitchell Hutchins, Mr. Tincher formed the Mitchell Hutchins Equity Research Team. Each analyst specializes in different industries, providing PaineWebber Stock Funds with more leverage. The Equity Research Team is also assisted by members of Mitchell Hutchins' fixed income groups, which provide input on market outlook, interest rate forecasts and other considerations pertaining to domestic equity and fixed income investments. From March 1988 to March 1995, Mr. Tincher worked for Chase Manhattan Private Bank where he was a vice president. Mr. Tincher directed the U.S. funds management and equity research area at Chase - -------------------------------------------------------------------------------- Prospectus Page 30 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund and oversaw the management of all Chase U.S. equity funds (the Vista Funds and Trust Investment Funds). Ellen R. Harris has been responsible for the day-to-day portfolio management of Growth Fund since its inception. Ms. Harris is a managing director of Mitchell Hutchins. Prior to joining Mitchell Hutchins in 1983 as a portfolio manager, Ms. Harris served as a vice president and portfolio manager at American General Capital Management (now American Capital Management). Donald R. Jones has been primarily responsible for day-to-day portfolio management of Small Cap Value Fund since April 1996. Mr. Jones has been a first vice president of Mitchell Hutchins since February 1996. Prior to joining Mitchell Hutchins, Mr. Jones was a vice president in the Asset Management Group of First Fidelity Bancorporation, which he joined in 1983. Mitchell Hutchins personnel may engage in securities transactions for their own accounts pursuant to a code of ethics that establishes procedures for personal investing and restricts certain transactions. MANAGEMENT FEES & OTHER EXPENSES The Funds pay Mitchell Hutchins a monthly fee for its services. For the most recently ended fiscal year, the Funds paid advisory fees at the annual rate (as a percentage of average daily net assets) of 0.75% for Growth Fund, 0.70% for Growth and Income Fund and 1.00% for Small Cap Value Fund. The management fees paid by Growth Fund and Small Cap Value Fund are higher than those paid by most other mutual funds. However, Mitchell Hutchins believes that these fees are comparable to the management fees paid by other funds with similar investment objectives and policies. Each Fund also pays PaineWebber an annual fee of $4.00 per active shareholder account held at PaineWebber for certain services not provided by the Transfer Agent. DISTRIBUTION ARRANGEMENTS Mitchell Hutchins is the distributor of each Fund's shares and has appointed PaineWebber as the exclusive dealer for the sale of those shares. Under distribution plans for Class A, Class B and Class C shares ("Class A Plan," "Class B Plan" and "Class C Plan," collectively, "Plans"), the Funds pay Mitchell Hutchins: . Monthly service fees at the annual rate of up to 0.25% of the average daily net assets of each class of shares. . Monthly distribution fees at the annual rate of 0.75% of the average daily net assets of Class B and Class C shares. Under the Plans, Mitchell Hutchins primarily uses the service fees to pay PaineWebber for shareholder servicing, currently at the annual rate of up to 0.25% of the aggregate investment amounts maintained in each Fund by PaineWebber clients. PaineWebber then compensates its investment executives for shareholder servicing that they perform and offsets its own expenses in servicing and maintaining shareholder accounts. Mitchell Hutchins uses the distribution fees under the Class B and Class C Plans to: . Offset the commissions it pays to PaineWebber for selling each Fund's Class B and Class C shares, respectively. . Offset each Fund's marketing costs attributable to such classes, such as preparation, printing and distribution of sales literature, advertising and prospectuses to prospective investors and related overhead expenses, such as employee salaries and bonuses. PaineWebber compensates investment executives when Class B and Class C shares are sold, as well as on an ongoing basis. Mitchell Hutchins receives no special compensation from any of the Funds or investors at the time of sale of Class B or C shares. Mitchell Hutchins receives the proceeds of the initial sales charge paid when Class A shares are bought and of the contingent deferred sales charge paid upon sales of shares. These proceeds may be used to cover distribution expenses. The Plans and the related distribution contracts for each class of shares ("Distribution Contracts") specify that each Fund must pay service and distribution fees to Mitchell Hutchins for its activities, not as reimbursement for specific expenses incurred. Therefore, even if Mitchell Hutchins' expenses exceed the service or distribution fees it receives, the Funds will not be obligated to pay more than those fees. On the other hand, if Mitchell Hutchins' expenses are less than such fees, it will retain its full fees and realize a profit. Expenses in excess of service and distribution fees received or accrued through the termination date of any Plan will be Mitchell Hutchins' sole responsibility and not that of the Funds. Annually, the board of trustees of each Fund reviews the Plan and Mitchell Hutchins' corresponding expenses for each class separately from the Plans and expenses of the other classes. - -------------------------------------------------------------------------------- Prospectus Page 31 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund Determining the Shares' Net Asset Value - ------------------------------------------------------------------------------- The net asset value of each Fund's shares fluctuates and is determined separately for each class as of the close of regular trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time) each Business Day. Each Fund's net asset value per share is determined by dividing the value of the securities held by the Fund, plus any cash or other assets, minus all liabilities, by the total number of Fund shares outstanding. Each Fund values its assets based on their current market value when market quotations are readily available. If that value is not readily available, assets are valued at fair value as determined in good faith by or under the direction of its board of trustees. The amortized cost method of valuation generally is used to value debt obligations with 60 days or less remaining to maturity, unless a Fund's board of trustees determines that this does not represent fair value. It should be recognized that judgment plays a greater role in valuing lower-rated corporate bonds because there is less reliable, objective data available. - ------------------------------------------------------------------------------- Dividends & Taxes - ------------------------------------------------------------------------------- DIVIDENDS Growth Fund and Small Cap Value Fund each pays an annual dividend and Growth and Income Fund pays a semi-annual dividend from its net investment income and net short-term capital gain, if any. Each Fund also distributes annually substantially all of its net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any. Each Fund may make additional distributions, if necessary, to avoid a 4% excise tax on certain undistributed income and capital gain. Dividends and other distributions paid on each class of shares of the Funds are calculated at the same time and in the same manner. Dividends on Class B and Class C shares of the Funds are expected to be lower than those on its Class A shares because Class B and Class C shares have higher expenses resulting from their distribution fees. Dividends on each class might be affected differently by the allocation of other class-specific expenses. See "General Information." Each Fund's dividends and other distributions are paid in additional Fund shares of the same class at net asset value, unless the shareholder has requested cash payments. Shareholders who wish to receive dividends and other distributions in cash, either mailed to the shareholder by check or credited to the shareholder's PaineWebber account, should contact their investment executive at PaineWebber or one of its correspondent firms or complete the appropriate section of the account application. TAXES Each of the Funds intends to continue to qualify for treatment as a regulated investment company under the Internal Revenue Code so that it will not have to pay Federal income tax on that part of its investment company taxable income (generally consisting of net investment income and net short-term capital gain) and net capital gain that it distributes to its shareholders. Dividends from each Fund's investment company taxable income (whether paid in cash or additional shares) are generally taxable to shareholders as ordinary income. Distributions of each Fund's net capital gain (whether paid in cash or additional shares) are taxable to shareholders as a long-term capital gain, regardless of how long they have held their Fund shares. Shareholders who are not subject to tax on their income generally will not be required to pay tax on distributions. - -------------------------------------------------------------------------------- Prospectus Page 32 - ------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund YEAR-END TAX REPORTING Following the end of each calendar year, each Fund notifies its shareholders of the dividends and capital gain distributions paid (or deemed paid) by the Fund that year and any portion of those dividends that qualify for special tax treatment. WITHHOLDING REQUIREMENTS Each Fund is required to withhold 31% of all dividends, capital gain distributions and redemption proceeds payable to individuals and certain other non-corporate shareholders who do not provide the Funds with a correct taxpayer identification number. Withholding from dividends and capital gain distributions at that rate is also required for shareholders who otherwise are subject to backup withholding. TAXES ON THE SALE OR EXCHANGE OF FUND SHARES When shareholders sell (redeem) shares, it may result in a taxable gain or loss. This depends upon whether the shareholders receive more or less than their adjusted basis for the shares (which normally takes into account any initial sales charge paid on Class A shares). An exchange of any Fund's shares for shares of another PaineWebber mutual fund generally will have similar tax consequences. In addition, if a Fund's shares are bought within 30 days before or after selling other shares of the Fund (regardless of class) at a loss, all or a portion of that loss will not be deductible and will increase the basis of the newly purchased shares. SPECIAL TAX RULES FOR CLASS A SHAREHOLDERS Special tax rules apply when a shareholder sells or exchanges Class A shares within 90 days of purchase, and subsequently acquires Class A shares of a PaineWebber mutual fund without paying a sales charge due to the 365-day reinstatement privilege or the exchange privilege. In these cases, any gain on the sale or exchange of the original Class A shares would be increased or, in the case of a loss, decreased by the amount of the sales charge paid when those shares were bought, and that amount will increase the basis of the PaineWebber mutual fund shares subsequently acquired. * * * * Because the foregoing only summarizes some of the important considerations affecting the Funds and their shareholders, a further discussion is contained in the Statement of Additional Information. Prospective shareholders are urged to consult their tax advisers. - ------------------------------------------------------------------------------- General Information - ------------------------------------------------------------------------------- ORGANIZATION GROWTH AND INCOME FUND Growth and Income Fund is a diversified series of PaineWebber America Fund, an open-end management investment company which was formed on October 31, 1986 as a business trust under the laws of the Commonwealth of Massachusetts. The trustees have authority to issue an unlimited number of shares of beneficial interest of separate series, par value $0.001 per share. GROWTH FUND Growth Fund is a diversified series of PaineWebber Olympus Fund, an open-end management investment company which was formed on October 31, 1986 as a business trust under the laws of the Commonwealth of Massachusetts. The trustees have authority to issue an unlimited number of shares of beneficial interest of separate series, par value $0.001 per share. SMALL CAP VALUE FUND Small Cap Value Fund is a diversified series of PaineWebber Securities Trust, an open-end management investment company which was formed on December 3, 1992 as a business trust under the laws of the Commonwealth of Massachusetts. The trustees have authority to issue an unlimited number of shares of beneficial interest of separate series, par value $0.001 per share. In addition to Small Cap Value Fund, shares of one other series have been authorized. SHARES The shares of each Fund are divided into four classes, designated Class A shares, Class B shares, Class C shares and Class Y shares. Each class represents an identical interest in the respective Fund's investment portfolio and has the same rights, privileges and preferences. However, each class may differ with - -------------------------------------------------------------------------------- Prospectus Page 33 - -------------------------------------------------------------------------------- PaineWebber Growth and Income Fund Growth Fund Small Cap Value Fund respect to sales charges, if any, distribution and/or service fees, if any, other expenses allocable exclusively to each class, voting rights on matters exclusively affecting that class, and its exchange privilege. The different sales charges and other expenses applicable to the different classes of shares of the Funds will affect the performance of those classes. Each share of each Fund is entitled to participate equally in dividends, other distributions and the proceeds of any liquidation of that Fund. However, due to the differing expenses of the classes, dividends on Class B and Class C shares are likely to be lower than for Class A shares and are likely to be higher for Class Y shares than for any other class of shares. Class Y shares, which are offered only to limited groups of investors, are subject to neither an initial or contingent deferred sales charge nor ongoing service or distribution fees. More information concerning Class Y shares of the Funds may be obtained from a PaineWebber investment executive or correspondent firm or by calling 1-800-647-1568. Although each Fund is offering only its own shares, it is possible that a Fund might become liable for a misstatement in the Prospectus about another Fund. The board of trustees of each Fund has considered this factor in approving the use of a single, combined Prospectus. VOTING RIGHTS Shareholders of each Fund are entitled to one vote for each full share held and fractional votes for fractional shares held. Voting rights are not cumulative and, as a result, the holders of more than 50% of all the shares of any Fund (or Trust if there is more than one series) may elect all of the trustees of that Fund. The shares of the Funds will be voted separately except where an aggregate vote of all the series in a Trust is required by law and except where only the shareholders of a particular class of a Fund may vote on matters affecting only that class, such as the terms of a Plan as it relates to the class. SHAREHOLDER MEETINGS The Funds, do not intend to hold annual meetings. Shareholders of record of no less than two-thirds of the outstanding shares of a Trust may remove a Trustee through a declaration in writing or by vote cast in person or by proxy at a meeting called for that purpose. A meeting will be called to vote on the removal of a trustee at the written request of holders of 10% of a Trust's outstanding shares. REPORTS TO SHAREHOLDERS Each Fund sends its shareholders audited annual and unaudited semi-annual reports, each of which includes a list of the investment securities held by that Fund as of the end of the period covered by the report. The Statement of Additional Information, which is incorporated herein by reference, is available to shareholders upon request. CUSTODIAN & RECORDKEEPING AGENT; TRANSFER & DIVIDEND AGENT State Street Bank and Trust Company, located at One Heritage Drive, North Quincy, Massachusetts 02171, serves as each Fund's custodian and recordkeeping agent. PFPC Inc., a subsidiary of PNC Bank, N.A., serves as each Fund's transfer and dividend disbursing agent. It is located at 400 Bellevue Parkway, Wilmington, DE 19809. - -------------------------------------------------------------------------------- Prospectus Page 34 - -------------------------------------------------------------------------------- PaineWebber Growth and Income Fund PaineWebber Growth Fund PaineWebber Small Cap Value Fund Prospectus -- May 1, 1996 - -------------------------------------------------------------------------------- [_] PAINEWEBBER BOND FUNDS [_] PAINEWEBBER STOCK FUNDS High Income Fund Capital Appreciation Fund Investment Grade Income Growth Fund Fund Growth and Income Fund Low Duration U.S. Financial Services Growth Fund Government Income Fund Small Cap Value Fund Strategic Income Fund Utility Income Fund U.S. Government Income Fund [_] PAINEWEBBER TAX-FREE BOND [_] PAINEWEBBER GLOBAL FUNDS FUNDS Global Equity Fund California Tax-Free Global Income Fund Income Fund Emerging Markets Equity Fund Municipal High Income Fund National Tax-Free Income Fund New York Tax-Free [_] PAINEWEBBER MONEY MARKET Income Fund FUND [_] PAINEWEBBER ASSET ALLOCATION FUNDS Balanced Fund Tactical Allocation Fund A prospectus containing more complete information for any of these funds, including charges and expenses, can be obtained from a PaineWebber invest- ment executive or correspondent firm. Please read it carefully before in- vesting. It is important you have all the information you need to make a sound investment decision. (C) 1996 PaineWebber Incorporated - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----