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PaineWebber S&P 500 Index Fund
1285 Avenue of the Americas, New York, New York 10019
Prospectus -- November 1, 1997, as revised July 22, 1998
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PaineWebber S&P 500 Index Fund ("Fund") is designed for long-term investors who
seek investment results, before fees and expenses, that track the performance
results of the Standard & Poor's 500 Composite Stock Price Index ("S&P 500
Index"). The Fund, a series of PaineWebber Index Trust, seeks to replicate the
total return of the S&P 500 Index, which is composed of 500 selected large
capitalization common stocks. The Fund is newly organized and has no operating
history.
This Prospectus concisely sets forth information that a prospective investor
should know about the Fund before investing. Please read this Prospectus
carefully and retain a copy for future reference.
A Statement of Additional Information dated November 1, 1997, as revised
January 21, 1998 has been filed with the Securities and Exchange Commission
("SEC") 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 the Fund, your investment executive at PaineWebber or one of its
correspondent firms or by calling toll-free 1-800-647-1568. In addition, the
SEC maintains a website (http://www.sec.gov) that contains the Statement of
Additional Information, material incorporated by reference and other
information regarding registrants that file electronically with the SEC.
INVESTORS SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN THIS
PROSPECTUS. THE FUND AND ITS DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE TO PROVIDE
INVESTORS WITH INFORMATION THAT IS DIFFERENT. THE PROSPECTUS IS NOT AN OFFER TO
SELL SHARES OF THE FUND IN ANY JURISDICTION WHERE THE FUND OR ITS DISTRIBUTOR
MAY NOT LAWFULLY SELL THOSE SHARES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Prospectus Page 1
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PaineWebber S&P 500 Index Fund
Table of Contents
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<TABLE>
<CAPTION>
Page
----
<S> <C>
The Fund At A Glance....................................................... 3
Expense Table.............................................................. 4
Investment Objective & Policies............................................ 6
Investment Philosophy & Process............................................ 7
Performance................................................................ 7
The Fund's Investments..................................................... 8
Classes of Shares.......................................................... 10
How To Buy Shares.......................................................... 11
How To Sell Shares......................................................... 11
Other Services............................................................. 12
Management................................................................. 13
Determining The Shares' Net Asset Value.................................... 14
Dividends & Taxes.......................................................... 14
General Information........................................................ 15
</TABLE>
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Prospectus Page 2
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PaineWebber S&P 500 Index Fund
The Fund at a Glance
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The Fund is not intended to provide a complete investment program but may be
appropriate as a component of an investor's overall portfolio. Some common
reasons to invest in the Fund 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 Fund
will achieve its goal.
GOAL: To increase the value of your investment by investing in the common
stocks of companies in the S&P 500 Index.
INVESTMENT OBJECTIVE: To replicate the total return of the S&P 500 Index,
before fees and expenses.
RISKS: Stock prices rise and fall. The U.S. stock market tends to be cyclical,
with periods when stock prices generally rise and periods when prices
generally decline. Deviations from the performance of the S&P 500 Index may
result from shareholder purchases and sales of shares that can occur daily, as
well as from expenses borne by the Fund. The Fund may use derivative
instruments, such as options and futures contracts, to simulate full
investment in the S&P 500 Index until the Fund's assets reach a level that
permits investment directly in the common stocks represented in the S&P 500
Index, while handling cash flows into and out of the Fund and to reduce
transaction expenses. These derivatives involve special risks. Investors may
lose money by investing in the Fund; investments in the Fund are not
guaranteed.
MANAGEMENT
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned
asset management subsidiary of PaineWebber Incorporated ("PaineWebber"), is
the Fund's investment adviser and administrator.
WHO SHOULD INVEST
The Fund is for investors who seek investment results, before fees and
expenses, that track the performance results of the S&P 500 Index. Unlike
other mutual funds, which generally seek to "beat" stock market averages and
often have unpredictable results, the Fund seeks to "match" the performance of
the S&P 500 Index and thus is expected to provide a predictable return
relative to its benchmark.
MINIMUM INVESTMENT
To open an account, investors must invest at least $10,000; to add to an
account, investors need only $100.
HOW TO PURCHASE SHARES OF THE FUND
Class Y shares are currently offered for sale only to limited groups of
investors. All other investors must purchase Class A shares.
CLASS A SHARES
The price is the net asset value. Investors do not pay an initial sales charge
when they buy Class A shares. As a result, 100% of their purchase is
immediately invested. Class A shares have higher ongoing expenses than Class Y
shares.
CLASS Y SHARES
The price is the net asset value. Investors do not pay an initial sales charge
when they buy Class Y shares. As a result, 100% of their purchase is
immediately invested. Class Y shares have lower ongoing expenses than Class A
shares.
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Prospectus Page 3
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PaineWebber S&P 500 Index Fund
Expense Table
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The following tables are intended to assist investors in understanding the
expenses associated with investing in each class of shares of the Fund.
Because the Fund has no operating history, "Other Expenses" shown below
represent those estimated for the first year of operations. For the first year
of operations Mitchell Hutchins intends to waive its management fees and
reimburse Fund expenses, if necessary, so that the total operating expenses
for Class A shares do not exceed 0.40% of the Fund's average net assets and
the total operating expenses for Class Y shares do not exceed 0.35% of the
Fund's average net assets.
<TABLE>
<CAPTION>
CLASS A CLASS Y
SHAREHOLDER TRANSACTION EXPENSES ------- -------
<S> <C> <C>
Maximum Sales Charge on Purchases of Shares (as a % of offering
price)........................................................ None None
Sales Charge on Reinvested Dividends (as a % of offering
price)........................................................ None None
Maximum Contingent Deferred Sales Charge (as a % of offering
price or net asset value at the time of sale, whichever is
less)......................................................... None None
Exchange Fees.................................................. N/A N/A
ANNUAL FUND OPERATING EXPENSES
(as a % of average net assets)
Management Fees (after waivers)*............................... 0.00% 0.00%
12b-1 Fees..................................................... 0.05 None
Other Expenses (after expense reimbursements)*................. 0.35 0.35
---- ----
Total Operating Expenses (after fee waivers and expense reim-
bursements)*.................................................. 0.40% 0.35%
==== ====
</TABLE>
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* Without taking into account anticipated fee waivers and expense
reimbursements, the Fund's Management Fees, estimated Other Expenses and
Total Operating Expenses would be 0.20%, 0.55% and 0.80%, respectively, for
Class A shares and 0.20%, 0.55% and 0.75%, respectively, for Class Y shares.
CLASS A SHARES: No initial sales charge is imposed. Class A shares are
subject to 12b-1 service fees.
CLASS Y SHARES: No initial sales charge is imposed, nor are Class Y shares
subject to 12b-1 service fees. Class Y shares may be purchased by
participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds ("PW
Programs"), when Class Y shares are purchased through that program.
Participation in a PW Program is subject to an advisory fee at the maximum
annual rate of 1.5% of assets held through that PW Program. This account
charge is not included in the table because investors who are not PW
Program participants also are permitted to purchase Class Y shares of the
Fund.
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Prospectus Page 4
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PaineWebber S&P 500 Index Fund
Expense Table
(Continued)
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EXAMPLE OF EFFECT OF FUND EXPENSES
The following examples should assist investors in understanding various costs
and expenses incurred as shareholders of the 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 A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES OF THE FUND MAY BE MORE OR LESS THAN THOSE SHOWN.
An investor would pay the following expenses, directly or indirectly, on a
$1,000 investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
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<S> <C> <C>
Class A.......................................................... $ 4 $22
Class Y.......................................................... $ 4 $20
</TABLE>
ASSUMPTION MADE IN THE EXAMPLE
Reinvestment of all dividends and other distributions; percentage amounts
listed under "Annual Fund Operating Expenses" remain the same for the
years shown; .20% expense waiver in the first year of operations.
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Prospectus Page 5
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PaineWebber S&P 500 Index Fund
Investment Objective & Policies
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The Fund's investment objective is to replicate the total return of the S&P
500 Index, before fees and expenses. The investment objective of the Fund may
not be changed without shareholder approval. The Fund's other investment
policies, except where noted, are not fundamental and may be changed by its
board of trustees ("board").
The Fund seeks to achieve its objective by investing substantially all of its
assets in common stocks issued by companies in the S&P 500 Index and in
related derivatives, such as options and futures contracts, that simulate
investment in the S&P 500 Index. Once its assets have reached $10 million, the
Fund will invest at least 65% of its total assets in a substantial majority of
the common stocks issued by companies represented in the S&P 500 Index. Until
that time, the Fund may invest in a smaller number of common stocks and/or
derivative instruments that simulate full investment in the S&P 500 Index.
The S&P 500 Index is composed of 500 common stocks that are selected by
Standard & Poor's ("S&P") to capture the price performance of a large cross-
section of the U.S. publicly traded stock market. These 500 securities, most
of which trade on the New York Stock Exchange, represent approximately 75% of
the market value of all U.S. common stocks. Each stock in the S&P 500 Index is
weighted by its total market value relative to total market value of all
securities in the index. S&P selects the component stocks included in the S&P
500 Index with the aim of achieving a distribution at the index level
representative of the various industry components of the U.S. market for
common stocks. Therefore, these 500 stocks do not represent the 500 largest
companies. Aggregate market value and trading activity also are considered in
the selection process.
The Fund is not sponsored, endorsed, sold or promoted by S&P. "Standard &
Poor's(R)," "S&P(R)," "S&P 500(R)," and "500" are trademarks of The McGraw-
Hill Companies, Inc. and have been licensed for use by the Fund. S&P makes no
representation or warranty, express or implied, to the purchasers of the
Fund or any member of the public regarding the advisability of investing in
securities generally or the Fund particularly or the ability of the S&P 500
Index to track general stock market performance. S&P's only relationship to
the Fund is the licensing of certain trademarks and trade names of S&P and the
S&P 500 Index, which is determined, composed, and calculated by S&P without
regard to the Fund. S&P has no obligation to take the needs of the Fund into
consideration in determining, composing or calculating the S&P 500 Index. S&P
is not responsible for and has not participated in the determination or
calculation of the equation by which shares of the Fund are priced or
converted into cash. S&P has no obligation or liability in connection with the
administration of the Fund or the marketing or sale of the Fund's shares.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND OR ITS SHAREHOLDERS OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS
ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE
WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR
ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
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Prospectus Page 6
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PaineWebber S&P 500 Index Fund
Investment Philosophy & Process
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The Fund is not managed according to traditional methods of "active"
management, which involve the buying and selling of securities based upon
economic, financial and market analysis and investment judgment. Instead, it
uses a "passive" investment approach attempting to duplicate the investment
performance of the S&P 500 Index.
Once its assets have reached $10 million, the Fund expects to invest in
substantially all 500 stocks in the S&P 500 Index in proportion to their
weighting in the S&P 500 Index and, ordinarily, will invest in at least 450
stocks that are represented in the S&P 500 Index. If the Fund experiences
exceptional levels of purchases or redemptions, the Fund may be delayed in
rebalancing its portfolio to reflect the weightings of the common stocks
reflected in the S&P 500 Index or may hold less than 450 stocks of the Index.
The Fund will be rebalanced as soon as practicable to reflect the common stock
weightings represented in the S&P 500
Index and may use derivative instruments to replicate the weightings of the
Index in the interim.
Because the Fund seeks to replicate the performance of the S&P 500 Index, a
close correlation between the Fund's performance and the performance of the
S&P 500 Index is anticipated in both rising and falling markets.
The Fund attempts to achieve a correlation between the performance of its
investments and that of the S&P 500 Index, over time of at least 0.95, before
deduction of fees and expenses. A correlation of 1.00 would represent perfect
correlation between the Fund and the S&P 500 Index. The performance of the
Fund versus that of the S&P 500 Index is compared at least weekly. If an
unexpected tracking error develops, the Fund will be rebalanced to bring it
into line with the S&P 500 Index. There can be no assurance that the Fund will
achieve its expected results.
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Performance
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The Fund performs a standardized computation of annualized total return and
may show this return in advertisements or promotional materials. Standardized
return shows the change in value of an investment in the Fund as a steady
compound annual rate of return. Actual year-by-year returns fluctuate and may
be higher or lower than standardized return. One-, five- and ten-year periods
will be shown, unless the Fund has been in existence for a shorter period. If
so, returns will be shown for the period since inception.
The Fund may use other total return presentations in conjunction with
standardized return. These may cover the same or different periods as those
used for standardized return and may include cumulative returns, average
annual rates, actual year-by-year rates or any combination thereof.
Total return information reflects past performance and does not indicate
future results. The investment return and principal value of shares of the
Fund will fluctuate. The amount investors receive when selling shares may be
more or less than what they paid.
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Prospectus Page 7
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PaineWebber S&P 500 Index Fund
The Fund's Investments
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EQUITY SECURITIES. 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.
RISKS
EQUITY SECURITIES. While past performance does not guarantee future results,
equity securities historically have provided the greatest long-term growth
potential in a company. However, their prices generally fluctuate more than
other securities and reflect changes in a company's financial condition and in
overall market and economic conditions. Common stocks generally represent the
riskiest investment in a company. It is possible that the Fund may experience
a substantial or complete loss on an individual common stock investment.
INDEX INVESTING AND OPEN-END INVESTMENT COMPANIES. While the Fund attempts to
duplicate, before deduction of operating expenses, the investment results of
the S&P 500 Index, the Fund's investment results generally will not be
identical to those of the S&P 500 Index. Deviations from the performance of
the S&P 500 Index may result from shareholder purchases and sales of shares
that can occur daily, as well as from expenses borne by the Fund.
FOREIGN SECURITIES. The S&P 500 Index includes some U.S. dollar-denominated
foreign securities that are traded on recognized U.S. exchanges or on the U.S.
over-the-counter ("OTC") market. Investing in the securities of foreign
companies may involve 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.
DERIVATIVES. Some of the instruments in which the Fund may invest may be
referred to as "derivatives," because their value depends on (or "derives"
from) the value of an underlying asset, reference rate or index. Derivatives
include options and futures contracts that may be used to simulate full
investment in the S&P 500 Index and in other strategies. There is limited
consensus as to what constitutes a "derivative" security or instrument. The
market value of derivatives sometimes is more volatile than that of other
investments, and each type of derivative may pose its own special risks.
Mitchell Hutchins takes these risks into account in its management of the
Fund.
COUNTERPARTIES. The Fund may be exposed to the risk of financial failure or
insolvency of another party. To help lessen those risks, Mitchell Hutchins,
subject to the supervision of the board, monitors and evaluates the
creditworthiness of the parties with which the Fund does business.
INDUSTRY CONCENTRATION POLICY. The Fund will invest 25% or more of its total
assets in securities of issuers in the same industry if necessary to replicate
the weighting of that particular industry in the S&P 500 Index.
INVESTMENT TECHNIQUES AND STRATEGIES
STRATEGIES USING DERIVATIVES. The Fund may use derivatives, which may include
options (both exchange traded and OTC) and futures contracts in strategies
intended to simulate full investment in the S&P 500 Index until the Fund's
assets reach a level that permits investment directly in the common stocks
represented in the S&P 500 Index or while retaining a cash balance for Fund
management purposes, such as to provide liquidity to meet anticipated sales of
its shares by shareholders and for Fund operating expenses. The Fund may also
use these derivatives to reduce the risk of adverse price movements in the
securities in the S&P 500 Index while investing cash received from investor
purchases of Fund shares, to facilitate trading and to reduce transaction
costs. New financial
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Prospectus Page 8
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Paine Webber S&P 500 Index Fund
products and management techniques continue to be developed and may be used by
the Fund if consistent with its investment objective and policies. The
Statement of Additional Information contains further information on these
derivatives and related strategies.
The Fund might not use any derivative instruments or strategies, and there can
be no assurance that using them will succeed. If Mitchell Hutchins is
incorrect in its judgment on market values or other economic factors in using
a strategy, the Fund may have lower net income and a net loss on the
investment. Each of these strategies involves certain risks, which include:
. the possibility of imperfect correlation between price movements of
derivatives used in the Fund's strategies and price movements of the
securities in the S&P 500 Index;
. possible constraints placed on the 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
position in derivatives.
LENDING PORTFOLIO SECURITIES. The Fund may lend its securities to qualified
broker-dealers or institutional investors in an amount up to 33 1/3% of the
Fund's total assets. Lending securities enables the Fund to earn additional
income, but could result in a loss or delay in recovering these securities.
CASH MANAGEMENT. The Fund expects to use derivatives to provide liquidity for
anticipated sales of its shares by shareholders and for Fund operating
expenses and to manage cash flows into the Fund pending investment in
securities in the S&P 500 Index. The Fund may also invest in cash or
investment grade U.S. money market instruments, including repurchase
agreements, for liquidity purposes or pending investment in other securities.
The Fund is authorized to invest up to 35% of its total assets in cash or
money market instruments, although it expects these investments will represent
a much smaller portion of its total assets under normal circumstances.
Repurchase agreements are transactions in which the Fund purchases securities
from banks or recognized securities dealers and simultaneously commits to
resell the securities to the bank or dealer, usually no more than seven days
after purchase. Repurchase agreements carry certain risks not associated with
direct investments in securities, including a possible decline in the market
value of the underlying securities and delays and costs to the Fund if the
other party to the repurchase agreement becomes insolvent.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities, including certain cover for OTC options and securities
whose disposition is restricted under the federal securities laws. The Fund
does 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 board.
OTHER INFORMATION. The Fund may purchase securities on a when-issued basis or
may purchase or sell securities for delayed delivery. The Fund 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. The Fund may borrow money for temporary or
emergency purposes in an amount up to 33 1/3% of its total assets, including
up to 5% of its net assets in reverse repurchase agreements.
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Prospectus Page 9
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PaineWebber S&P 500 Index Fund
Classes of Shares
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The Fund offers through this Prospectus two classes of shares that differ in
terms of expenses. Class Y shares have lower ongoing expenses than Class A
shares but are available only to limited groups of investors.
CLASS A SHARES
HOW PRICE IS CALCULATED: The price is the net asset value next calculated
after PaineWebber's New York City headquarters or PFPC Inc., the Fund's
transfer agent ("Transfer Agent"), receives the purchase order. Because
investors do not pay an initial sales charge when they buy Class A shares,
100% of their purchase is immediately invested. Class A shares are subject to
rule 12b-1 service fees.
CLASS Y SHARES
HOW PRICE IS CALCULATED. Class Y shares are sold to eligible investors at the
net asset value next calculated after PaineWebber's New York City headquarters
or the Transfer Agent receives the purchase order. Because investors do not
pay an initial sales charge when they buy Class Y shares, 100% of their
purchase is immediately invested. The ongoing expenses for Class Y shares are
lower than for Class A shares because Class Y shares are not subject to rule
12b-1 service fees.
LIMITED GROUPS OF INVESTORS. Only the following investors are eligible to buy
Class Y shares:
. a participant in an investment program that is sponsored by PaineWebber and
may invest in PaineWebber mutual funds, when Class Y shares are purchased
through that program;
. an investor who buys $10 million or more at any one time in any combination
of the Fund and any PaineWebber mutual fund in the Flexible Pricing SM
System;
. an employee benefit plan qualified under section 401, including a salary
reduction plan qualified under section 401(k), or 403(b) of the Internal
Revenue Code that has either
. 5,000 or more eligible employees or
. $50 million or more in assets; and
. an investment company advised by PaineWebber or an affiliate of PaineWebber.
PACE MULTI-ADVISOR PROGRAM. An investor who participates in the PACE Multi-
Advisor Program is eligible to purchase Class Y shares. The PACE Multi-Advisor
Program is an advisory program sponsored by PaineWebber that provides
comprehensive investment services, including investor profiling, a
personalized asset allocation strategy using an appropriate combination of
funds, and a quarterly investment performance review. Participation in the
Pace Multi-Advisor Program is subject to payment of an advisory fee to
PaineWebber at the maximum annual rate of 1.5% of assets. Employees of
PaineWebber and its affiliates are entitled to a waiver of this fee.
Please contact your PaineWebber investment executive or PaineWebber's
correspondent firms for more information concerning mutual funds that are
available to the PACE Multi-Advisor Program.
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Prospectus Page 10
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PaineWebber S&P 500 Index Fund
How to Buy Shares
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Shares are purchased at the next share price calculated after the purchase
order is received by PaineWebber's New York City headquarters or the Transfer
Agent. Prices are calculated for the Fund's 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.
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. Investors in Class Y shares must provide
satisfactory information to PaineWebber or the Fund that they are eligible to
purchase Class Y shares.
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.
OTHER INVESTORS
Investors who are not PaineWebber clients may purchase Fund shares and set up
an account through the Transfer Agent (PFPC Inc.) by completing an account
application which may be obtained 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.
Investors do not have to send an application when making additional investments
in a Fund.
MINIMUM INVESTMENTS FOR CLASS A SHARES
<TABLE>
<S> <C>
To open an account............ $10,000
To add to an account.......... $ 100
</TABLE>
The Fund may waive or reduce these minimums for:
. employees of PaineWebber or its affiliates; or
. participants in certain pension plans, retirement accounts, investment
programs or the Fund's automatic investment plan.
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How to Sell Shares
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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 by
PaineWebber's New York City headquarters or the Transfer Agent. 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 Y shares.
If a shareholder wants to sell shares which were purchased recently, the Fund
may delay payment until it verifies that good payment was received. In the case
of purchases by check, this can take up to 15 days.
Investors who have an account with PaineWebber or one of PaineWebber's
correspondent firms can sell their shares by contacting their investment
executives. PaineWebber investment executives and correspondent firms are
responsible for promptly sending investors' sell orders to PaineWebber's New
York City headquarters. Investors who do not have an account
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Prospectus Page 11
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PaineWebber S&P 500 Index Fund
and have bought their shares through the Fund's Transfer Agent (PFPC Inc.),
may sell 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;
. 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.
Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, it reserves the right to purchase back all of its shares in any
shareholder account with a net asset value of less than $5,000. If the Fund
elects to do so, it will notify the shareholder of the opportunity to increase
the amount invested to $5,000 or more within 60 days of the notice. The Fund
will not purchase back accounts that fall below $5,000 solely due to a
reduction in net asset value per share.
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Other Services
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Investors should consult their investment executives at PaineWebber or one of
its correspondent firms to learn more about the following services available
with respect to the Fund's Class A shares:
AUTOMATIC INVESTMENT PLAN
Investing on a regular basis helps investors meet their financial goals.
PaineWebber offers an Automatic Investment Plan with a minimum initial
investment of $10,000 through which the Fund will deduct $50 or more monthly,
quarterly, semiannually or annually 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), semiannual (June and December) or
annual (December) withdrawals from their Fund accounts. To participate in this
Plan, an investor's Class A shares must have a minimum value of $25,000; the
minimum value of withdrawals is $100.
An investor may not withdraw more than 12% of the value of the Fund account
when the investor signed up for the Plan during the first year under the Plan.
Shareholders who elect to receive dividends or other distributions in cash may
not participate in the Plan.
INDIVIDUAL RETIREMENT ACCOUNTS
Self-directed Individual Retirement Accounts ("IRAs") are available through
PaineWebber in which purchases of PaineWebber mutual funds and other
investments may be made. Investors considering establishing an IRA should
review applicable tax laws and should consult their tax advisers.
TRANSFER OF ACCOUNTS
If investors holding shares of the 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.
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Prospectus Page 12
<PAGE>
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PaineWebber S&P 500 Index Fund
Management
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The Fund is governed by a board of trustees, which oversees its operations.
The Fund has appointed Mitchell Hutchins as investment adviser and
administrator responsible for the Fund's operations (subject to the authority
of the board). As investment adviser and administrator, Mitchell Hutchins
supervises all aspects of the Fund's operations and makes and implements all
investment decisions for the Fund.
In accordance with procedures adopted by the board, brokerage transactions for
the Fund may be conducted through PaineWebber or its affiliates and the Fund
may pay fees, including fees calculated as a percentage of earnings, to
PaineWebber for its services as lending agent in its portfolio securities
lending program.
ABOUT THE INVESTMENT ADVISER
Mitchell Hutchins, located at 1285 Avenue of the Americas, New York, New York
10019, is an asset management subsidiary of PaineWebber Incorporated, which is
wholly owned by Paine Webber Group Inc., a publicly owned financial services
holding company. On December 31, 1997, Mitchell Hutchins was adviser or sub-
adviser of 30 investment companies with 65 separate portfolios and aggregate
assets of approximately $35.8 billion.
Personnel of Mitchell Hutchins may engage in securities transactions for their
own accounts pursuant to Mitchell Hutchins' code of ethics which establishes
procedures for personal investing and restricts certain transactions.
T. Kirkham Barneby is responsible for the day-to-day management of the Fund's
portfolio. Mr. Barneby is a managing director and chief investment officer of
quantitative investments of Mitchell Hutchins. Mr. Barneby rejoined Mitchell
Hutchins in 1994 after being with Vantage Global Management for one year.
During the eight years that Mr. Barneby was previously with Mitchell Hutchins,
he was a senior vice president responsible for quantitative management and
asset allocation models.
MANAGEMENT FEES & OTHER EXPENSES
The Fund incurs various expenses in its operations, such as the management fee
paid to Mitchell Hutchins, 12b-1 services fees paid with respect to Class A
shares, custody and transfer agency fees, professional fees, expenses of board
and shareholder meetings, fees and expenses relating to registration of its
shares, taxes and governmental fees, fees and expenses of trustees, costs of
obtaining insurance, expenses of printing and distributing shareholder
materials, organizational expenses and extraordinary expenses, including costs
or losses in any litigation.
The Fund has agreed to pay Mitchell Hutchins a management fee at the annual
rate of 0.20% of the Fund's average daily net assets. For the first year of
the Fund's operations, however, Mitchell Hutchins has agreed to waive its fee
and reimburse Fund expenses, if necessary, so that the total annual operating
expenses for that first year do not exceed 0.40% of annual average net assets
for Class A shares and 0.35% of average annual net assets for Class Y shares.
DISTRIBUTION ARRANGEMENTS
Mitchell Hutchins is the distributor of the Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. There is no
distribution plan with respect to the Fund's Class Y shares. Under the
distribution plan for Class A shares ("Class A Plan"), the Fund pays Mitchell
Hutchins monthly service fees at the annual rate of 0.05% of the average daily
net assets of Class A shares.
Mitchell Hutchins primarily uses the service fees under the Class A Plan to
pay PaineWebber for shareholder servicing, currently at the annual rate of
0.05% of the aggregate investment amounts maintained in the 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.
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Prospectus Page 13
<PAGE>
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PaineWebber S&P 500 Index Fund
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The Class A Plan and the related distribution contracts ("Distribution
Contracts") specify that the service fees paid to Mitchell Hutchins are not
reimbursement for specific expenses incurred. Therefore, even if Mitchell
Hutchins' expenses exceed the service fees it receives, the Fund 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 fees received or accrued
through the termination date of the Plan will be Mitchell Hutchins' sole
responsibility and not that of the Fund. Annually, the board reviews the Class
A Plan and Mitchell Hutchins' corresponding expenses for that class of shares.
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Determining the Shares' Net Asset Value
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The net asset value of the Fund's shares fluctuates and is determined
separately for each class as of the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time) each Business Day. The
Fund's net asset value per share is determined by dividing the value of the
securities held by the Fund, plus any cash or other assets, minus all
liabilities, by the total number of Fund shares outstanding.
Short-term investments that have a maturity of more than 60 days are valued at
prices based on market quotations for securities of similar type, yield and
maturity. The amortized cost method of valuation generally is used to value
debt obligations with 60 days or less remaining to maturity, unless the board
determines that this does not represent fair value.
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Dividends & Taxes
- -------------------------------------------------------------------------------
DIVIDENDS
The Fund will pay an annual dividend from its net investment income and net
short-term capital gain, if any. The Fund will also distribute annually
substantially all of its net capital gain (the excess of net long-term capital
gain over net short-term capital loss), if any. The Fund may make additional
distributions, if necessary, to avoid a 4% excise tax on certain undistributed
income and capital gains.
Dividends and other distributions paid on each class of shares of the Fund are
calculated at the same time and in the same manner. Dividends on Class A
shares of the Fund are expected to be lower than those on its Class Y shares
because Class A shares have higher expenses resulting from their service fees.
The 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 them by check or credited to their
PaineWebber accounts, should contact their investment executives at
PaineWebber or one of its correspondent firms or complete the appropriate
section of the account application.
TAXES
The Fund intends 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 the part of its investment company taxable income and net capital gain
that it distributes to its shareholders. Investment company taxable income
generally consists of net investment income and net short-term capital gain
(the excess of gains from the sale or exchange of capital assets held for not
more than one year over loss therefrom).
Dividends from the Fund's investment company taxable income (whether paid in
cash or additional
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Prospectus Page 14
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PaineWebber S&P 500 Index Fund
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shares) are generally taxable to its shareholders as ordinary income.
Distributions of the Fund's net capital gain (whether paid in cash or
additional shares) are taxable to its shareholders as long-term capital gain,
regardless of how long they have held their Fund shares. Under the Taxpayer
Relief Act of 1997, different maximum tax rates apply to a non-corporate
taxpayer's net capital gain depending on the taxpayer's holding period and
marginal rate of federal income tax--generally, 28% for gain recognized on
securities held for more than one year but not more than 18 months and 20% (10%
for taxpayers in the 15% marginal tax bracket) for gain recognized on
securities held for more than 18 months. Pursuant to an Internal Revenue
Service notice, the Fund may divide each net capital gain distribution into a
28% rate gain distribution and a 20% rate gain distribution (in accordance with
the Fund's holding periods for the securities it sold that generated the
distributed gain) and its shareholders must treat those portions accordingly.
Shareholders who are not subject to tax on their income generally will not be
required to pay tax on distributions.
YEAR-END TAX REPORTING
Following the end of each calendar year, the Fund notifies its shareholders of
the amounts of dividends and capital gain distributions paid (or deemed paid)
for that year including any portion of those dividends that qualifies for
special treatment. The information regarding capital gain destributions
designates the portions thereof subject to the different maximum rates of tax
applicable to non-corporate taxpayers' net capital gain.
WITHHOLDING REQUIREMENTS
The Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
and capital gain distributions payable to such shareholders who otherwise are
subject to backup withholding.
TAXES ON THE SALE OF FUND SHARES
A shareholder's sale (redemption) of shares may result in a taxable gain or
loss. This depends upon whether the shareholder receives more or less than the
shareholder's adjusted basis for the shares. Capital gain on shares held for
more than one year will be long-term capital gain, in which event it will be
subject to federal income tax at the rates indicated above. In addition, if
Fund shares are bought within 30 days before or after selling other Fund shares
(regardless of class) at a loss, all or a portion of that loss will not be
deductible and will increase the basis of the newly purchased shares.
* * * *
Because the foregoing only summarizes some of the important tax considerations
affecting the Fund and its shareholders, prospective shareholders are urged to
consult their tax advisers.
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General Information
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ORGANIZATION
The Fund is a newly created, diversified series of PaineWebber Index Trust
("Trust"), an open-end management investment company formed on May 27, 1997 as
a business trust under the laws of Delaware. The board has authority to issue
an unlimited number of shares of beneficial interest of separate series, with a
par value of $0.001 per share.
SHARES
The shares of the Fund are divided into two classes, Class A and Class Y. Each
class represents an identical interest in the Fund's investment portfolio and
has the same rights, privileges and preferences. However, each class differs
with respect to service fees, other expenses allocable exclusively to that
class and voting rights on matters exclusively affecting that class. The
different charges applicable to the different classes of shares of the Fund
will affect the performance of those classes.
Each share of the Fund is entitled to participate equally in dividends, other
distributions and the proceeds of any liquidation of the Fund. However, due to
the differing expenses of the classes, dividends on Class A shares are likely
to be lower than for Class Y shares, which bear lower expenses.
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Prospectus Page 15
<PAGE>
-------------------
PaineWebber S&P 500 Index Fund
VOTING RIGHTS
Shareholders of the Fund are entitled to one vote for each full share held and
fractional votes for fractional shares held. Voting rights are not cumulative
and the holders of more than 50% of all the shares of the Fund as a group may
elect all its board members of the Trust. The shares of the Fund will be voted
together, except that only the shareholders of a particular class may vote on
matters affecting only that class, such as the terms of a distribution plan as
it relates to the class. As of the date of this Prospectus, Mitchell Hutchins
and PaineWebber are the sole shareholders of the Fund and may be deemed
controlling persons of the Fund until additional investors purchase Fund
shares.
SHAREHOLDER MEETINGS
The Fund does not intend to hold annual meetings.
Shareholders of record of no less than two-thirds of the outstanding shares of
the Trust may remove a board member through a declaration in writing or by
vote cast in person or by proxy at a meeting called for that purpose. A
meeting will be called to vote on the removal of a board member at the written
request of holders of 10% of the outstanding shares of the Trust.
REPORTS TO SHAREHOLDERS
The Fund sends its shareholders audited annual and unaudited semiannual
reports, each of which includes a list of the investment securities held by
the Fund as of the end of the period covered by the report. The Statement of
Additional Information, which is incorporated by this reference into this
Prospectus, is available to shareholders upon request.
CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, located at One Heritage Drive, North
Quincy, Massachusetts 02171, serves as custodian and recordkeeping agent for
the Fund. PFPC Inc., a subsidiary of PNC Bank, N.A., serves as the Fund's
transfer and dividend disbursing agent. It is located at 400 Bellevue Parkway,
Wilmington, DE 19809.
PFPC Inc. (not the Fund) pays PaineWebber for certain transfer agency related
services that PFPC Inc. has delegated to PaineWebber.
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Prospectus Page 16
<PAGE>
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PaineWebber S&P 500 Index Fund
Prospectus -- November 1, 1997, as revised July 22, 1998
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PAINEWEBBER MUTUAL FUNDS IN THE FLEXIBLE PRICING SYSTEM SM
. PAINEWEBBER BOND FUNDS . PAINEWEBBER STOCK FUNDS
High Income Fund Capital Appreciation Fund
Investment Grade Income Financial Services Growth Fund
Fund Growth Fund
Low Duration U.S. Growth and Income Fund
Government Income Fund Small Cap Fund
Strategic Income Fund Utility Income Fund
U.S. Government Income
Fund
. PAINEWEBBER TAX-FREE BOND . PAINEWEBBER GLOBAL FUNDS
FUNDS
Asia Pacific Growth Fund
California Tax-Free Emerging Markets Equity Fund
Income Fund Global Equity Fund
Municipal High Income Global Income Fund
Fund
National Tax-Free
Income Fund
New York Tax-Free
Income Fund
. PAINEWEBBER MONEY MARKET
FUND
. PAINEWEBBER
ASSETALLOCATION FUNDS
Balanced Fund . MITCHELL HUTCHINS PORTFOLIOS
Tactical Allocation
Fund Conservative Portfolio
Moderate Portfolio
Aggressive Portfolio
Shares of PaineWebber S&P 500 Index Fund may not be exchanged for shares of
any PaineWebber mutual fund in the Flexible Pricing System SM.
A prospectus containing more complete information for any of the above
funds, including charges and expenses, can be obtained from a PaineWebber
investment executive or correspondent firm. Please read it carefully before
investing. It is important you have all the information you need to make a
sound investment decision.
(C) 1998 PaineWebber Incorporated
