<PAGE>
As filed with the Securities and Exchange Commission on September 30, 1998
1933 Act Registration No. 333-27917
1940 Act Registration No. 811-08229
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
---
Pre-Effective Amendment No [ ]
--- ---
Post-Effective Amendment No. 2 [ X ]
--- ---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
---
Amendment No. 3
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PAINEWEBBER INDEX TRUST
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, Esq.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ELINOR W. GAMMON, Esq.
BENJAMIN J. HASKIN, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., Second Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: Effective Date of this Post-
Effective Amendment.
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
--- --------------------------------------------------
[ X ] On October 1, 1998 pursuant to Rule 485(b)
---
[ ] 60 days after filing pursuant to Rule 485(a)(1)
---
[ ] On pursuant to Rule 485(a)(1)
--- -----------
[ ] 75 days after filing pursuant to Rule 485(a)(2)
---
[ ] On pursuant to Rule 485(a)(2)
--- -----------
Title of Securities Being Registered: Shares of Beneficial Interest.
<PAGE>
PAINEWEBBER INDEX TRUST
Contents of Registration Statement
This Registration Statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
PAINEWEBBER INDEX TRUST:
PaineWebber S & P 500 Index Fund
Form N-1A Cross Reference Sheet
<TABLE>
<CAPTION>
Part A Item No. and Caption Prospectus Caption
--------------------------- ------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis The Fund at a Glance; Expense Table
3. Condensed Financial Information Financial Highlights; Performance
4. General Description of Registrant The Fund at a Glance; Investment Objective &
Policies; Investment Philosophy & Process; The
Fund's Investments; General Information
5. Management of the Fund Management; General Information
5A. Management's Discussion of Fund Performance Financial Highlights
6. Capital Stock and Other Securities Cover Page; Flexible PricingSM; Dividends & Taxes;
General Information
7. Purchase of Securities Being Offered Flexible PricingSM; How to Buy Shares; Other
Services; Determining the Shares' Net Asset Value
8. Redemption or Repurchase How to Sell Shares; Other Services
9. Pending Legal Proceedings Not Applicable
Part B Item No. and Caption Statement of Additional Information Caption
--------------------------- -------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Other Information
13. Investment Objective and Policies Investment Policies and Restrictions; Strategies
14. Management of the Fund Trustees and Officers; Principal Holders of
Securities
15. Control Persons and Principal Holders of Trustees and Officers; Principal Holders of
Securities Securities
16. Investment Advisory and Other Services Investment Advisory and Distribution Arrangements
17. Brokerage Allocation and Other Services Portfolio Transactions
18. Capital Stock and Other Securities Other Information
19. Purchase, Redemption and Pricing of Redemption Information and Other Services;
Securities Being Offered Valuation of Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory and Distribution Arrangements
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
Part C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
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PaineWebber S&P 500 Index Fund
1285 Avenue of the Americas, New York, New York 10019
Prospectus -- October 1, 1998
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PaineWebber S&P 500 Index 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" or "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.
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 October 1, 1998, has been filed
with the Securities and Exchange Commission ("SEC" or "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 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 Commission
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 Commission.
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THE PAINEWEBBER FAMILY OF MUTUAL FUNDS
The PaineWebber Family of Mutual Funds consists of seven broad categories,
which are presented here. Generally, investors seeking to maximize return must
assume greater risk. The Fund offered by this Prospectus is in the STOCK FUNDS
category.
[] Asset Allocation Funds [] Global Funds for long-
for high total return by term growth by investing
investing in stocks and mainly in foreign stocks
bonds. or high current income
by investing mainly in
global debt instruments.
[] Stock funds for long-
term growth by investing
mainly in stocks. [] Money Market Fund for
income and stability by
investing in high-
[] Bond Funds for income by quality, short-term
investing mainly in investments.
bonds.
[] Tax-Free Bond Funds for
income exempt from [] Funds of Funds for
federal income tax and, either long-term growth
in some cases, state of capital; total
and local income taxes, return; or income and,
by investing in secondarily, growth of
municipal bonds. capital by investing in
other PaineWebber mutual
funds.
A complete listing of the PaineWebber Family of Mutual Funds is found on the
back cover of this Prospectus.
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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
<PAGE>
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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
Financial Highlights....................................................... 6
Investment Objective & Policies............................................ 7
Investment Philosophy & Process............................................ 8
Performance................................................................ 8
The Fund's Investments..................................................... 9
Flexible PricingSM......................................................... 11
How To Buy Shares.......................................................... 14
How To Sell Shares......................................................... 15
Other Services............................................................. 16
Management................................................................. 17
Determining The Shares' Net Asset Value.................................... 18
Dividends & Taxes.......................................................... 19
General Information........................................................ 20
</TABLE>
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Prospectus Page 2
<PAGE>
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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 fees and expenses borne by the Fund. The Fund may use derivative
instruments, such as options and futures contracts, to simulate full
investment in the 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 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 $1,000; to add to an
account, investors need only $100.
HOW TO PURCHASE SHARES OF THE FUND
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
sales charge is 2.5% 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 for Class C shares.
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 1.00% is charged on
shares sold within one year of purchase.
CLASS Y SHARES
Class Y shares are offered only to limited groups of investors. 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. Investors also do not pay a contingent deferred sales charge when
they sell Class Y shares. Class Y shares have lower ongoing expenses than the
other classes of shares.
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Prospectus Page 3
<PAGE>
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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 had less than six months of operation at the end of its
initial fiscal period, "Other Expenses" shown below are estimated.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS Y
SHAREHOLDER TRANSACTION EXPENSES ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge on Purchases of Shares (as a % of
offering price)...................................... 2.5% None None
Sales Charge on Reinvested Dividends (as a % of offer-
ing price)........................................... None 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 1% None
Exchange Fees......................................... None None None
ANNUAL FUND OPERATING EXPENSES (after December 31,
1998)*
(as a % of average net assets)
Management Fees (after waivers)....................... 0.00% 0.00% 0.00%
12b-1 Fees............................................ 0.25 1.00 None
Other Expenses (after expense reimbursements)......... 0.60 0.60 0.60
---- ---- ----
Total Operating Expenses (after fee waivers and ex-
pense reimbursements)*............................... 0.85% 1.60% 0.60%
==== ==== ====
</TABLE>
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- --------------------------------------------------------------------------------
*Mitchell Hutchins intends to waive its Management Fees and reimburse Fund
expenses so that total operating expenses for Class Y shares through December
31, 1998 (the first year of operations) do not exceed 0.35% of its average net
assets. During this period, Mitchell Hutchins will waive Management Fees and
reimburse expenses of Class A and Class C shares proportionately. After
December 31, 1998, Mitchell Hutchins intends to continue waiving Management
Fees and reimburse Fund expenses, if necessary, so that the Total Operating
Expenses for each class of shares do not exceed the amounts shown in the table
for the fiscal year ending May 31, 1999. Although Mitchell Hutchins currently
expects to continue such waivers and expense reimbursements after May 31,
1999, it may discontinue or change them at any time in the future. 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%, 2.02% and 2.47% for its Class A shares; 0.20%, 2.02% and 3.22%
for its Class C shares; and 0.20%, 2.02% and 2.22% for its Class Y shares.
CLASS A SHARES: Sales charge waivers and a reduced sales purchase plan are
available. Purchases of $1 million or more are not subject to an initial
sales charge; however, if a shareholder sells those shares within one year
after purchase, a contingent deferred sales charge of 0.50% of the offering
price or the net asset value of the shares at the time of sale by the
shareholder, whichever is less, is imposed.
CLASS C SHARES: If a shareholder sells these shares within one year after
purchase, a contingent deferred sales charge of 1% of the offering price or
the net asset value of the shares at the time of sale by the shareholder,
whichever is less, is imposed.
CLASS Y SHARES: No initial or contingent sales charge is imposed, nor are
Class Y shares subject to 12b-1 distribution or 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 PW
Program. Participation in a PW Program is subject to an advisory fee at the
effective 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
<PAGE>
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--------------------------------
PaineWebber S&P 500 Index Fund
Expense Table
(Continued)
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12b-1 distribution fees are asset-based sales charges. Long-term Class C
shareholders may pay more in direct and indirect sales charges (including
12b-1 distribution fees) than the economic equivalent of the maximum front-end
sales charge permitted by the National Association of Securities Dealers, Inc.
12b-1 fees have two components, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS Y
------- ------- -------
<S> <C> <C> <C>
12b-1 service fees...................................... 0.25% 0.25% 0.00%
12b-1 distribution fees................................. 0.00 0.75 0.00
</TABLE>
For more information, see "Management" and "Flexible PricingSM."
EXAMPLES 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 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
------ -------
<S> <C> <C>
Class A.......................................................... $33 $51
Class C (Assuming sale of all shares at end of period)........... $26 $51
Class C (Assuming no sale of shares)............................. $16 $51
Class Y.......................................................... $ 6 $19
</TABLE>
ASSUMPTION MADE IN THE EXAMPLE
. ALL CLASSES: Reinvestment of all dividends and other distributions;
percentage amounts listed under "Annual Fund Operating Expenses" remain
the same for the years shown.
. CLASS A SHARES: Deduction of the maximum 2.5% initial sales charge at
the time of purchase.
. CLASS C SHARES: Deduction of a 1% contingent deferred sales charge for
sales of shares within one year of purchase.
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Prospectus Page 5
<PAGE>
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--------------------------------
PaineWebber S&P 500 Index Fund
Financial Highlights
- -------------------------------------------------------------------------------
The following table provides investors with data and ratios for one Class Y
share for the period shown. The Fund had no Class A or Class C shares
outstanding during that period. This information is supplemented by the
financial statements, accompanying notes and the report of Ernst & Young LLP,
independent auditors, which appear in the Fund's Annual Report to Shareholders
for the period ended May 31, 1998, and are incorporated by reference into the
Statement of Additional Information. The financial statements and notes, as
well as the information below, 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.
<TABLE>
<CAPTION>
CLASS Y
------------------
FOR THE PERIOD
DECEMBER 31, 1997+
TO
MAY 31, 1998
------------------
<S> <C>
Net asset value, beginning of period........................ $12.50
-------
Net investment income ...................................... 0.06
Net realized and unrealized gains from investments and
futures.................................................... 1.56
-------
Net increase from investment operations..................... 1.62
-------
Net asset value, end of period.............................. $ 14.12
=======
Total investment return (1)................................. 12.96 %
=======
Ratios/Supplemental Data:
Net assets, end of period (000's)......................... $12,892
Expenses to average net assets net of waivers and reim-
bursements from adviser.................................. 0.35 %*
Expenses to average net assets before waivers and reim-
bursements from adviser ................................. 2.22 %*
Net investment income to average net assets net of waivers
and reimbursements from adviser.......................... 1.41 %*
Net investment loss to average net assets before waivers
and reimbursements from adviser.......................... (0.46)%*
Portfolio Turnover Rate................................... 1 %
</TABLE>
- -------
+ Commencement of operations.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of the period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale
at net asset value on the last day of the period reported. Total
investment return for the period has not been annualized.
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Prospectus Page 6
<PAGE>
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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 Index. The Fund invests 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.
The S&P 500 Index is composed of 500 common stocks that are selected by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), to
capture the price performance of a large cross-section of the U.S. publicly
traded stock market. These 500 stocks, 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 Index is weighted by its total market value
relative to the total market value of all securities in the Index. S&P selects
the component stocks included in the 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, the 500 stocks do
not represent the 500 largest companies. Aggregate market value and trading
activity also are considered in the selection process.
The inclusion of a security in the S&P 500 Index in no way implies an opinion
by S&P as to the attractiveness of the security as an investment. The Fund is
not sponsored, endorsed, sold or promoted by S&P.
ADDITIONAL INFORMATION CONCERNING THE S&P 500 INDEX. "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 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 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 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 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 7
<PAGE>
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PaineWebber S&P 500 Index Fund
Investment Philosophy & Process
- -------------------------------------------------------------------------------
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 in attempting to replicate the investment
performance of the S&P 500 Index.
The Fund invests in substantially all 500 stocks in the S&P 500 Index in
proportion to their weighting in the Index and, ordinarily, invests in at
least 450 stocks that are represented in the 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 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 Index and may use derivative instruments to
replicate the weightings of the Index in the interim. From time to time,
adjustments may be made in the Fund's investments because of changes in the
composition of the Index.
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
Index is anticipated in both rising and falling markets.
The Fund attempts to achieve a correlation, over time, between the performance
of its investments and that of the S&P 500 Index of at least 0.95, before
deduction of fees and expenses. A correlation of 1.00 would represent perfect
correlation between the Fund's performance and that of the Index. The
performance of the Fund versus that of the Index is compared at least weekly.
If an unexpected tracking error develops, the Fund's portfolio will be
rebalanced to bring it into line with the Index. There can be no assurance
that the Fund will achieve its expected results.
- -------------------------------------------------------------------------------
Performance
- -------------------------------------------------------------------------------
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. Standardized return for Class A
shares of the Fund reflects deduction of the maximum initial sales charge of
2.5% at the time of purchase, and standardized return for the Class C shares
reflects the 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 has been in existence for a shorter
period. If so, returns will be shown for the period since inception, known as
"Life." Total return calculations assume reinvestment of dividends and other
distributions.
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. Non-
standardized return does not reflect initial or contingent deferred sales
charges and would be lower if such charges were deducted.
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 8
<PAGE>
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PaineWebber S&P 500 Index Fund
The Fund's Investments
- -------------------------------------------------------------------------------
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
replicate, before deduction of fees and 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 Index. Deviations from the performance of the
Index may result from shareholder purchases and sales of shares that can occur
daily, as well as from fees and 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.
YEAR 2000 RISK. Like other mutual funds and other financial and business
organizations around the world, the Fund could be adversely affected if the
computer systems used by Mitchell Hutchins, other service providers and
entities with computer systems that are linked to Fund records do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Issue." Mitchell Hutchins is
taking steps that it believes are reasonably designed to address the Year 2000
Issue with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Fund's other major service providers. However, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the Fund.
Similarly, the companies in which the Fund invests and trading systems used by
the Fund could be adversely affected by the Year 2000 Issue. The ability of a
company or trading system to respond successfully to the Year 2000 Issue
requires both technological sophistication and diligence, and there can be no
assurance that any steps taken will be sufficient to avoid an adverse impact.
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Prospectus Page 9
<PAGE>
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-------------------
Paine Webber S&P 500 Index Fund
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 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 Index while investing cash
received from investor purchases of Fund shares, to facilitate trading and to
reduce transaction costs. New financial 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 obligations
from a bank or securities dealer or its affiliates and simultaneously commits
to resell the obligations to that counterparty, usually no more than seven
days after purchase. Repurchase agreements carry certain risks not associated
with direct investments in securities, including possible decline in the
market value of the underlying obligations. Repurchase agreeements involving
obligations other than U.S. government securities (such as commercial paper
and corporate bonds) may be subject to special risks and may not have the
benefit of certain protections in the event of the counterparty's insolvency.
If the seller or guarantor becomes insolvent, the Fund may suffer delays,
costs and possible losses.
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 the
securities are 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 the 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 10
<PAGE>
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-------------------
PaineWebber S&P 500 Index Fund
Flexible Pricing
- -------------------------------------------------------------------------------
The Fund offers through this Prospectus three classes of shares that differ in
terms of sales charges and expenses. An eligible investor can select the class
that is best suited to his or her investment needs, based upon the holding
period and the amount of the investment.
CLASS A SHARES
HOW PRICE IS CALCULATED: The price is the net asset value plus the initial
sales charge (the maximum is 2.5% of the public offering price next calculated
after PaineWebber's New York City headquarters or PFPC Inc., the Fund's
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 the ongoing expenses of Class C
shares. Class A shares sales charges are calculated as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF: DISCOUNTS TO SELECTED
---------------------------------- DEALERS AS PERCENTAGE OF
MOUNT OF INVESTMENTA OFFERING PRICE NET AMOUNT INVESTED OFFERING PRICE
- -------------------- -------------- ------------------- ------------------------
<S> <C> <C> <C>
Less than $100,000...... 2.50% 2.56% 2.25%
$100,000 to $249,999.... 2.00 2.04 1.75
$250,000 to $499,999.... 1.50 1.52 1.25
$500,000 to $999,999.... 1.00 1.01 0.75
$1,000,000 and over(1).. None None 0.50(2)
</TABLE>
- -------
(1) A contingent deferred sales charge of 0.50% of the shares' offering price
or the net asset value at the time of sale by the shareholder, whichever
is less, is charged on sales of shares made within one year of the
purchase date. Class A shares representing reinvestment of any dividends
or other distributions are not subject to the 0.50% charge. Withdrawals
under the Systematic Withdrawal Plan are not subject to this charge.
However, investors may withdraw no more than 12% of the value of the Fund
account under the Plan in the first year after purchase.
(2) Mitchell Hutchins pays 0.50% to PaineWebber.
SALES CHARGE REDUCTIONS & WAIVERS
Investors 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 in either case, please refer to the chart above.
Investors may also qualify for a lower 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 investors;
. trusts created by the investor;
. Uniform Gifts 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 employer, director, trustee or officer of PaineWebber, its affiliates
or any PaineWebber mutual fund;
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Prospectus Page 11
<PAGE>
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-------------------
Paine Webber S&P 500 Index Fund
. is the spouse, parent or child of any of the above;
. 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
. was the investment executive's client at the competing brokerage firm;
. within 90 days of buying Class A shares in this Fund, the investor sells
shares of one or more mutual funds that (a) were principally underwritten by
the competing brokerage firm or its affiliates and (b) the investor either
paid a sales charge to buy those shares, paid a contingent deferred sales
charge when selling them or held those shares until the contingent deferred
sales charge was waived; and
. the amount that 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, including a salary reduction plan qualified under section 401(k) or
section 403(b), of the Internal Revenue Code ("Code") (each a "qualified
plan"). (This waiver is subject to minimum requirements, with respect to the
number of employees and amount of plan assets, established by Mitchell
Hutchins. Currently, a plan must have 50 or more eligible employees and at
least $1 million in plan assets.) For investments made pursuant to this
waiver, Mitchell Hutchins may make a payment to PaineWebber out of its own
resources in an amount not to exceed 1% of the amount invested;
. is a participant in the PaineWebber Members Only Program(TM). For
investments made pursuant to this waiver, Mitchell Hutchins may make
payments out of its own resources to PaineWebber and to participating
membership organizations in a total amount not to exceed 1% of the amount
invested;
. is a variable annuity offered only to qualified plans. For investments made
pursuant to this waiver, Mitchell Hutchins may make payments out of its own
resources to PaineWebber and to the variable annuity's sponsor, adviser or
distributor in a total amount not to exceed 1% of the amount invested;
. acquires Class A shares through an investment program that is not sponsored
by PaineWebber or its affiliates and that charges participants a fee for
program services, provided that the program sponsor has entered into a
written agreement with PaineWebber permitting the sale of Class A shares at
net asset value to that program. For investments made pursuant to this
waiver, Mitchell Hutchins may make a payment to PaineWebber out of its own
resources in an amount not to exceed 1% of the amount invested. For
subsequent investments or exchanges made to supplement a rebalancing feature
of such an investment program, the minimum subsequent investment requirement
is also waived; 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.
. acquires Class A shares in connection with the disposition of proceeds from
the sale of shares of Managed High Yield Plus Fund Inc. that were acquired
during that fund's initial public offering of shares and that met certain
other conditions described in its prospectus.
For more information on how to get any reduced sales charge, investors should
contact their investment executive at PaineWebber or one of its correspondent
firms or call 1-800-647-1568. Investors must provide satisfactory information
to PaineWebber or the Fund if they seek any of these sales charge reductions
or 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. Because investors do not pay
an initial sales charge when they buy Class C shares, 100% of their purchase
is immediately invested.
A contingent deferred sales charge of 1% of the offering price (net asset
value at the time of purchase) or net asset value of the shares at the time of
sale by the shareholder, whichever is less, is charged on sales of shares made
within one year of the purchase date. Other PaineWebber mutual funds may
impose a
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Prospectus Page 12
<PAGE>
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-------------------
Paine Webber S&P 500 Index Fund
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. Class C shares representing
reinvestment of any dividends or capital gains are not subject to the 1%
charge. Withdrawals under the Systematic Withdrawal Plan also are not subject
to this charge. However, investors may withdraw no more than 12% of the value
of the Fund account under the Plan in the first year after purchase.
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 the other classes because Class Y shares are not subject to rule
12b-1 service or distribution fees.
LIMITED GROUPS OF INVESTORS. Only the following investors are eligible to buy
Class Y shares:
. a participant in the PaineWebber Program listed below, 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
System SM;
. an employee benefit plan qualified under section 401, including a salary
reduction plan qualified under section 401(k), or 403(b) of the 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 effective maximum annual rate of 1.5% of assets. Employees
of PaineWebber and its affiliates are entitled to a waiver of this fee.
Please contact your PaineWebber 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 13
<PAGE>
-------------------
PaineWebber S&P 500 Index Fund
How to Buy Shares
- -------------------------------------------------------------------------------
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 each class of the Fund's shares once each
Business Day, at the close of regular trading on the New York Stock Exchange
(usually 4:00 p.m., Eastern time). Prices will be calculated earlier when the
New York Stock Exchange closes early because trading has been halted for the
day. 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, which include an initial sales charge.
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 who are new to PaineWebber may complete and sign an account
application and mail it along with a check. Investors also may open an account
in person.
Investors who already have money invested in a PaineWebber mutual fund, and
want to invest in another PaineWebber mutual fund, can:
. mail an application with a check; or
. open an account by exchanging from another PaineWebber mutual fund.
Investors do not have to send an application when making additional
investments in the Fund.
MINIMUM INVESTMENTS
<TABLE>
<S> <C>
To open an account............. $1,000
To add to an account........... $ 100
</TABLE>
The Fund may waive or reduce these minimums for:
. employees of PaineWebber or its affiliates; or
. participants in certain pension plans, retirement accounts, investment
programs or the Fund's automatic investment plan.
HOW TO EXCHANGE SHARES
As shareholders, investors have the privilege of exchanging Class A and C
shares for the same class of most other PaineWebber mutual funds. Class Y
shares are not exchangeable. For classes where no initial sales charge is
imposed, a contingent deferred sales charge may apply if the investor sells
the shares acquired through the exchange.
Exchanges may be subject to minimum investment requirements of the fund into
which exchanges are made.
. Investors who purchased their shares through an investment executive at
PaineWebber or one of its correspondent firms may exchange their shares by
contacting their investment executive in person or by telephone, mail or
wire.
. Investors who do not have an account with an investment executive at
PaineWebber or one of its
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Prospectus Page 14
<PAGE>
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-------------------
PaineWebber S&P 500 Index Fund
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;
. the dollar amount or number of shares to be sold; and
. a guarantee of each registered owner's signature. A signature guarantee may
be obtained from a domestic bank or trust company, broker, dealer, clearing
agency or savings association which is a participant in a medallion program
recognized by the Securities Transfer Association. The three recognized
medallion programs are Securities Transfer Agents Medallion Program (STAMP),
Stock Exchanges Medallion Program (SEMP) and the New York Stock Exchange
Medallion Signature Program (MSP). Signature guarantees which are not part
of these programs will not be accepted.
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 A or C shares are
exchanged for the corresponding class of 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 acquired 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 60 days' notice. See the
back cover of this Prospectus for a list 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 (less any contingent deferred
sales charge) 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 (usually 4:00
p.m., Eastern time). Prices will be calculated earlier when the New York Stock
Exchange closes early because trading has been halted for the day.
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 shares and last, Class Y shares.
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
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 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, as detailed in "How
to Exchange Shares."
Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, it reserves the right to purchase back all 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.
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.
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Prospectus Page 15
<PAGE>
-------------------
PaineWebber S&P 500 Index Fund
Other Services
- -------------------------------------------------------------------------------
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 and Class C 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 $1,000 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 or Class C shares must have a minimum value of
$5,000; 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 16
<PAGE>
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PaineWebber S&P 500 Index Fund
Management
- -------------------------------------------------------------------------------
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. 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.
ABOUT THE INVESTMENT ADVISER
Mitchell Hutchins, located at 1285 Avenue of the Americas, New York, New York
10019, is wholly owned asset management subsidiary of PaineWebber
Incorporated, which is wholly owned by Paine Webber Group Inc., a publicly
owned financial services holding company. On August 31, 1998, Mitchell
Hutchins was adviser or sub-adviser of 32 investment companies with 68
separate portfolios and aggregate assets of approximately $38.9 billion.
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 service and distribution fees, 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. Mitchell Hutchins
intends to waive its management fees and reimburse Fund expenses, if
necessary, so that the total operating expenses for the fiscal year ending May
31, 1999 do not exceed 0.85% for Class A shares, 1.60% for Class C shares and
0.60% for Class Y shares. Although Mitchell Hutchins currently expects to
continue such waivers and expense reimbursements after May 31, 1999, it may
discontinue or change them at any time in the future.
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 and Class C shares ("Class A Plan" and "Class C
Plan," collectively, "Plans"), the Fund pays Mitchell Hutchins:
. Monthly service fees at the annual rate of 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 C shares.
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Prospectus Page 17
<PAGE>
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-------------------
PaineWebber S&P 500 Index Fund
Mitchell Hutchins uses the service fees under the Plans primarily to pay
PaineWebber for shareholder servicing, currently at the annual rate of 0.25%
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.
Mitchell Hutchins uses the distribution fees under the Class C Plan to:
. Offset the commissions it pays to PaineWebber for selling the Fund's Class C
shares.
. Offset the 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 C shares are bought
by investors, as well as on an ongoing basis. Mitchell Hutchins receives no
special compensation from the Fund or investors at the time Class C shares are
bought.
Mitchell Hutchins receives the proceeds of the initial sales charge paid when
Class A shares are bought and of the contingent deferred sales charge paid
upon sales of shares. These proceeds may be used to cover distribution
expenses.
The Plans and the related distribution contracts for Class A and Class C
shares ("Distribution Contracts") specify that the service and distribution
fees paid to Mitchell Hutchins are not reimbursement for specific expenses
incurred. Therefore, even if Mitchell Hutchins' expenses exceed the service
and distribution 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 and distribution 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 each Plan and Mitchell
Hutchins' corresponding expenses for that class of shares separately from the
Plan and expenses of the other class.
- -------------------------------------------------------------------------------
Determining the Shares' Net Asset Value
- -------------------------------------------------------------------------------
The net asset value of the Fund's shares fluctuates and is determined
separately for each class, normally as of the close of regular trading on the
New York Stock Exchange (usually 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.
If trading on the NYSE is halted for the day before 4:00 p.m., Eastern time,
and trading on the NYSE will not resume again that day, the Fund's net asset
value per share will be calculated at the time trading was halted.
The Fund values its assets based on its current market value when market
quotations are readily available. If market quotations are not readily
available, assets are valued at fair value as determined in good faith by or
under the direction of the board.
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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Prospectus Page 18
<PAGE>
-------------------
PaineWebber S&P 500 Index Fund
Dividends & Taxes
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DIVIDENDS
The Fund pays an annual dividend from its net investment income and net short-
term capital gain, if any. The 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. 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 and
Class C shares of the Fund are expected to be lower than those on its Class Y
shares because shares of the first two classes have higher expenses resulting
from their service fees and, in the case of Class C shares, their distribution
fees. Similarly, dividends on Class C shares are expected to be lower than
those on Class A shares because Class A shares bear no distribution fees.
Dividends on each class might also be affected differently by the allocation
of other class-specific expenses. See "General Information."
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 continue to qualify for treatment as a regulated
investment company under the 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 losses from those assets).
Dividends from the Fund's investment company taxable income (whether paid in
cash or additional 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, as modified by recent legislation, the
maximum tax rate applicable to a non-corporate taxpayer's net capital gain
recognized on capital assets held for more than one year is 20% (10% for
taxpayers in the 15% marginal tax bracket). In the case of a regulated
investment company such as the Fund, the relevant holding period is determined
by how long the Fund has held the portfolio securities on which the gain was
realized, not by how long the shareholders have held their Fund shares.
Shareholders who are not subject to tax on their income generally will not be
required to pay tax on distributions.
YEAR-END TAX REPORTING
Following the end of each calendar year, 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.
BACKUP WITHHOLDING
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.
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Prospectus Page 19
<PAGE>
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-------------------
PaineWebber S&P 500 Index Fund
TAXES ON THE SALE OR EXCHANGE 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 (which normally includes any
initial sales charge paid on Class A shares). An exchange of a Fund's shares
for shares of another PaineWebber mutual fund generally will have the same tax
consequences. 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.
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 any
loss would be decreased, by the amount of the sales charge paid when those
shares were bought, and that amount would increase the basis of the
PaineWebber mutual fund shares subsequently acquired.
* * * *
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 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 three classes, Class A, Class C 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 may differ with respect to sales charges, distribution and/or service
fees, other expenses allocable exclusively to that class and voting rights on
matters exclusively affecting that class and its exchange privilege. 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 and liquidation proceeds on
Class A, C and Y shares will differ.
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 may elect all
the 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 August 31, 1998 PaineWebber owns more than 69% of
the outstanding shares 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.
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Prospectus Page 20
<PAGE>
-------------------
PaineWebber S&P 500 Index Fund
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.
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Prospectus Page 21
<PAGE>
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PaineWebber S&P 500 Index Fund
Prospectus -- October 1, 1998
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.PAINEWEBBER BOND FUNDS .PAINEWEBBER STOCK FUNDS
High Income Fund Financial Services Growth Fund
Investment Grade Income Growth Fund
Fund Growth and Income Fund
Low Duration U.S. Mid Cap Fund
Government Income Fund Small Cap Fund
Strategic Income Fund S&P 500 Index Fund
U.S. Government Income Utility Income Fund
Fund
.PAINEWEBBER TAX-FREE BOND .PAINEWEBBER GLOBAL FUNDS
FUNDS
California Tax-Free Asia Pacific Growth Fund
Income Fund Emerging Markets Equity Fund
Municipal High Income Global Equity Fund
Fund Global Income Fund
National Tax-Free
Income Fund
New York Tax-Free
Income Fund
.PAINEWEBBER ASSET .PAINEWEBBER MONEY MARKET FUND
ALLOCATION FUNDS
Balanced Fund .PAINEWEBBER FUNDS OF FUNDS
Tactical Allocation Mitchell Hutchins Conservative Portfolio
Fund Mitchell Hutchins Moderate Portfolio
Mitchell Hutchins Aggressive Portfolio
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
---------
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<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
STATEMENT OF ADDITIONAL INFORMATION
PaineWebber S&P 500 Index Fund ("Fund") is a diversified series of
PaineWebber Index Trust ("Trust"), an open-end management investment company
organized as Delaware business trust. The Fund seeks to replicate the total
return of the Standard & Poor's 500 Composite Price Index ("S&P 500 Index"),
before fees and expenses.
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly
owned asset management subsidiary of PaineWebber Incorporated ("PaineWebber"),
is the investment adviser, administrator and distributor for the Fund. As
distributor, Mitchell Hutchins has appointed PaineWebber to serve as the
exclusive dealer for the sale of the Fund shares.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Fund's current Prospectus dated October 1,
1998. A copy of the Prospectus may be obtained by calling any PaineWebber
investment executive or correspondent firm. This Statement of Additional
Information is dated October 1, 1998.
INVESTMENT POLICIES AND RESTRICTIONS
The following supplements the information contained in the Prospectus
concerning the Fund's investment policies and limitations. Except as indicated
in the Prospectus or this Statement of Additional Information, there are no
policy limitations on the Fund's ability to use the investments or techniques
discussed in these documents.
MONEY MARKET INSTRUMENTS. Money market instruments in which the Fund may
invest include: U.S. Treasury bills and other obligations issued or guaranteed
as to interest and principal by the U.S. government, its agencies and
instrumentalities; obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) with total assets in excess of $1.5 billion
at the time of purchase; interest-bearing savings deposits in U.S. commercial
and savings banks with principal amounts not greater than are fully insured by
the Federal Deposit Insurance Corporation (the aggregate amount of these
deposits may not exceed 5% of the value of the Fund's assets); commercial
paper and other short-term corporate obligations; and variable and floating-
rate securities and repurchase agreements. In addition, the Fund may hold cash
and may invest in participation interests in the money market securities
mentioned above without limitation.
SPECIAL CONSIDERATIONS RELATING TO FOREIGN SECURITIES. To the extent the
Fund holds U.S. dollar-denominated securities of foreign issuers, such
securities may not be registered with the Securities and Exchange Commission
("SEC"), nor are the issuers thereof subject to its reporting requirements.
Accordingly, there may be less publicly available information concerning
foreign issuers of securities held by the Fund than is available concerning
U.S. companies. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
requirements comparable to those applicable to U.S. companies.
The Fund invests in securities of foreign issuers only if such securities
are traded in the U.S. securities markets directly or through American
Depository Receipts ("ADRs"). Generally, ADRs, in registered form, are
denominated in U.S. dollars and are designed for use in the U.S. securities
markets. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying securities. For purposes of the
<PAGE>
Fund's investment policies, ADRs are deemed to have the same classification as
the underlying securities they represent. Thus, an ADR evidencing ownership of
common stock will be treated as common stock.
Investment income and realized gains on certain foreign securities in which
the Fund may invest may be subject to foreign withholding or other taxes that
could reduce the return on these securities. Tax treaties between the United
States and foreign countries, however, may reduce or eliminate the amount of
foreign taxes to which the Fund would be subject.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
Fund purchases securities or other obligations and simultaneously commits to
resell them to the counterparty at an agreed-upon date or upon demand and at a
price reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased obligations. The Fund maintains custody of the
securities prior to their repurchase, either through its regular custodian or
through a special "tri-party" custodian or subcustodian that maintains
separate accounts for both the Fund and its counterparty. Thus, the obligation
of the counterparty to pay the repurchase price on the date agreed to or upon
demand is, in effect, secured by such obligations. If their value becomes less
than the repurchase price, plus any agreed-upon additional amount, the
counterparty must provide additional collateral so that at all times the
collateral is at least equal to the repurchase price, plus any agreed-upon
additional amount. The difference between the total amount to be received upon
repurchase of the obligations and the price that was paid by the Fund upon
acquisition is accrued as interest and included in its net investment income.
The Fund intends to enter into repurchase agreements only with
counterparties in transactions believed by Mitchell Hutchins to present
minimal credit risks in accordance with guidelines established by the Trust's
board of trustees ("board").
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Fund has valued the
securities and includes, among other things, purchased over-the-counter
("OTC") options, repurchase agreements maturing in more than seven days and
restricted securities other than those Mitchell Hutchins has determined are
liquid pursuant to guidelines established by the board. The assets used as
cover for OTC options written by the Fund will be considered illiquid unless
the OTC options are sold to qualified dealers who agree that the Fund may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC option written
subject to this procedure would be considered illiquid only to the extent that
the maximum repurchase price under the formula exceeds the intrinsic value of
the option. To the extent the Fund invests in illiquid securities, it may not
be able readily to liquidate these investments and may have to sell other
investments if necessary to raise cash to meet its obligations.
Restricted securities are not registered under the Securities Act of 1933
("1933 Act") and may be sold only in privately negotiated or other exempted
transactions or after a 1933 Act registration statement has become effective.
Where registration is required, the Fund may be obligated to pay all or part
of the registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
However, not all restricted securities are illiquid. In recent years a large
institutional market has developed for many U.S. and foreign securities that
are not registered under the 1933 Act. Institutional investors generally will
not seek to sell these instruments to the general public, but instead will
often depend either on an efficient institutional market in which such
unregistered securities can be readily resold or on an issuer's ability to
honor a demand for repayment. Therefore, the fact that there are contractual
or legal restrictions on resale to the general public or certain institutions
is not dispositive of the liquidity of such investments.
Institutional markets for restricted securities also have developed as a
result of Rule 144A, which establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
2
<PAGE>
institutional buyers, providing both readily ascertainable values for
restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc. An insufficient number of qualified
institutional buyers interested in purchasing Rule 144A-eligible restricted
securities held by the Fund, however, could affect adversely the marketability
of such portfolio securities and the Fund might be unable to dispose of such
securities promptly or at favorable prices.
The board has delegated the function of making day-to-day determinations of
liquidity to Mitchell Hutchins pursuant to guidelines approved by the board.
Mitchell Hutchins takes into account a number of factors in reaching liquidity
decisions, including (1) the frequency of trades for the security, (2) the
number of dealers that make quotes for the security, (3) the number of dealers
that have undertaken to make a market in the security, (4) the number of other
potential purchasers and (5) the nature of the security and how trading is
effected (e.g., the time needed to sell the security, how offers are solicited
and the mechanics of transfer). Mitchell Hutchins monitors the liquidity of
restricted securities in the Fund's portfolio and reports periodically on such
decisions to the board.
LENDING OF PORTFOLIO SECURITIES. The Fund is authorized to lend up to 33
1/3% of its total assets to broker-dealers or institutional investors that
Mitchell Hutchins deems qualified, but only when the borrower maintains
acceptable collateral with the Fund's custodian in an amount, marked to market
daily, at least equal to the market value of the securities loaned, plus
accrued interest and dividends. Acceptable collateral is limited to cash, U.S.
government securities and irrevocable letters of credit that meet certain
guidelines established by Mitchell Hutchins. The Fund may reinvest cash
collateral in money market instruments or other short-term liquid investments.
In determining whether to lend securities to a particular broker-dealer or
institutional investor, Mitchell Hutchins will consider, and during the period
of the loan will monitor, all relevant facts and circumstances, including the
creditworthiness of the borrower. The Fund will retain authority to terminate
any of its loans at any time. The Fund may pay reasonable fees in connection
with a loan and may pay the borrower or placing broker a negotiated portion of
the interest earned on the reinvestment of cash held as collateral. The Fund
will receive amounts equivalent to any dividends, interest or other
distributions on the securities loaned. The Fund will regain record ownership
of loaned securities to exercise beneficial rights, such as voting and
subscription rights, when regaining such rights is considered to be in the
Fund's interest.
Pursuant to procedures adopted by the board governing the Fund's securities
lending program, PaineWebber has been retained to serve as lending agent for
the Fund. The board also has authorized the payment of fees (including fees
calculated as a percentage of invested cash collateral) to PaineWebber for
these services. The board periodically reviews all portfolio securities loan
transactions for which PaineWebber has acted as lending agent.
WARRANTS. Warrants are securities permitting, but not obligating, their
holder to subscribe for other securities or commodities. Warrants do not carry
with them the right to dividends or voting rights with respect to the
securities that they entitle their holder to purchase, and they do not
represent any rights in the assets of the issuer. As a result, warrants may be
considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities, and a warrant ceases to have value if it is not
exercised prior to its expiration date.
SEGREGATED ACCOUNTS. When the Fund enters into certain transactions to make
future payments to third parties, including the purchase of securities on a
when-issued or delayed delivery basis, it will maintain with an approved
custodian in a segregated account cash or liquid securities, marked to market
daily, in an amount at least equal to the Fund's obligation or commitment
under such transactions. As described below under "Strategies Using Derivative
Instruments," segregated accounts may also be required in connection with
certain transactions involving options and futures contracts.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. A security purchased on a when-
issued or delayed delivery basis is recorded as an asset on the commitment
date and is subject to changes in market value, generally
3
<PAGE>
based upon changes in the level of interest rates. Thus, fluctuation in the
value of the security from the time of the commitment date will affect the
Fund's net asset value. When the Fund agrees to purchase securities on a when-
issued or delayed delivery basis, its custodian segregates assets to cover the
amount of the commitment. See "Investment Policies and Restrictions--
Segregated Accounts." The Fund purchases when-issued securities only with the
intention of taking delivery, but may sell the right to acquire the security
prior to delivery if Mitchell Hutchins deems it advantageous to do so, which
may result in a gain or loss to the Fund.
INVESTMENT LIMITATIONS OF THE FUND
FUNDAMENTAL INVESTMENT LIMITATIONS. The following fundamental investment
limitations cannot be changed for the Fund without the affirmative vote of the
lesser of (a) more than 50% of the outstanding shares of the Fund or (b) 67%
or more of the Fund's shares present at a shareholders' meeting if more than
50% of the outstanding Fund shares are represented at the meeting in person or
by proxy. If a percentage restriction is adhered to at the time of an
investment or transaction, a later increase or decrease in percentage
resulting from a change in values of portfolio securities or amount of total
assets will not be considered a violation of any of the following limitations.
The Fund will not:
(1) purchase securities of any one issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer
or the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities or to securities issued by
other investment companies.
The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the
securities having the same sponsor, and mortgage- and asset-backed
securities issued by a finance or other special purpose subsidiary that are
not guaranteed by the parent company will be considered to be issued by a
separate issuer from the parent company.
(2) purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers
having their principal business activities in the same industry, except
that this limitation does not apply to investments in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities or to
municipal securities and provided that 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.
(3) issue senior securities or borrow money, except as permitted under
the Investment Company Act of 1940 ("1940 Act") and then not in excess of
33 1/3% of the Fund's total assets (including the amount of the senior
securities issued but reduced by any liabilities not constituting senior
securities) at the time of the issuance or borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes.
(4) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this restriction, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers'
acceptances or similar instruments will not be considered the making of a
loan.
(5) engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities.
(6) purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except
that the Fund may exercise rights under agreements relating to such
securities, including the right to enforce security interests and to hold
real estate acquired by reason of such enforcement until that real estate
can be liquidated in an orderly manner.
4
<PAGE>
(7) purchase or sell physical commodities unless acquired as a result of
owning securities or other instruments, but the Fund may purchase, sell or
enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are non-
fundamental and may be changed by the vote of the board without shareholder
approval.
The Fund will not:
(1) invest more than 15% of its net assets in illiquid securities, a term
which means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund
has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days.
(2) purchase portfolio securities while borrowings in excess of 5% of its
total assets are outstanding.
(3) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may make
margin deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
(4) engage in short sales of securities or maintain a short position,
except that the Fund may (a) sell short "against the box" and (b) maintain
short positions in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
(5) purchase securities of other investment companies, except to the
extent permitted by the 1940 Act or under the terms of an exemptive order
granted by the SEC and except that this limitation does not apply to
securities received or acquired as dividends, through offers of exchange,
or as a result of reorganization, consolidation, or merger.
STRATEGIES USING DERIVATIVE INSTRUMENTS
GENERAL DESCRIPTION OF DERIVATIVE INSTRUMENTS. Mitchell Hutchins may use a
variety of derivative instruments ("Derivative Instruments"), including
certain options, futures contracts (sometimes referred to as "futures") and
options on futures contracts, to simulate full investment by the Fund in the
S&P 500 Index while retaining a cash balance for Fund management purposes,
such as to provide liquidity to meet anticipated shareholder sales of Fund
shares and for Fund operating expenses. As part of its use of Derivative
Instruments for the Fund's cash management purposes, Mitchell Hutchins may
attempt to reduce the risk of adverse price movements ("hedge") in the
securities in the S&P 500 Index while investing cash received from investor
purchases of Fund shares, to facilitate trading and selling securities to meet
shareholder redemptions. Mitchell Hutchins may also use Derivative Instruments
to reduce transaction costs for the Fund. The Fund may enter into transactions
involving one or more types of Derivative Instruments under which the full
value of its portfolio is at risk. Under normal circumstances, however, the
Fund's use of these derivative contracts will place at risk a much smaller
portion of its assets. The particular Derivative Instruments used by the Fund
are described below.
OPTIONS ON SECURITIES INDEXES--A securities index assigns relative values
to the securities included in the index and fluctuates with changes in the
market values of those securities. A securities index option operates in
the same way as a more traditional securities option, except that exercise
of a securities index option is effected with cash payment and does not
involve delivery of securities. Thus, upon exercise of a securities index
option, the purchaser will realize, and the writer will pay, an amount
based on the difference between the exercise price and the closing price of
the securities index.
SECURITIES INDEX FUTURES CONTRACTS--A securities index futures contract
is a bilateral agreement pursuant to which one party agrees to accept, and
the other party agrees to make, delivery of an amount of
5
<PAGE>
cash equal to a specified dollar amount times the difference between the
securities index value at the close of trading of the contract and the
price at which the futures contract is originally struck. No physical
delivery of the securities comprising the index is made. Generally,
contracts are closed out prior to the expiration date of the contract.
OPTIONS ON FUTURES CONTRACTS--Options on futures contracts are similar to
options on securities, except that an option on a futures contract gives
the purchaser the right, in return for the premium, to assume a position in
a futures contract (a long position if the option is a call and a short
position if the option is a put), rather than to purchase or sell a
security, at a specified price at any time during the option term. Upon
exercise of the option, the delivery of the futures position to the holder
of the option will be accompanied by delivery of the accumulated balance
that represents the amount by which the market price of the futures
contract exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the future. The writer of an
option, upon exercise, will assume a short position in the case of a call
and a long position in the case of a put.
GENERAL DESCRIPTION OF STRATEGIES. Hedging strategies can be broadly
categorized as "short hedges" and "long hedges." A short hedge is a purchase
or sale of a Derivative Instrument intended partially or fully to offset
potential declines in the value of one or more investments held in the Fund's
portfolio. Thus, in a short hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the opposite direction of the
price of the investment being hedged. For example, the Fund might purchase a
put option on a security to hedge against a potential decline in the value of
that security. If the price of the security declined below the exercise price
of the put, the Fund could exercise the put and thus limit its loss below the
exercise price to the premium paid plus transaction costs. In the alternative,
because the value of the put option can be expected to increase as the value
of the Fund security declines, the Fund might be able to close out the put
option and realize a gain to offset the decline in the value of the security.
Conversely, a long hedge is a purchase or sale of a Derivative Instrument
intended partially or fully to offset potential increases in the acquisition
cost of one or more investments that the Fund intends to acquire. Thus, in a
long hedge, the Fund takes a position in a Derivative Instrument whose price
is expected to move in the same direction as the price of the prospective
investment being hedged. For example, the Fund might purchase a call option on
a security it intends to purchase in order to hedge against an increase in the
cost of the security. If the price of the security increased above the
exercise price of the call, the Fund could exercise the call and thus limit
its acquisition cost to the exercise price plus the premium paid and
transaction costs. Alternatively, the Fund might be able to offset the price
increase by closing out an appreciated call option and realizing a gain.
Derivative Instruments on securities generally are used to hedge against
price movements in one or more particular securities positions that the Fund
owns or intends to acquire. Derivative Instruments on stock indices, in
contrast, generally are used to hedge against price movements in broad equity
market sectors.
Derivative Instruments also can be used to increase or reduce the Fund's
exposure to the stocks in the S&P 500 Index without buying or selling those
securities.
The use of Derivative Instruments is subject to applicable regulations of
the SEC, the several options and futures exchanges upon which they are traded
and the Commodity Futures Trading Commission ("CFTC"). In addition, the Fund's
ability to use Derivative Instruments may be limited by tax considerations.
See "Taxes."
In addition to the products, strategies and risks described below and in the
Prospectus, Mitchell Hutchins expects to discover additional opportunities in
connection with options, futures contracts and other derivative contracts and
hedging techniques. These new opportunities may become available as Mitchell
Hutchins develops new techniques, as regulatory authorities broaden the range
of permitted transactions and as new options, futures contracts, or other
derivative contracts and techniques are developed. Mitchell Hutchins may
utilize these opportunities for the Fund to the extent that they are
consistent with the Fund's investment objective and permitted by its
investment limitations and applicable regulatory authorities. The Fund's
Prospectus or this Statement of Additional Information will be supplemented to
the extent that new products or techniques involve materially different risks
than those described below or in its Prospectus.
6
<PAGE>
SPECIAL RISKS OF STRATEGIES USING DERIVATIVE INSTRUMENTS. The use of
Derivative Instruments involves special considerations and risks, as described
below. Risks pertaining to particular Derivative Instruments are described in
the sections that follow.
(1) There might be imperfect correlation between price movements of a
Derivative Instrument and price movements of the investments being hedged.
For example, if the value of a Derivative Instrument used in a short hedge
increased by less than the decline in value of the hedged investment, the
hedge would not be fully successful. Such a lack of correlation might occur
due to factors unrelated to the value of the investments being hedged, such
as speculative or other pressures on the markets in which Derivative
Instruments are traded.
The effectiveness of hedges using Derivative Instruments on indices will
depend on the degree of correlation between price movements in the index
and price movements in the securities being hedged.
(2) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also
reduce opportunity for gain by offsetting the positive effect of favorable
price movements in the hedged investments. For example, if the Fund entered
into a short hedge because Mitchell Hutchins projected a decline in the
price of a security in that Fund's portfolio, and the price of that
security increased instead, the gain from that increase might be wholly or
partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
hedged at all.
(3) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(i.e., Derivative Instruments other than purchased options). If the Fund
was unable to close out its positions in such Derivative Instruments, it
might be required to continue to maintain such assets or accounts or make
such payments until the positions expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
a contra party to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a
time and price that is favorable to the Fund.
COVER FOR STRATEGIES USING DERIVATIVE INSTRUMENTS. Transactions using
Derivative Instruments, other than purchased options, expose the Fund to an
obligation to another party. The Fund will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, other options or futures contracts or (2) cash and liquid
securities, with a value sufficient at all times to cover its potential
obligations to the extent not covered as provided in (1) above. The Fund will
comply with SEC guidelines regarding cover for these transactions and will, if
the guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Derivative Instrument is open, unless they
are replaced with similar assets. As a result, the commitment of a large
portion of the Fund's assets to cover or segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or
other current obligations.
OPTIONS. The Fund may purchase put and call options, and write (sell)
covered put or call options on securities on which it is permitted to invest
and indices of those securities. The purchase of call options serves as a long
hedge, and the purchase of put options serves as a short hedge. Writing
covered call options serves as a limited short hedge, because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security appreciates to a
price higher than the exercise price of the call option, it can be expected
that the option will be exercised and the Fund will be obligated to sell
7
<PAGE>
the security at less than its market value. Writing covered put options serves
as a limited long hedge because increases in the value of the hedged
investment would be offset to the extent of the premium received for writing
the option. However, if the security depreciates to a price lower than the
exercise price of the put option, it can be expected that the put option will
be exercised and the Fund will be obligated to purchase the security at more
than its market value. The securities or other assets used as cover for OTC
options written by the Fund would be considered illiquid to the extent
described under "Investment Policies and Restrictions--Illiquid Securities."
The value of an option position will reflect, among other things, the
current market value of the Fund investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
Fund investment, the historical price volatility of the Fund investment and
general market conditions. Options normally have expiration dates of up to
nine months. Options that expire unexercised have no value.
The Fund may effectively terminate its right or obligation under an option
by entering into a closing transaction. For example, the Fund may terminate
its obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a
closing sale transaction. Closing transactions permit the Fund to realize
profits or limit losses on an option position prior to its exercise or
expiration.
The Fund may purchase and write both exchange-traded and OTC options.
Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed which,
in effect, guarantees completion of every exchange-traded option transaction.
In contrast, OTC options are contracts between the Fund and its counterparty
(usually a securities dealer or a bank) with no clearing organization
guarantee. Thus, when the Fund purchases or writes an OTC option, it relies on
the counterparty to make or take delivery of the Fund investment upon exercise
of the option. Failure by the counterparty to do so would result in the loss
of any premium paid by the Fund as well as the loss of any expected benefit of
the transaction.
Generally, the OTC debt options used by the Fund are European-style options.
This means that the option is only exercisable immediately prior to its
expiration. This is in contrast to American-style options, which are
exercisable at any time prior to the expiration date of the option.
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Fund intends to
purchase or write only those exchange-traded options for which there appears
to be a liquid secondary market. However, there can be no assurance that such
a market will exist at any particular time. Closing transactions can be made
for OTC options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. Although the
Fund will enter into OTC options only with counterparties that are expected to
be capable of entering into closing transactions with the Fund, there is no
assurance that the Fund will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the event of insolvency
of the counterparty, the Fund might be unable to close out an OTC option
position at any time prior to its expiration.
If the Fund were unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered put or
call option written by the Fund could cause material losses because the Fund
would be unable to sell the investment used as cover for the written option
until the option expires or is exercised.
LIMITATIONS ON THE USE OF OPTIONS. The use of options is governed by the
following guidelines, which can be changed by the board without shareholder
vote:
(1) The Fund may purchase a put or call option, including any straddle or
spread, only if the value of its premium, when aggregated with the premiums
on all other options held by the Fund, does not exceed 5% of its total
assets.
8
<PAGE>
(2) The aggregate value of securities underlying put options written by
the Fund determined as of the date the put options are written will not
exceed 50% of its net assets.
(3) The aggregate premiums paid on all options (including options on
securities, stock indices and options on futures contracts) purchased by
the Fund that are held at any time will not exceed 20% of its net assets.
FUTURES. The Fund may purchase and sell futures contracts that are related
to securities in which it is permitted to invest, such as securities index
futures contracts. The Fund may also purchase put and call options, and write
covered put and call options, on futures in which it is allowed to invest. The
purchase of futures or call options thereon can serve as a long hedge, and the
sale of futures or the purchase of put options thereon can serve as a short
hedge. Writing covered call options on futures contracts can serve as a
limited short hedge, and writing covered put options on futures contracts can
serve as a limited long hedge, using a strategy similar to that used for
writing covered options on securities or indices.
No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract the Fund is required to deposit in a
segregated account with its custodian, in the name of the futures broker
through whom the transaction was effected, "initial margin" consisting of
cash, obligations of the United States or obligations that are fully
guaranteed as to principal and interest by the United States, in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call option on a futures contract, in accordance with
applicable exchange rules. Unlike margin in securities transactions, initial
margin on futures contracts does not represent a borrowing, but rather is in
the nature of a performance bond or good-faith deposit that is returned to the
Fund at the termination of the transaction if all contractual obligations have
been satisfied. Under certain circumstances, such as periods of high
volatility, the Fund may be required by an exchange to increase the level of
its initial margin payment, and initial margin requirements might be increased
generally in the future by regulatory action.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking to market." Variation margin does not involve borrowing, but rather
represents a daily settlement of the Fund's obligations to or from a futures
broker. When the Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when the Fund purchases
or sells a futures contract or writes a call option thereon, it is subject to
daily variation margin calls that could be substantial in the event of adverse
price movements. If the Fund has insufficient cash to meet daily variation
margin requirements, it might need to sell securities at a time when such
sales are disadvantageous.
Holders and writers of futures positions and options on futures can enter
into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to
the instrument held or written. Positions in futures and options on futures
may be closed only on an exchange or board of trade that provides a secondary
market. The Fund intends to enter into futures transactions only on exchanges
or boards of trade where there appears to be a liquid secondary market.
However, there can be no assurance that such a market will exist for a
particular contract at a particular time.
Under certain circumstances, futures exchanges may establish daily limits on
the amount that the price of a future or related option can vary from the
previous day's settlement price; once that limit is reached, no trades may be
made that day at a price beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily limit for several
consecutive days with little or no trading, thereby preventing liquidation of
unfavorable positions.
If the Fund were unable to liquidate a futures or related options position
due to the absence of a liquid secondary market or the imposition of price
limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in
the case of purchased options, the Fund would continue to be required to make
daily variation margin payments and might be required to maintain the position
being hedged by the future or option or to maintain cash or securities in a
segregated account.
9
<PAGE>
Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or related options might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the futures and related options
markets are subject to daily variation margin calls and might be compelled to
liquidate futures or related options positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the futures market are
less onerous than margin requirements in the securities markets, there might
be increased participation by speculators in the futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the futures and securities markets
involving arbitrage, "program trading" and other investment strategies might
result in temporary price distortions.
LIMITATIONS ON THE USE OF FUTURES AND RELATED OPTIONS. The use of futures
and related options is governed by the following guidelines, which can be
changed by the board without shareholder vote:
(1) To the extent the Fund enters into futures contracts and options on
futures positions that are not for bona fide hedging purposes (as defined
by the CFTC), the aggregate initial margin and premiums on those positions
(excluding the amount by which options are "in-the-money") may not exceed
5% of its net assets.
(2) The aggregate premiums paid on all options (including options on
securities, stock indices and options on futures contracts) purchased by
the Fund that are held at any time will not exceed 20% of its net assets.
(3) The aggregate margin deposits on all futures contracts and options
thereon held at any time by the Fund will not exceed 5% of its total
assets.
TRUSTEES AND OFFICERS; PRINCIPAL HOLDERS OF SECURITIES
The trustees and executive officers of the Trust, their ages, business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
POSITION WITH THE BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE TRUST DIRECTORSHIPS
---------------------- ----------------- --------------------------
<S> <C> <S>
Margo N. Alexander*; 51 Trustee and Mrs. Alexander is president,
President chief executive officer and a
director of Mitchell Hutchins
(since January 1995) and an ex-
ecutive vice president and a di-
rector of PaineWebber (since
March 1984). Mrs. Alexander is
president and a director or
trustee of 32 investment compa-
nies for which Mitchell Hutchins
or PaineWebber or their affili-
ates serve as investment advis-
er.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS*; AGE POSITION WITH THE TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
---------------------- ----------------------- ----------------------------------------
<C> <C> <S>
Richard Q. Armstrong; 63 Trustee Mr. Armstrong is chairman and principal of RQA Enterprises
One Old Church Road (management consulting firm) (since April 1991 and
- -Unit #6 principal occupation since March 1995). Mr. Armstrong
Greenwich, CT 06830 was chairman of the board, chief executive officer
and co-owner of Adirondack Beverages (producer and
distributor of soft drinks and sparkling/still waters)
(October 1993-March 1995). He was a partner of the
New England Consulting Group (management consulting firm)
(December 1992-September 1993). He was managing director
of LVMH U.S. Corporation (U.S. subsidiary of the French
luxury goods conglomerate, Louis Vuitton Moet Hennessey
Corporation) (1987-1991) and chairman of its wine and
spirits subsidiary, Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong is a director or trustee of 31
investment companies for which Mitchell Hutchins or
PaineWebber or their affiliates serve as investment adviser.
E. Garrett Bewkes, Jr.*; 72 Trustee and Chairman Mr. Bewkes is a director of Paine Webber Group Inc. ("PW
of the Board of Trustees Group") (holding company of PaineWebber and Mitchell
Hutchins). Prior to December 1995, he was a consultant to PW
Group. Prior to 1988, he was chairman of the board,
president and chief executive officer of American Bakeries
Company. Mr. Bewkes is a director of Interstate Bakeries
Corporation. Mr. Bewkes is a director or trustee of 34
investment companies for which Mitchell Hutchins or
PaineWebber or their affiliates serve as investment adviser.
Richard R. Burt; 51 Trustee Mr. Burt is chairman of IEP Advisors, Inc. (international
1275 Pennsylvania Ave., N.W. investments and consulting firm) (since March 1994) and
Washington, D.C. 20004 a partner of McKinsey & Company (management consulting firm)
(since 1991). He is also a director of Archer-Daniels-Midland
Co. (agricultural commodities), Hollinger International
Co. (publishing), Homestake Mining Corp., Powerhouse
Technologies Inc. and Wierton Steel Corp. He was the
chief negotiator in the Strategic Arms Reduction Talks
with the former Soviet Union (1989-1991) and the U.S.
Ambassador to the Federal Republic of Germany (1985-1989).
Mr. Burt is a director or trustee of 31 investment companies
for which Mitchell Hutchins or PaineWebber or their affiliates
serve as investment adviser.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH THE BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE TRUST DIRECTORSHIPS
---------------------- ----------------- --------------------------
<S> <C> <C>
Mary C. Farrell*; 48 Trustee Ms. Farrell is a managing di-
rector, senior investment
strategist and member of the
Investment Policy Committee of
PaineWebber. Ms. Farrell joined
PaineWebber in 1982. She is a
member of the Financial Women's
Association and Women's Eco-
nomic Roundtable, and appears
as a regular panelist on Wall
$treet Week with Louis
Rukeyser. She also serves on
the Board of Overseers of New
York University's Stern School
of Business. Ms. Farrell is a
director or trustee of 31 in-
vestment companies for which
Mitchell Hutchins or
PaineWebber or their affiliates
serve as investment adviser.
Meyer Feldberg; 56 Trustee Mr. Feldberg is Dean and Pro-
Columbia University fessor of Management of the
101 Uris Hall Graduate School of Business,
New York, New York 10027 Columbia University. Prior to
1989, he was president of the
Illinois Institute of Technolo-
gy. Dean Feldberg is also a di-
rector of Primedia Inc., Feder-
ated Department Stores, Inc.
and Revlon, Inc. Dean Feldberg
is a director or trustee of 33
investment companies for which
Mitchell Hutchins, PaineWebber
or their affiliates serve as
investment adviser.
George W. Gowen; 69 Trustee Mr. Gowen is a partner in the
666 Third Avenue law firm of Dunnington,
New York, New York 10017 Bartholow & Miller. Prior to
May 1994, he was a partner in
the law firm of Fryer, Ross &
Gowen. Mr. Gowen is a director
or trustee of 31 investment
companies for which Mitchell
Hutchins or PaineWebber or
their affiliates serve as in-
vestment adviser.
Frederic V. Malek; 61 Trustee Mr. Malek is chairman of Thayer
1445 Pennsylvania Capital Partners (merchant
Avenue, N.W. bank). From January 1992 to No-
Suite 350 vember 1992, he was campaign
Washington, D.C. 20004 manager of Bush-Quayle '92.
From 1990 to 1992, he was vice
chairman and, from 1989 to
1990, he was president of
Northwest Airlines Inc., NWA
Inc. (holding company of North-
west Airlines Inc.) and Wings
Holdings Inc. (holding company
of NWA Inc.). Prior to 1989, he
was employed by the Marriott
Corporation (hotels, restau-
rants, airline catering and
contract feeding), where he
most recently was an executive
vice president and president of
Marriott Hotels and Resorts.
Mr. Malek is also a director of
American Management Systems,
Inc. (management consulting and
computer-related services), Au-
tomatic Data Processing, Inc.,
CB Commercial Group, Inc. (real
estate services), Choice Hotels
International (hotel and hotel
franchising), FPL Group, Inc.
(electric services), Manor
Care, Inc. (health care), and
Northwest Airlines Inc. Mr.
Malek is a director or trustee
of 31 investment companies for
which Mitchell Hutchins or
PaineWebber or their affiliates
serve as investment adviser.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH THE BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE TRUST DIRECTORSHIPS
---------------------- ----------------- --------------------------
<C> <C> <S>
Carl W. Schafer; 62 Trustee Mr. Schafer is president of the
66 Witherspoon Street Atlantic Foundation (charitable
#1100 foundation supporting mainly
Princeton, NJ 08542 oceanographic exploration and
research). He is a director of
Base Ten Systems, Inc. (Soft-
ware), Roadway Express, Inc.
(trucking), The Guardian Group
of Mutual Funds, the Harding,
Loevner Funds, Evans Systems,
Inc. (motor fuels, convenience
store and diversified company),
Electronic Clearing House, Inc.
(financial transactions
processing), Frontier Oil Cor-
poration and Nutraceutix, Inc.
(biotechnology). Prior to Janu-
ary 1993, Mr. Schafer was
chairman of the Investment Ad-
visory Committee of the Howard
Hughes Medical Institute. Mr.
Schafer is a director or
trustee of 31 investment compa-
nies for which Mitchell
Hutchins or PaineWebber or
their affiliates serve as in-
vestment adviser.
T. Kirkham Barneby; 52 Vice President Mr. Barneby is a managing di-
rector and chief investment of-
ficer--quantitative investments
of Mitchell Hutchins. Prior to
September 1994, he was a senior
vice president at Vantage
Global Management. Mr. Barneby
is a vice president of six in-
vestment companies for which
Mitchell Hutchins or
PaineWebber or their affiliates
serve as investment adviser.
Lawrence Chinksy; 29 Vice President and Mr. Chinsky is an assistant
Assistant Treasurer vice president and investment
monitoring officer of the mu-
tual fund finance department of
Mitchell Hutchins. Prior to Au-
gust 1997, he was a securities
compliance examiner with the
Office of Compliance, Inspec-
tions and Examinations in the
New York Regional Office of the
SEC. Mr. Chinsky is vice presi-
dent and assistant treasurer of
32 investment companies for
which Mitchell Hutchins or
PaineWebber or their affiliates
serve as investment adviser.
John J. Lee; 30 Vice President and Mr. Lee is a vice president and
Assistant Treasurer a manager of the mutual fund
finance department of Mitchell
Hutchins. Prior to September
1997, he was an audit manager
in the financial services prac-
tice of Ernst & Young LLP. Mr.
Lee is a vice president and as-
sistant treasurer of 32 invest-
ment companies for which Mitch-
ell Hutchins or PaineWebber or
their affiliates serve as in-
vestment adviser.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH THE BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE TRUST DIRECTORSHIPS
---------------------- ----------------- --------------------------
<S> <C> <C>
Ann E. Moran; 41 Vice President and Ms. Moran is a vice president
Assistant Treasurer and a manager of the mutual
fund finance department of
Mitchell Hutchins. Ms. Moran is
a vice president and assistant
treasurer of 32 investment com-
panies for which Mitchell
Hutchins or PaineWebber or
their affiliates serve as in-
vestment adviser.
Dianne E. O'Donnell; 46 Vice President and Ms. O'Donnell is a senior vice
Secretary president and deputy general
counsel of Mitchell Hutchins.
Ms. O'Donnell is a vice presi-
dent and secretary of 31 in-
vestment companies and vice
president and assistant secre-
tary of one investment company
for which Mitchell Hutchins or
PaineWebber or their affiliates
serve as investment adviser.
Emil Polito; 37 Vice President Mr. Polito is a senior vice
president and director of oper-
ations and control for Mitchell
Hutchins. Mr. Polito is a vice
president of 32 investment com-
panies for which Mitchell
Hutchins or PaineWebber or
their affiliates serve as in-
vestment adviser.
Victoria E. Schonfeld; Vice President Ms. Schonfeld is a managing di-
47 rector and general counsel of
Mitchell Hutchins. Prior to May
1994, she was a partner in the
law firm of Arnold & Porter.
Ms. Schonfeld is a vice presi-
dent of 31 investment companies
and vice president and secre-
tary of one investment company
for which Mitchell Hutchins or
PaineWebber or their affiliates
serve as investment adviser.
Paul H. Schubert; 35 Vice President and Mr. Schubert is a senior vice
Treasurer president and the director of
the mutual fund finance depart-
ment of Mitchell Hutchins. From
August 1992 to August 1994, he
was a vice president of Black-
Rock Financial Management L.P.
Mr. Schubert is a vice presi-
dent and treasurer of 32 in-
vestment companies for which
Mitchell Hutchins or
PaineWebber or their affiliates
serve as investment adviser.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH THE BUSINESS EXPERIENCE; OTHER
NAME AND ADDRESS*; AGE TRUST DIRECTORSHIPS
---------------------- ----------------- --------------------------
<S> <C> <C>
Barney A. Taglialatela; Vice President and Mr. Taglialatela is a vice
37 Assistant Treasurer president and manager of the
mutual fund finance division of
Mitchell Hutchins. Prior to
February 1995, he was a manager
of the mutual fund finance di-
vision of Kidder Peabody Asset
Management Inc. Mr.
Taglialatela is a vice presi-
dent and assistant treasurer of
32 investment companies for
which Mitchell Hutchins or
PaineWebber or their affiliates
serve as investment adviser.
Keith A. Weller; 37 Vice President and Mr. Weller is a first vice
Assistant Secretary president and associate general
counsel of Mitchell Hutchins.
Prior to May 1995, he was an
attorney in private practice.
Mr. Weller is a vice president
and assistant secretary of 31
investment companies for which
Mitchell Hutchins or
PaineWebber or their affiliates
serve as investment adviser.
</TABLE>
- --------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019. Mrs. Alexander, Mr.
Bewkes and Ms. Farrell are "interested persons" of the Trust as defined in
the 1940 Act by virtue of their positions with PW Group, PaineWebber and/or
Mitchell Hutchins.
The Trust pays trustees who are not "interested persons" of the Trust $1,000
for each series and $150 per series for each board meeting and each meeting of
a board committee (other than committee meetings held on the same day as a
board meeting). The Trust has only one operating series and thus pays each
such trustee $1,000 annually, plus any additional amounts due for board or
committee meetings. Each chairman of the audit and contract review committees
of individual funds within the PaineWebber fund complex receives additional
compensation aggregating $15,000 annually from the relevant funds. All
trustees are reimbursed for any expenses incurred in attending meetings.
Trustees and officers own no outstanding shares of the Fund. Because
PaineWebber and Mitchell Hutchins perform substantially all the services
necessary for the operation of the Trust and the Fund, the Trust requires no
employees. No officer, director or employee of Mitchell Hutchins or
PaineWebber presently receives any compensation from the Trust for acting as a
trustee or officer.
The table below includes certain information related to the compensation of
the Trust's trustees during the period ended May 31, 1998 and the compensation
of those trustees from other PaineWebber funds during the calendar year ended
December 31, 1997.
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM THE FUND
NAME OF PERSON, POSITION(1) FROM THE TRUST(2) COMPLEX(3)
- --------------------------- ----------------- -------------
<S> <C> <C>
Richard A. Armstrong, Trustee................... $400 $94,885
Richard R. Burt, Trustee........................ 400 87,085
Meyer Feldberg, Trustee......................... 570 117,853
George W. Gowen, Trustee........................ 400 101,567
Frederic V. Malek, Trustee...................... 400 95,845
Carl W. Schafer, Trustee........................ 400 94,885
</TABLE>
- --------
(1) Only independent members of the board are compensated by the Trust and
identified above; trustees who are "interested persons," as defined by the
1940 Act, do not receive compensation.
(2) Represents total compensation paid to each board member during the initial
fiscal period ended May 31, 1998.
(3) Represents total compensation paid to each trustee during the calendar
year ended December 31, 1997; no fund within the fund complex has a
pension or retirement plan.
15
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES. As of August 31, 1998, the records of the
Trust indicate that PaineWebber owned 69.7% of the Fund's shares. The Trust is
not aware of any other shareholder who is the beneficial owner of 5% or more
of the Fund's shares
INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY ARRANGEMENTS. Mitchell Hutchins acts as the investment
adviser and administrator to the Fund pursuant to a contract (the "Advisory
Contract") with the Trust dated October 14, 1997. Under the Advisory Contract,
the Fund pays Mitchell Hutchins a fee, computed daily and paid monthly, at the
annual rate of 0.20% of average daily net assets.
During the period December 31, 1997 (commencement of operations) to May 31,
1998, Mitchell Hutchins earned advisory fees in the amount of $8,340 (all of
which was waived) from the Fund.
Under the terms of the Advisory Contract, the Fund bears all expenses
incurred in its operation that are not specifically assumed by Mitchell
Hutchins. Expenses borne by the Fund include the following: (1) the cost
(including brokerage commissions) of securities purchased or sold by the Fund
and any losses incurred in connection therewith; (2) fees payable to and
expenses incurred on behalf of the Fund by Mitchell Hutchins; (3)
organizational expenses; (4) filing fees and expenses relating to the
registration and qualification of the Fund's shares under federal and state
securities laws and maintenance of such registrations and qualifications; (5)
fees and salaries payable to trustees and officers who are not interested
persons (as defined in the 1940 Act) of the Trust or Mitchell Hutchins; (6)
all expenses incurred in connection with the trustees' services, including
travel expenses; (7) taxes (including any income or franchise taxes) and
governmental fees; (8) costs of any liability, uncollectible items of deposit
and other insurance or fidelity bonds; (9) any costs, expenses or losses
arising out of a liability of or claim for damages or other relief asserted
against the Trust or Fund for violation of any law; (10) legal, accounting and
auditing expenses, including legal fees of special counsel for the independent
trustees; (11) charges of custodians, transfer agents and other agents; (12)
costs of preparing share certificates; (13) expenses of setting in type and
printing prospectuses, statements of additional information and supplements
thereto, reports and proxy materials for existing shareholders, and costs of
mailing such materials to shareholders; (14) any extraordinary expenses
(including fees and disbursements of counsel) incurred by the Fund; (15) fees,
voluntary assessments and other expenses incurred in connection with
membership in investment company organizations; (16) costs of tabulating
proxies and costs of meetings of shareholders, the board and any committees
thereof; (17) the cost of investment company literature and other publications
provided to trustees and officers; (18) costs of mailing, stationery and
communications equipment; (19) expenses incident to any dividend, withdrawal
or redemption options; (20) charges and expenses of any outside pricing
service used to value portfolio securities; (21) interest on borrowings of the
Fund; and (22) fees or expenses related to license agreements with respect to
securities indices.
Under the Advisory Contract, Mitchell Hutchins will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of the Advisory Contract, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part
of Mitchell Hutchins in the performance of its duties or from reckless
disregard of its duties and obligations thereunder. The Advisory Contract
terminates automatically upon assignment and is terminable at any time without
penalty by the board or by vote of the holders of a majority of the Fund's
outstanding voting securities on 60 days' written notice to Mitchell Hutchins,
or by Mitchell Hutchins on 60 days' written notice to the Fund.
16
<PAGE>
NET ASSETS. The following table shows the approximate net assets as of
August 31, 1998, sorted by category of investment objective, of the investment
companies as to which Mitchell Hutchins serves as adviser or sub-adviser. An
investment company may fall into more than one of the categories below.
<TABLE>
<CAPTION>
NET ASSETS
INVESTMENT CATEGORY $ MIL
------------------- ----------
<S> <C>
Domestic (excluding Money Market)................................. $ 7,065.7
Global............................................................ 3,506.5
Equity/Balanced................................................... 5,530.6
Fixed Income (excluding Money Market)............................. 5,058.7
Taxable Fixed Income............................................ 3,474.7
Tax-Free Fixed Income........................................... 1,584.0
Money Market Funds................................................ 29,448.7
</TABLE>
PERSONNEL TRADING POLICIES. Mitchell Hutchins personnel may invest in
securities for their own accounts pursuant to a code of ethics that describes
the fiduciary duty owed to shareholders of PaineWebber mutual funds and other
Mitchell Hutchins advisory accounts by all Mitchell Hutchins' directors,
officers and employees, establishes procedures for personal investing and
restricts certain transactions. For example, employee accounts generally must
be maintained at PaineWebber, personal trades in most securities require pre-
clearance and short-term trading and participation in initial public offerings
generally are prohibited. In addition, the code of ethics puts restrictions on
the timing of personal investing in relation to trades by PaineWebber funds and
other Mitchell Hutchins advisory clients.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor of each
class of shares of the Fund under separate distribution contracts with the
Trust ("Distribution Contracts") that require Mitchell Hutchins to use its best
efforts, consistent with its other businesses, to sell shares of the Fund.
Shares of the Fund are offered continuously. Under exclusive dealer agreements
between Mitchell Hutchins and PaineWebber relating to each class of shares
("Exclusive Dealer Agreements"), PaineWebber and its correspondent firms sell
the Fund's shares.
Under a plan of distribution pertaining to the Class A shares and Class C
shares adopted by the Trust in the manner prescribed under Rule 12b-1 under the
1940 Act ("Class A Plan" and "Class C Plan," collectively, "Plans"), the Fund
pays Mitchell Hutchins a service fee, accrued daily and payable monthly, at the
annual rate of 0.25% of the average daily net assets of Class A and Class C
shares of the Fund. Under the Class C Plan, the Fund pays Mitchell Hutchins a
distribution fee, accrued daily and payable monthly at the annual rate of 0.75%
of the average daily net assets of the Class C shares. The Fund pays Mitchell
Hutchins no distribution fees with respect to its Class A shares. There is no
distribution plan with respect to Class Y shares and the Fund pays no service
or distribution fees with respect to its Class Y shares.
Among other things, each Plan provides that (1) Mitchell Hutchins will
submit to the board at least quarterly, and the trustees will review, reports
regarding all amounts expended under the Plan and the purposes for which such
expenditures were made, (2) the Plan will continue in effect only so long as it
is approved at least annually, and any material amendment thereto is approved,
by the board, including those trustees who are not "interested persons" of the
Trust and who have no direct or indirect financial interest in the operation of
the Plan or any agreement related to the Plan, acting in person at a meeting
called for that purpose, (3) payments by the Fund under the Plan shall not be
materially increased without the affirmative vote of the holders of a majority
of the outstanding shares of the relevant class and (4) while the Plan remains
in effect, the selection and nomination of trustees who are not "interested
persons" of the Trust shall be committed to the discretion of the trustees who
are not "interested persons" of the Trust.
In reporting amounts expended under the Plan to the board, Mitchell Hutchins
allocates expenses attributable to the sale of each class of the Fund's shares
to such class based on the ratio of sales of shares of such class to the sales
of all classes of shares. The fees paid by one class of the Fund's shares will
not be used to subsidize the sale of the other class of the Fund's shares.
17
<PAGE>
In approving the Fund's overall Flexible PricingSM system of distribution,
the board considered several factors, including that implementation of
Flexible Pricing would (1) enable investors to choose the purchasing option
best suited to their individual situation, thereby encouraging current
shareholders to make additional investments in the Fund and attracting new
investors and assets to the Fund to the benefit of the Fund and its
shareholders, (2) facilitate distribution of the Fund's shares and (3)
maintain the competitive position of the Fund in relation to other funds that
have implemented or are seeking to implement similar distribution
arrangements.
In approving the Class A Plan, the board considered all the features of the
distribution system, including (1) the conditions under which initial sales
charges would be imposed and the amount of such charges, (2) Mitchell
Hutchins' belief that the initial sales charge combined with a service fee
would be attractive to PaineWebber investment executives and correspondent
firms, resulting in greater growth of the Fund than might otherwise be the
case, (3) the advantages to the shareholders of economies of scale resulting
from growth in the Fund's assets and potential continued growth, (4) the
services provided to the Fund and its shareholders by Mitchell Hutchins, (5)
the services provided by PaineWebber pursuant to its Exclusive Dealer
Agreement with Mitchell Hutchins and (6) Mitchell Hutchins' shareholder
service-related expenses and costs.
In approving the Class C Plan, the board considered all the features of the
distribution system, including (1) the advantage to investors in having no
initial sales charges deducted from the Fund purchase payments and instead
having the entire amount of their purchase payments immediately invested in
Fund shares, (2) the advantage to investors in being free from contingent
deferred sales charges upon redemption for shares held more than one year and
paying for distribution on an ongoing basis, (3) Mitchell Hutchins' belief
that the ability of PaineWebber investment executives and correspondent firms
to receive sales compensation for their sales of Class C shares on an ongoing
basis, along with continuing service fees, while their customers invest their
entire purchase payments immediately in Class C shares and generally do not
face contingent deferred sales charges, would prove attractive to the
investment executives and correspondent firms, resulting in greater growth to
the Fund than might otherwise be the case, (4) the advantage to the
shareholders of economies of scale resulting from growth in the Fund's assets
and potential continued growth, (5) the services provided to the Fund and its
shareholders by Mitchell Hutchins, (6) the services provided by PaineWebber
pursuant to its Exclusive Dealer Agreement with Mitchell Hutchins and (7)
Mitchell Hutchins' shareholder service- and distribution-related expenses and
costs. The board members also recognized that Mitchell Hutchins' willingness
to compensate PaineWebber and its investment executives without the
concomitant receipt by Mitchell Hutchins of initial sales charges or
contingent deferred sales charges upon redemption, was conditioned upon its
expectation of being compensated under the Class C Plan.
With respect to each Plan, the board considered all compensation that
Mitchell Hutchins would receive under the Plan and the Distribution Contract,
including service and, as applicable, initial sales charge and distribution
fees. The board also considered the benefits that would accrue to Mitchell
Hutchins under the Plan in that Mitchell Hutchins would receive service and
advisory fees which are calculated based upon a percentage of the average net
assets of the Fund, which would increase if the Plan were successful and the
Fund attained and maintained significant asset levels.
PORTFOLIO TRANSACTIONS
Subject to policies established by the board, Mitchell Hutchins is
responsible for the execution of the Fund's portfolio transactions and the
allocation of brokerage transactions. In executing portfolio transactions,
Mitchell Hutchins generally seeks to obtain the best net results for the Fund,
taking into account such factors as the price (including the applicable
brokerage commission or dealer spread), size of order, difficulty of execution
and operational facilities of the firm involved. While Mitchell Hutchins
generally seeks reasonably competitive commission rates, payment of the lowest
commission is not necessarily consistent with obtaining the best net results.
Prices paid to dealers in principal transactions, through which some equity
securities and most debt securities are traded, generally include a "spread,"
which is the difference between the prices at which the dealer is willing to
purchase and sell a specific security at the time. The Fund may invest in
securities traded in the OTC market and will engage primarily in transactions
directly with the dealers who make markets in such securities, unless a better
price or execution could be obtained by using a broker. For the period
December 31, 1997 (commencement of operations) to May 31, 1998, the Fund paid
$4,199 in brokerage commissions.
18
<PAGE>
The Fund has no obligation to deal with any broker or group of brokers in
the execution of portfolio transactions. The Fund contemplates that,
consistent with the policy of obtaining the best net results, brokerage
transactions may be conducted through PaineWebber. The board has adopted
procedures in conformity with Rule 17e-1 under the 1940 Act to ensure that all
brokerage commissions paid to PaineWebber are reasonable and fair. Specific
provisions in the Advisory Contract authorize PaineWebber to effect portfolio
transactions for the Fund on such exchange and to retain compensation in
connection with such transactions. Any such transactions will be effected and
related compensation paid only in accordance with applicable SEC regulations.
For the period December 31, 1997 (commencement of operations) to May 31, 1998,
the Fund paid no commissions to PaineWebber.
Transactions in futures contracts are executed through futures commission
merchants ("FCMs"), who receive brokerage commissions for their services. The
Fund's procedures in selecting FCMs to execute its transactions in futures
contracts, including procedures permitting the use of PaineWebber, are similar
to those in effect with respect to brokerage transactions in securities.
Consistent with the interests of the Fund and subject to the review of the
board, Mitchell Hutchins may cause the Fund to purchase and sell portfolio
securities from and to dealers or through brokers who provide Mitchell
Hutchins with research, analysis, advice and similar services. The Fund may
pay to those brokers a higher commission than may be charged by other brokers,
provided that Mitchell Hutchins determines in good faith that such commission
is reasonable in terms either of that particular transaction or of the overall
responsibility of Mitchell Hutchins to the Fund and its other clients and that
the total commissions paid by the Fund will be reasonable in relation to the
benefits to the Fund over the long term. During the fiscal year ended May 31,
1998, the Fund directed no brokerage transactions to brokers chosen because
they provided research services.
For purchases or sales with broker-dealer firms which act as principal,
Mitchell Hutchins seeks best execution. Although Mitchell Hutchins may receive
certain research or execution services in connection with these transactions,
it will not purchase securities at a higher price or sell securities at a
lower price than would otherwise be paid if no weight was attributed to the
services provided by the executing dealer. Moreover, Mitchell Hutchins will
not enter into any explicit soft dollar arrangements relating to principal
transactions and will not receive in principal transactions the types of
services which could be purchased for hard dollars. Mitchell Hutchins may
engage in agency transactions in OTC equity securities in return for research
and execution services. These transactions are entered into only in compliance
with procedures ensuring that the transaction (including commissions) is at
least as favorable as it would have been if effected directly with a market-
maker that did not provide research or execution services. These procedures
include Mitchell Hutchins receiving multiple quotes from dealers before
executing the transactions on an agency basis.
Information and research services furnished by brokers or dealers through
which or with which the Fund effects securities transactions may be used by
Mitchell Hutchins in advising other funds or accounts and, conversely,
research services furnished to Mitchell Hutchins by brokers or dealers in
connection with other funds or accounts that it advises may be used in
advising the Fund. Information and research received from brokers or dealers
will be in addition to, and not in lieu of, the services required to be
performed by Mitchell Hutchins under the Advisory Contract.
Investment decisions for the Fund and for other investment accounts managed
by Mitchell Hutchins are made independently of each other in light of
differing considerations for the various accounts. However, the same
investment decision may occasionally be made for the Fund and one or more of
such accounts. In such cases, simultaneous transactions are inevitable.
Purchases or sales are then averaged as to price and allocated between the
Fund and such other account(s) as to amount according to a formula deemed
equitable to the Fund and such account(s). While in some cases this practice
could have a detrimental effect upon the price or value of the security as far
as the Fund is concerned, or upon its ability to complete its entire order, in
other cases it is believed that coordination and the ability to participate in
volume transactions will be beneficial to the Fund.
19
<PAGE>
The Fund will not purchase securities that are offered in underwritings in
which PaineWebber is a member of the underwriting or selling group, except
pursuant to procedures adopted by the board pursuant to Rule 10f-3 under the
1940 Act. Among other things, these procedures require that the spread or
commission paid in connection with such a purchase be reasonable and fair, the
purchase be at not more than the public offering price prior to the end of the
first business day after the date of the public offering and that PaineWebber
or any affiliate thereof not participate in or benefit from the sale to the
Fund.
PORTFOLIO TURNOVER. The Fund's annual portfolio turnover rate may vary
greatly from year to year, but will not be a limiting factor when management
deems portfolio changes appropriate. The portfolio turnover rate is calculated
by dividing the lesser of the Fund's annual sales or purchases of portfolio
securities (exclusive of purchases or sales of securities whose maturities at
the time of acquisition were one year or less) by the monthly average value of
securities in the portfolio during the year. For the period December 31, 1997
(commencement of operations) to May 31, 1998, the Fund's portfolio turnover
rate was 1.0%.
REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND REDEMPTION
INFORMATION AND OTHER SERVICES
COMBINED PURCHASE PRIVILEGE-CLASS A SHARES. Investors and eligible groups of
related Fund investors may combine purchases of Class A shares of the Fund
with concurrent purchases of Class A shares of any other PaineWebber mutual
fund and thus take advantage of the reduced sales charges indicated in the
table of sales charges for Class A shares in the Prospectus. The sales charge
payable on the purchase of Class A shares of the Fund and Class A shares of
such other funds will be at the rates applicable to the total amount of the
combined concurrent purchases.
An "eligible group of related Fund investors" can consist of any combination
of the following:
(a) an individual, that individual's spouse, parents and children;
(b) an individual and his or her Individual Retirement Account ("IRA");
(c) an individual (or eligible group of individuals) and any company
controlled by the individual(s) (a person, entity or group that holds 25%
or more of the outstanding voting securities of a corporation will be
deemed to control the corporation, and a partnership will be deemed to be
controlled by each of its general partners);
(d) an individual (or eligible group of individuals) and one or more
employee benefit plans of a company controlled by individual(s);
(e) an individual (or eligible group of individuals) and a trust created
by the individual(s), the beneficiaries of which are the individual and/or
the individual's spouse, parents or children;
(f) an individual and a Uniform Gifts to Minors Act/Uniform Transfers to
Minors Act account created by the individual or the individual's spouse;
(g) an employer (or group of related employers) and one or more qualified
retirement plans of such employer or employers (an employer controlling,
controlled by or under common control with another employer is deemed
related to that other employer); or
(h) individual accounts related together under one registered investment
adviser having full discretion and control over the accounts. The
registered investment adviser must communicate at least quarterly through a
newsletter or investment update establishing a relationship with all of the
accounts.
RIGHTS OF ACCUMULATION-CLASS A SHARES. Reduced sales charges are available
through a right of accumulation, under which investors and eligible groups of
related Fund investors (as defined above) are permitted to purchase Class A
shares of the Fund among related accounts at the offering price applicable to
the
20
<PAGE>
total of (1) the dollar amount then being purchased plus (2) an amount equal
to the then-current net asset value of the purchaser's combined holdings of
Class A Fund shares and Class A shares of any other PaineWebber mutual fund.
The purchaser must provide sufficient information to permit confirmation of
his or her holdings, and the acceptance of the purchase order is subject to
such confirmation. The right of accumulation may be amended or terminated at
any time.
ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION. As discussed in the
Prospectus, eligible shares of the Fund may be exchanged for shares of the
corresponding Class of most other PaineWebber mutual funds. Shareholders will
receive at least 60 days' notice of any termination or material modification
of the exchange offer, except no notice need be given of an amendment whose
only material effect is to reduce the exchange fee and no notice need be given
if, under extraordinary circumstances, either redemptions are suspended under
the circumstances described below or the Fund temporarily delays or ceases the
sales of its shares because it is unable to invest amounts effectively in
accordance with the Fund's investment objective, policies and restrictions.
If conditions exist that make cash payments undesirable, the Fund reserves
the right to honor any request for redemption by making payment in whole or in
part in securities chosen by the Fund and valued in the same way as they would
be valued for purposes of computing the Fund's net asset value. If payment is
made in securities, a shareholder may incur brokerage expenses in converting
these securities into cash.
The Fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange ("NYSE") is closed or
trading on the NYSE is restricted as determined by the SEC, (2) when an
emergency exists, as defined by the SEC, that makes it not reasonably
practicable for the Fund to dispose of securities owned by it or fairly to
determine the value of its assets or (3) as the SEC may otherwise permit. The
redemption price may be more or less than the shareholder's cost, depending on
the market value of the Fund's portfolio at the time.
AUTOMATIC INVESTMENT PLAN. Participation in the Automatic Investment Plan
enables an investor to use the technique of "dollar cost averaging." When an
investor invests the same dollar amount each month under the Plan, the
investor will purchase more shares when the Fund's net asset value per share
is low and fewer shares when the net asset value per share is high. Using this
technique, an investor's average purchase price per share over any given
period will be lower than if the investor purchased a fixed number of shares
on a monthly basis during the period. Of course, investing through the
automatic investment plan does not assure a profit or protect against loss in
declining markets. Additionally, because the automatic investment plan
involves continuous investing regardless of price levels, an investor should
consider his or her financial ability to continue purchases through periods of
low price levels.
SYSTEMATIC WITHDRAWAL PLAN. An investor's participation in the systematic
withdrawal plan will terminate automatically if the "Initial Account Balance"
(a term that means the value of the Fund account at the time the investor
elects to participate in the systematic withdrawal plan) less aggregate
redemptions made other than pursuant to the systematic withdrawal plan is less
than $25,000 for Class A shareholders. Purchases of additional shares of the
Fund concurrent with withdrawals are ordinarily disadvantageous to shareholders
because of tax liabilities. On or about the 20th of each month for monthly,
quarterly, semiannual or annual plans, PaineWebber will arrange for redemption
by the Fund of sufficient Fund shares to provide the withdrawal payments
specified by participants in the Fund's systematic withdrawal plan. The
payments generally are mailed approximately five Business Days (defined under
"Valuation of Shares") after the redemption date. Withdrawal payments should
not be considered dividends, but redemption proceeds, with the tax consequences
described under "Dividends & Taxes" in the Prospectus. If periodic withdrawals
continually exceed reinvested dividends and other distributions, a
shareholder's investment may be correspondingly reduced. A shareholder may
change the amount of the systematic withdrawal or terminate participation in
the systematic withdrawal plan at any time without charge or penalty by written
instructions with signatures guaranteed to PaineWebber or PFPC Inc. ("Transfer
Agent"). Instructions to participate in the plan, change the withdrawal amount
or terminate participation in the plan will not be effective until five days
after written instructions with signatures guaranteed
21
<PAGE>
are received by the Transfer Agent. Shareholders may request the forms needed
to establish a systematic withdrawal plan from their PaineWebber investment
executives, correspondent firms or the Transfer Agent at 1-800-647-1568.
REINSTATEMENT PRIVILEGE--CLASS A SHARES. As described in the Prospectus,
shareholders who have redeemed their Class A shares of the Fund may reinstate
their account without a sales charge. Shareholders may exercise the
reinstatement privilege by notifying the Transfer Agent of such desire and
forwarding a check for the amount to be purchased within 365 days after the
date of redemption. The reinstatement will be made at the net asset value per
share next computed after the notice of reinstatement and check are received.
The amount of a purchase under this reinstatement privilege cannot exceed the
amount of the redemption proceeds. Gain on a redemption is taxable regardless
of whether the reinstatement privilege is exercised; however, a loss arising
out of a redemption will not be deductible to the extent the redemption
proceeds are reinvested, if the reinstatement privilege is exercised within 30
days after redemption, and an adjustment will be made to the shareholder's tax
basis for the shares acquired pursuant to the reinstatement privilege. Gain or
loss on a redemption also will be adjusted for federal income tax purposes by
the amount of any sales charge paid on Class A shares, under the circumstances
and to the extent described in "Dividends & Taxes" in the Prospectus.
PAINEWEBBER RMA RESOURCE ACCUMULATION PLANSM
PAINEWEBBER RESOURCE MANAGEMENT ACCOUNT(R) (RMA)(R)
Shares of PaineWebber mutual funds, including the Fund (each a "PW Fund"
and, collectively, the "PW Funds") are available for purchase through the RMA
Resource Accumulation Plan ("Plan") by customers of PaineWebber and its
correspondent firms who maintain Resource Management Accounts ("RMA
accountholders"). The Plan allows an RMA accountholder continually to invest
in one or more of the PW Funds at regular intervals, with payment for shares
purchased automatically deducted from the client's RMA account. The client may
elect to invest at monthly or quarterly intervals and may elect either to
invest a fixed dollar amount (minimum $100 per period) or to purchase a fixed
number of shares. A client can elect to have Plan purchases executed on the
first or fifteenth day of the month. Settlement occurs three Business Days
(defined under "Valuation of Shares") after the trade date, and the purchase
price of the shares is withdrawn from the investor's RMA account on the
settlement date from the following sources and in the following order:
uninvested cash balances, balances in RMA money market funds, or margin
borrowing power, if applicable to the account.
To participate in the Plan, an investor must be an RMA accountholder, must
have made an initial purchase of the shares of each PW Fund selected for
investment under the Plan (meeting applicable minimum investment requirements)
and must complete and submit the RMA Resource Accumulation Plan Client
Agreement and Instruction Form available from PaineWebber. The investor must
have received a current prospectus for each PW Fund selected prior to
enrolling in the Plan. Information about mutual fund positions and outstanding
instructions under the Plan are noted on the RMA accountholder's account
statement. Instructions under the Plan may be changed at any time, but may
take up to two weeks to become effective.
The terms of the Plan, or an RMA accountholder's participation in the Plan,
may be modified or terminated at any time. It is anticipated that, in the
future, shares of other PW Funds and/or mutual funds other than the PW Funds
may be offered through the Plan.
PERIODIC INVESTING AND DOLLAR COST AVERAGING. Periodic investing in the PW
Funds or other mutual funds, whether through the Plan or otherwise, helps
investors establish and maintain a disciplined approach to accumulating assets
over time, deemphasizing the importance of timing the market's highs and lows.
Periodic investing also permits an investor to take advantage of "dollar cost
averaging." By investing a fixed amount in mutual fund shares at established
intervals, an investor purchases more shares when the price is lower and fewer
shares when the price is higher, thereby increasing his or her earning
potential. Of course, dollar cost averaging does not guarantee a profit or
protect against a loss in a declining market, and an investor should consider
his or her financial ability to continue investing through periods of low
share prices. However, over time, dollar cost averaging generally results in a
lower average original investment cost than if an investor invested a larger
dollar amount in a mutual fund at one time.
22
<PAGE>
PAINEWEBBER'S RESOURCE MANAGEMENT ACCOUNT. In order to enroll in the Plan,
an investor must have opened an RMA account with PaineWebber or one of its
correspondent firms. The RMA account is PaineWebber's comprehensive asset
management account and offers investors a number of features, including the
following:
. monthly Premier account statements that itemize all account activity,
including investment transactions, checking activity and Gold MasterCard(R)
transactions during the period, and provide unrealized and realized gain
and loss estimates for most securities held in the account;
. comprehensive preliminary 9-month and year-end summary statements that
provide information on account activity for use in tax planning and tax
return preparation;
. automatic "sweep" of uninvested cash into the RMA accountholder's choice of
one of the six RMA money market funds--RMA Money Market Portfolio, RMA U.S.
Government Portfolio, RMA Tax-Free Fund, RMA California Municipal Money
Fund, RMA New Jersey Municipal Money Fund and RMA New York Municipal Money
Fund. Each money market fund attempts to maintain a stable price per share
of $1.00, although there can be no assurance that it will be able to do so.
Investments in the money market funds are not insured or guaranteed by the
U.S. government;
. check writing, with no per-check usage charge, no minimum amount on checks
and no maximum number of checks that can be written. RMA accountholders can
code their checks to classify expenditures. All canceled checks are
returned each month;
. Gold MasterCard, with or without a line of credit, which provides RMA
accountholders with direct access to their accounts and can be used with
automatic teller machines worldwide. Purchases on the Gold MasterCard are
debited to the RMA account once monthly, permitting accountholders to
remain invested for a longer period of time;
. 24-hour access to account information through toll-free numbers, and more
detailed personal assistance during business hours from the RMA Service
Center;
. expanded account protection to $50 million in the event of the liquidation
of PaineWebber. This protection does not apply to shares of the RMA money
market funds or the PW Funds because those shares are held at the transfer
agent and not through PaineWebber; and
. automatic direct deposit of checks into your RMA account and automatic
withdrawals from the account.
The annual account fee for an RMA account is $85, which includes the Gold
MasterCard, with an additional fee of $40 if the investor selects an optional
line of credit with the Gold MasterCard.
VALUATION OF SHARES
The Fund determines its net asset value per share separately for each class
of shares as of the close of regular trading (currently 4:00 p.m., Eastern
time) on the NYSE on each Business Day, which is defined as each Monday
through Friday when the NYSE is open. Prices will be calculated earlier when
the NYSE closes early because trading has been halted for the day. Currently
the NYSE is closed on the observance of the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Securities that are listed on stock exchanges are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day,
at the last available bid price. In cases where securities are traded on more
than one exchange, the securities are generally valued on the exchange
considered by Mitchell Hutchins as the primary market. Securities traded in
the OTC market and listed on the Nasdaq Stock Market ("Nasdaq") are valued at
the last trade price on Nasdaq prior to valuation; other OTC securities are
valued at the last bid price available prior to valuation (other than short-
term investments that mature in 60 days or less which are valued at amortized
cost, unless the board determines that this does not represent fair value).
Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the board.
23
<PAGE>
PERFORMANCE INFORMATION
The Fund's performance data quoted in advertising and other promotional
materials ("Performance Advertisements") represents past performance and is
not intended to indicate future performance. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
TOTAL RETURN CALCULATIONS. Average annual total return quotes ("Standardized
Return") used in the Fund's Performance Advertisements are calculated
according to the following formula:
<TABLE>
<C> <C> <S>
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares of
a specified class
T = average annual total return of shares of that class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of that period.
</TABLE>
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over
the period. In calculating the ending redeemable value, for Class A shares,
the maximum 2.5% sales charge is deducted from the initial $1,000 payment and,
for Class C shares, the applicable contingent deferred sales charge imposed on
a redemption of Class C shares held for the period is deducted. All dividends
and other distributions are assumed to have been reinvested at net asset
value.
The Fund also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The Fund calculates Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in Fund
shares and assuming the reinvestment of all dividends and other distributions.
The rate of return is determined by subtracting the initial value of the
investment from the ending value and by dividing the remainder by the initial
value. Neither initial nor contingent deferred sales charges are taken into
account in calculating Non-Standardized Return; the inclusion of those charges
would reduce the return.
The following table shows performance information for the Fund's Class Y
shares outstanding for the period indicated. There were no Class A or C shares
outstanding as of May 31, 1998.
<TABLE>
<CAPTION>
CLASS
Y
-----
<S> <C>
Inception* to May 31, 1998:
Standardized Return.................................................... 12.96%
Non-Standardized Return................................................ 12.96%
</TABLE>
- --------
* The inception date for Class Y shares was December 31, 1997.
OTHER INFORMATION. In Performance Advertisements, the Fund may compare its
Standardized Return with data published by Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Wiesenberger Investment
Companies Service ("Wiesenberger"), Investment Company Data, Inc. ("ICD") or
Morningstar Mutual Funds ("Morningstar"), with the performance of recognized
stock and other indices, including (but not limited to) the S&P 500 Index, the
Dow Jones Industrial Average, the International Finance Corporation Global
Total Return Index, the Nasdaq Composite Index, the Russell 2000 Index, the
Wilshire 5000 Index, the Lehman Bond Index, the Lehman Brothers 20+ Year
Treasury Bond Index, the Lehman Brothers Government/Corporate Bond Index,
other similar Lehman Brothers indices or components thereof, 30-year and 10-
year U.S. Treasury bonds, the Morgan Stanley Capital International Perspective
Indices, the Morgan Stanley Capital International Energy Sources Index, the
Standard & Poor's Oil Composite Index, the Morgan Stanley
24
<PAGE>
Capital International World Index, the Salomon Brothers Non-U.S. Dollar Index,
the Salomon Brothers Non-U.S. World Government Bond Index, the Salomon
Brothers World Government Index, other similar Salomon Brothers indices or
components thereof and changes in the Consumer Price Index as published by the
U.S. Department of Commerce. The Fund also may refer in such materials to
mutual fund performance rankings and other data, such as comparative asset,
expense and fee levels, published by Lipper, CDA, Wiesenberger, ICD or
Morningstar. Performance Advertisements also may refer to discussions of the
Fund and comparative mutual fund data and ratings reported in independent
periodicals, including (but not limited to) THE WALL STREET JOURNAL, MONEY
MAGAZINE, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW
YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST AND THE KIPLINGER
LETTERS. Comparisons in Performance Advertisements may be in graphic form.
The Fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends or other distributions on the Fund investment are
reinvested in additional Fund shares, any future income or capital
appreciation of the Fund would increase the value, not only of the original
Fund investment, but also of the additional Fund shares received through
reinvestment. As a result, the value of the Fund investment would increase
more quickly than if dividends or other distributions had been paid in cash.
The Fund may also generally discuss or illustrate the increasingly popular
benefits of investing through an index fund, such as immediate
diversification; convenience; relatively lower portfolio turnover and expected
transaction costs; and the likelihood that lower portfolio turnover will
result in otherwise higher after-tax returns.
The Fund may also compare its performance with the performance of bank
certificates of deposit (CDs) as measured by the CDA Certificate of Deposit
Index, the Bank Rate Monitor National Index and the averages of yields of CDs
of major banks published by Banxquote(R) Money Markets. In comparing the
Fund's performance to CD performance, investors should keep in mind that bank
CDs are insured in whole or in part by an agency of the U.S. government and
offer fixed principal and fixed or variable rates of interest, and that bank
CD yields may vary depending on the financial institution offering the CD and
prevailing interest rates. Shares of the Fund are not insured or guaranteed by
the U.S. government and returns and net asset values will fluctuate. The debt
securities held by the Fund may have longer maturities than most CDs and may
reflect interest rate fluctuations for longer term debt securities. An
investment in the Fund involves greater risks than an investment in either a
money market fund or a CD.
The Fund may also compare its performance to general trends in the stock and
bond markets, as illustrated by the following graph prepared by Ibbotson
Associates, Chicago.*
[LINE GRAPH APPEARS HERE]
- --------
* Source: Stocks, Bonds, Bills and Inflation 1997 Yearbook(TM) Ibbotson
Assoc., Chi., (annual updates work by Roger G. Ibbotson & Rex A.
Sinquefield).
25
<PAGE>
The chart is shown for illustrative purposes only and does not represent the
Fund's performance. These returns consist of income and capital appreciation
(or depreciation) and should not be considered an indication or guarantee of
future investment results. Year-to-year fluctuations in certain markets have
been significant, and negative returns have been experienced in certain
markets from time to time. Stocks are measured by the S&P 500 Index, an
unmanaged weighted index comprising 500 widely held common stocks and varying
in composition. Unlike investors in bonds and U.S. Treasury bills, common
stock investors do not receive fixed income payments and are not entitled to
repayment of principal. These differences contribute to investment risk.
Returns shown for long-term government bonds are based on U.S. Treasury bonds
with 20-year maturities. Inflation is measured by the Consumer Price Index.
The indexes are unmanaged and are not available for investment.
Over time, stocks have outperformed all other investments by a wide margin,
offering a solid hedge against inflation. From 1925 to 1997, stocks beat all
other traditional asset classes. A $10,000 investment in the S&P 500 grew to
$18,272,762, significantly more than any other investment.
TAXES
To continue to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income and net short-
term capital gain) ("Distribution Requirement") and must meet several
additional requirements. These requirements include the following: (1) the
Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of securities, or other income (including gains
from options and futures) derived with respect to its business of investing in
securities ("Income Requirement"); (2) at the close of each quarter of the
Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities, with these other securities limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value
of the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities; and (3) at the close of each quarter
of the Fund's taxable year, not more than 25% of the value of its total assets
may be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer.
Dividends and other distributions declared by the Fund in October, November
or December of any year and payable to shareholders of record on a date in any
of those months will be deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will
be taxed to shareholders for the year in which that December 31 falls.
A portion of the dividends from the Fund's investment company taxable income
(whether paid in cash or additional shares) may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.
Investors also should be aware that if shares are purchased shortly before the
record date for any dividend or capital gain distribution, the shareholder
will pay full price for the shares and receive some portion of the price back
as a taxable distribution.
The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to
the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
26
<PAGE>
The use of hedging strategies involving Derivative Instruments, such as
writing (selling) and purchasing options and futures contracts, involves
complex rules that will determine for income tax purposes the amount,
character and timing of recognition of the gains and losses the Fund realizes
in connection therewith. Gains from options and futures contracts derived by
the Fund with respect to its business of investing in securities will qualify
as permissible income under the Income Requirement.
OTHER INFORMATION
The Trust is a Delaware business trust. The Trust has authority to issue an
unlimited number of shares of beneficial interest. The board may, without
shareholder approval, divide the authorized shares into an unlimited number of
separate series and may divide the shares of any series into classes, and the
costs of doing so will be borne by the Trust. The Trust currently consist of
one operating series with three classes of shares.
Although Delaware law statutorily limits the potential liabilities of a
Delaware business trust's shareholders to the same extent as it limits the
potential liabilities of a Delaware corporation, shareholders of the Fund
could, under certain conflicts of laws jurisprudence in various states, be
held personally liable for the obligations of the Trust or the Fund. However,
the Trust's trust instrument disclaims shareholder liability for acts or
obligations of the Trust or its series (the Fund) and requires that notice of
such disclaimer be given in each written obligation made or issued by the
trustees or by any officers or officer by or on behalf of the Trust, a series,
the trustees or any of them in connection with the Trust. The trust instrument
provides for indemnification from the Fund's property for all losses and
expenses of any series shareholder held personally liable for the obligations
of the Fund. Thus, the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances in which the Fund
itself would be unable to meet its obligations, a possibility which Mitchell
Hutchins believes is remote and not material. Upon payment of any liability
incurred by a shareholder solely by reason of being or having been a
shareholder of the Fund, the shareholder paying such liability will be
entitled to reimbursement from the general assets of the Fund. The trustees
intend to conduct the operations of the Fund in such a way as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of the
Fund.
Shareholders of the Fund are entitled to participate equally in the
dividends and other distributions from, and the proceeds of any liquidation
of, the Fund, except that, due to the differing expenses borne by the classes,
dividends and liquidation proceeds for each class will likely differ. Shares
are fully paid and non-assessable and have no preemptive or other right to
subscribe to any additional shares or other securities issued by the Trust.
Shareholders have non-cumulative voting rights. A shareholder is entitled to
one vote for each full share held and a proportionate fractional vote for each
fractional share held.
CLASS-SPECIFIC EXPENSES. The Fund may determine to allocate certain of its
expenses to the specific classes of the Fund's shares to which those expenses
are attributable. For example, the Fund's Class C shares bear higher transfer
agency fees per shareholder account than those borne by Class A or Class Y
shares. The higher fee is imposed due to the higher costs incurred by the
transfer agent in tracking shares subject to a contingent deferred sales
charge because, upon redemption, the duration of the shareholder's investment
must be determined to determine the applicable charge. Although the transfer
agency fee will differ on a per account basis as stated above, the specific
extent to which the transfer agency fees will differ between the classes as a
percentage of net assets is not certain, because the fee as a percentage of
net assets will be affected by the number of shareholder accounts in each
class and the relative amounts of net assets in each class.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the Fund.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.
AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for the Fund.
FINANCIAL STATEMENTS
The Fund's Annual Report to Shareholders for the period ended May 31, 1998
is a separate document supplied with this Statement of Additional Information,
and the financial statements, accompanying notes and report of independent
auditors appearing therein are incorporated herein by this reference.
27
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THE PROSPECTUS OR IN THIS STATEMENT OF
ADDITIONAL INFORMATION IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THE PROSPECTUS
AND THIS STATEMENT OF ADDITIONAL INFORMATION DO NOT CONSTITUTE AN OFFERING BY
THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
-----------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Investment Policies And Restrictions...................................... 1
Strategies Using Derivative Instruments................................... 5
Trustees And Officers; Principal Holders Of Securities.................... 10
Investment Advisory And Distribution Arrangements......................... 16
Portfolio Transactions.................................................... 18
Reduced Sales Charges, Additional Exchange and Redemption Information And
Other Services...........................................................
Valuation Of Shares....................................................... 23
Performance Information................................................... 24
Taxes..................................................................... 26
Other Information......................................................... 27
Financial Statements...................................................... 27
</TABLE>
(C)1998 PaineWebber Incorporated
PAINEWEBBER
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 1, 1998
- --------------------------------------------------------------------------------
[LOGO OF PAINEWEBBER APPEARS HERE]
<PAGE>
PART C. OTHER INFORMATION
--------------------------
Item 23. Exhibits
--------
(1) Trust Instrument 1/
-
(2) By-Laws 1/
-
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 2/
-
(4) Investment Advisory and Administration Contract (filed herewith)
(5) (a) Form of Distribution Contract (Class A Shares ) (filed herewith)
(b) Form of Distribution Contract (Class C Shares ) (filed herewith)
(c) Form of Distribution Contract (Class Y Shares) (filed herewith)
(d) Form of Exclusive Dealer Agreement (Class A Shares) (filed herewith
(e) Form of Exclusive Dealer Agreement (Class C Shares) (filed herewith)
(f) Form of Exclusive Dealer Agreement (Class Y Shares)
(filed herewith)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement (filed herewith)
(8) Transfer Agency Agreement (filed herewith)
(9) Opinion and consent of counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents: Auditor's consent (filed
herewith)
(11) Financial Statements omitted from Part B - none
(12) Letter of investment intent 3/
-
(13) Rule 12b-1 Plans
(a) Form of Rule 12b-1 Plan of Distribution with respect to Class A Shares
(filed herewith)
(b) Form of Rule 12b-1 Plan of Distribution with respect to Class C Shares
(filed herewith)
(14) and
(27) Financial Data Schedule (filed herewith)
(15) Plan Pursuant to Rule 18f-3 (filed herewith)
- ----------------------------------------
1/ Incorporated by reference from Registrant's initial Registration Statement,
- - SEC File No. 333-27917, filed May 28, 1997.
2/ Incorporated by reference from Articles IV, VI, IX and X of Registrant's
- - Trust Instrument and from Articles VI and IX of Registrant's By-Laws.
3/ Incorporated by reference from Pre-Effective Amendment No. 1 to the
- - Registration Statement, SEC File No. 333-27917, filed October 17, 1997.
C-1
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
PaineWebber Incorporated ("PaineWebber"), a Delaware corporation, owned
69.7% of the outstanding securities of PaineWebber S&P 500 Index Fund as of
August 31, 1997. PaineWebber is a wholly owned subsidiary of Paine Webber Group
Inc., a publicly owned financial services holding company. Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), the investment adviser,
administrator and distributor of the Trust, is a wholly owned subsidiary of
PaineWebber. Paine Webber Group Inc. and Mitchell Hutchins also are Delaware
corporations.
Item 25. Indemnification
---------------
Section 2 of Article IX of the Trust Instrument, "Indemnification," provides
that the appropriate series of the Registrant will indemnify the trustees and
officers of the Registrant to the fullest extent permitted by law against claims
and expenses asserted against or incurred by them by virtue of being or having
been a trustee or officer; provided that no such person shall be indemnified
where there has been an adjudication or other determination, as described in
Article IX, that such person is liable to the Registrant or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office or did not act in
good faith in the reasonable belief that his action was in the best interest of
the Registrant. Section 2 of Article IX also provides that the Registrant may
maintain insurance policies covering such rights of indemnification.
Additionally, "Limitation of Liability" in Section 1 of Article IX of the
Trust Instrument provides that the trustees or officers of the Registrant shall
not be personally liable to any person extending credit to, contracting with or
having a claim against the Registrant or a particular series; and that, provided
they have exercised reasonable care and have acted under the reasonable belief
that their actions are in the best interest of the Registrant, the trustees and
officers shall not be liable for neglect or wrongdoing by them or any officer,
agent, employee, investment adviser or independent contractor of the Registrant.
Section 9 of the Investment Advisory and Administration Contract with Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins") provides that Mitchell
Hutchins shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any series of the Registrant in connection with the matters
to which the Contract relates, except for a loss resulting from the willful
misfeasance, bad faith, or gross negligence of Mitchell Hutchins in the
performance of its duties or from its reckless disregard of its obligations and
duties under the Contract. Section 10 of the Contract provides that the
Trustees shall not be liable for any obligations of the Trust or any series
under the Contract and that Mitchell Hutchins shall look only to the assets and
property of the Registrant in settlement of such right or claim and not to the
assets and property of the Trustees.
Section 9 of each Distribution Contract provides that the Trust will indemnify
Mitchell Hutchins and its officers, directors and controlling persons against
all liabilities arising from any alleged untrue statement of material fact in
the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by Mitchell Hutchins to the Trust for use in the Registration
Statement; and provided that this indemnity agreement shall not protect any such
persons against liabilities arising by reason of their bad faith, gross
negligence or willful misfeasance; and shall not inure to the benefit of any
such persons unless a court of competent jurisdiction or controlling precedent
determines that such result is not against public policy as expressed in the
Securities Act of 1933. Section 9 of each Distribution Contract also provides
that Mitchell Hutchins agrees to indemnify, defend and hold the Trust, its
officers and Trustees free and harmless of any claims arising out of any alleged
untrue statement or any alleged omission of material fact contained in
information furnished by Mitchell Hutchins for use in the Registration Statement
or arising out of an agreement between Mitchell Hutchins and any retail dealer,
or arising out of supplementary literature or advertising used by Mitchell
Hutchins in connection with the Contract. Section 10 of each Distribution
Contract contains provisions similar to Section 10 of the Investment Advisory
and Administration Contract, with respect to Mitchell Hutchins and PaineWebber,
as appropriate.
Section 9 of each Exclusive Dealer Agreement contains provisions similar to
Section 9 of each Distribution Contract, with respect to PaineWebber
Incorporated ("PaineWebber").
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be provided to trustees, officers and controlling persons
of the Registrant, pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Registrant by
such trustee, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question
C-2
<PAGE>
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
Mitchell Hutchins, a Delaware corporation, is a registered investment adviser
and is a wholly owned subsidiary of PaineWebber which is, in turn, a wholly
owned subsidiary of Paine Webber Group Inc. Mitchell Hutchins is primarily
engaged in the investment advisory business. Information as to the officers and
directors of Mitchell Hutchins is included in its Form ADV, as filed with the
Securities and Exchange Commission (registration number 801-13219), and is
incorporated herein by reference.
Item 27. Principal Underwriters
----------------------
a) Mitchell Hutchins serves as principal underwriter and/or investment
adviser for the following investment companies:
ALL-AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
GLOBAL SMALL CAP FUND INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
MANAGED HIGH YIELD FUND INC.
MANAGED HIGH YIELD PLUS FUND INC.
MITCHELL HUTCHINS INSTITUTIONAL SERIES
MITCHELL HUTCHINS PORTFOLIOS
MITCHELL HUTCHINS SERIES TRUST
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INDEX TRUST
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
2002 TARGET TERM TRUST INC.
b) Mitchell Hutchins is the Registrant's principal underwriter. PaineWebber
acts as exclusive dealer of the Registrant's shares. The directors and officers
of Mitchell Hutchins, their principal business addresses, and their positions
and offices with Mitchell Hutchins are identified in its Form ADV, as filed with
the Securities and Exchange Commission (registration number 801-13219). The
directors and officers of PaineWebber, their principal business addresses, and
their positions and offices with PaineWebber are identified in its Form ADV, as
filed with the Securities and Exchange Commission (registration number 801-
7163). The foregoing information is hereby incorporated herein by reference.
The information set forth below is furnished for those directors and officers of
Mitchell Hutchins or PaineWebber who also serve as trustees or officers of the
Registrant. Unless otherwise indicated, the principal business address of each
person named is 1285 Avenue of the Americas, New York, NY 10019.
C-3
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices With Positions and Offices With Underwriter or
Name Registrant Exclusive Dealer
- ---- ---------- ----------------
<S> <C> <C>
Margo Alexander President and Trustee Director, President and Chief
Executive Officer of Mitchell
Hutchins and Executive Vice
President of PaineWebber
Mary C. Farrell Trustee Managing Director, Senior Investment
Strategist and member of Investment
Policy Committee of PaineWebber
T. Kirkham Barneby Vice President Managing Director, Chief Investment
Officer-Quantitative Investments of
Mitchell Hutchins
Lawrence Chinsky Vice President and Assistant Assistant Vice President and
Treasurer Investment Monitoring Officer of the
Mutual Fund Finance Department of
Mitchell Hutchins
John J. Lee Vice President and Assistant Vice President of Mitchell Hutchins
Treasurer and a Manager of the Mutual Fund
Finance Department of Mitchell Hutchins
Ann E. Moran Vice President and Assistant Vice President of Mitchell Hutchins
Treasurer and a Manager of the Mutual Fund
Finance Department of Mitchell Hutchins
Dianne E. O'Donnell Vice President and Secretary Senior Vice President and Deputy
General Counsel of Mitchell Hutchins
Emil Polito Vice President Senior Vice President and Director
of Operations and Control of
Mitchell Hutchins
Victoria E. Schonfeld Vice President Senior Director and General Counsel
of Mitchell Hutchins
Paul H. Schubert Vice President and Treasurer Senior Vice President and Director
of the Mutual Fund Finance
Department of Mitchell Hutchins
Barney A. Taglialatela Vice President and Assistant Vice President and a Manager of the
Treasurer Mutual Fund Finance Department of
Mitchell Hutchins
Keith A. Weller Vice President and Assistant First Vice President and Associate
Secretary General Counsel of Mitchell Hutchins
</TABLE>
c) None
Item 28. Location of Accounts and Records
--------------------------------
The books and other documents required by paragraphs (b)(4), (c) and (d) of
Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Registrant's investment adviser, Mitchell Hutchins, 1285
Avenue of the Americas, New York, New York 10019. All other accounts, books and
documents required by Rule 31a-1 are maintained in the physical possession of
Registrant's transfer agent and custodian.
Item 29. Management Services
-------------------
Not applicable.
C-4
<PAGE>
Item 30. Undertakings
------------
None.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Post-Effective Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York, on the
28th day of September , 1998.
PAINEWEBBER INDEX TRUST
By: /s/ Dianne E. O'Donnell
-----------------------
Dianne E. O'Donnell
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------------------- -------------------------------------- --------------------------
<S> <C> <C>
/s/ Margo N. Alexander
- -------------------------------------------- President and Trustee September 28, 1998
Margo N. Alexander * (Chief Executive Officer)
/s/ E. Garrett Bewkes, Jr.
- -------------------------------------------- Trustee and Chairman September 28, 1998
E. Garrett Bewkes, Jr. * of the Board of Trustees
/s/ Richard Q. Armstrong September 28, 1998
- -------------------------------------------- Trustee
Richard Q. Armstrong *
/s/ Richard R. Burt September 28, 1998
- -------------------------------------------- Trustee
Richard R. Burt *
/s/ Mary C. Farrell September 28, 1998
- -------------------------------------------- Trustee
Mary C. Farrell *
/s/ Meyer Feldberg September 28, 1998
- -------------------------------------------- Trustee
Meyer Feldberg *
/s/ George W. Gowen September 28, 1998
- -------------------------------------------- Trustee
George W. Gowen *
/s/ Frederic V. Malek September 28, 1998
- -------------------------------------------- Trustee
Frederic V. Malek *
/s/ Carl W. Schafer September 28, 1998
- -------------------------------------------- Trustee
Carl W. Schafer *
/s/ Paul H. Schubert September 28, 1998
- -------------------------------------------- Vice President and Treasurer (Chief
Paul H. Schubert Financial and Accounting Officer)
</TABLE>
<PAGE>
SIGNATURES (CONTINUED)
* Signature affixed by Elinor W. Gammon pursuant to powers of attorney dated
October 8, 1997 and incorporated by reference from Pre-Effective Amendment
No. 1 to the registration statement of PaineWebber Index Trust, SEC File
333-27917, filed October 17, 1997.
<PAGE>
PAINEWEBBER INDEX TRUST
EXHIBIT INDEX
-------------
Exhibit
Number
- ------
(1) Trust Instrument 1/
-
(2) By-Laws 1/
-
(3) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 2/
-
(4) Investment Advisory and Administration Contract (filed herewith)
(5) (a) Form of Distribution Contract (Class A Shares ) (filed herewith)
(b) Form of Distribution Contract (Class C Shares ) (filed herewith)
(c) Form of Distribution Contract (Class Y Shares) (filed herewith)
(d) Form of Exclusive Dealer Agreement (Class A Shares) (filed herewith)
(e) Form of Exclusive Dealer Agreement (Class C Shares) (filed herewith)
(f) Form of Exclusive Dealer Agreement (Class Y Shares)
(filed herewith)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement (filed herewith)
(8) Transfer Agency Agreement (filed herewith)
(9) Opinion and consent of counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents: Auditor's consent (filed
herewith)
(11) Financial Statements omitted from Part B - none
(12) Letter of investment intent 3/
-
(13) Rule 12b-1 Plans
(a) Form of Rule 12b-1 Plan of Distribution with respect to Class A Shares
(filed herewith)
(b) Form of Rule 12b-1 Plan of Distribution with respect to Class C Shares
(filed herewith)
(14) and
(27) Financial Data Schedule (filed herewith)
(15) Plan Pursuant to Rule 18f-3 (filed herewith)
- -------------------------------------
1/ Incorporated by reference from Registrant's initial Registration Statement,
- - SEC File No. 333-27917, filed May 28, 1997.
2/ Incorporated by reference from Articles IV, VI, IX and X of Registrant's
- - Trust Instrument and from Articles VI and IX of Registrant's By-Laws.
3/ Incorporated by reference from Pre-Effective Amendment No. 1 to the
- - Registration Statement, SEC File No. 333-27917, filed October 17, 1997.
<PAGE>
Exhibit No. 4
INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of October 14, 1997 between PAINEWEBBER INDEX TRUST, a
Delaware business trust ("Trust"), and MITCHELL HUTCHINS ASSET MANAGEMENT INC.
("Mitchell Hutchins"), a Delaware corporation registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and as an
investment adviser under the Investment Advisers Act of 1940, as amended.
WHEREAS the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company, and
intends to offer for public sale distinct series of shares of beneficial
interest ("Series"), each corresponding to a distinct portfolio; and
WHEREAS the Trust desires to retain Mitchell Hutchins as investment adviser
and administrator to furnish certain administrative, investment advisory and
portfolio management services to the Trust and each Series as now exists and as
hereafter may be established, and Mitchell Hutchins in willing to furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints Mitchell Hutchins as investment
-----------
adviser and administrator of the Trust and each Series for the period and on the
terms set forth in this Contract. Mitchell Hutchins accepts such appointment
and agrees to render the services herein set forth, for the compensation herein
provided.
2. Duties as Investment Adviser.
----------------------------
(a) Subject to the supervision of the Trust's Board of Trustees ("Board"),
Mitchell Hutchins will provide a continuous investment program for each Series,
including investment research and management with respect to all securities and
investments and cash equivalents in each Series. Mitchell Hutchins will
determine from time to time what securities and other investments will be
purchased, retained or sold by each Series.
(b) Mitchell Hutchins agrees that in placing orders with brokers, it will
attempt to obtain the best net result in terms of price and execution; provided
that, on behalf of any Series, Mitchell Hutchins may, in its discretion, use
brokers who provide the Series with research, analysis, advice and similar
services to execute portfolio transactions on behalf of the Series, and Mitchell
Hutchins may pay to those brokers in return for brokerage and research services
a higher commission than may be charged by other brokers, subject to Mitchell
Hutchins' determining in good faith that such commission is reasonable in terms
either of the particular transaction or of the overall responsibility of
Mitchell Hutchins to such Series and its other clients and that the total
commissions paid by such Series will be reasonable in relation to the benefits
to the Series over the
-1-
<PAGE>
long term. In no instance will portfolio securities be
purchased from or sold to Mitchell Hutchins, or any affiliated person thereof,
except in accordance with the federal securities laws and the rules and
regulations thereunder. Whenever Mitchell Hutchins simultaneously places orders
to purchase or sell the same security on behalf of a Series and one or more
other accounts advised by Mitchell Hutchins, such orders will be allocated as to
price and amount among all such accounts in a manner believed to be equitable to
each account. The Trust recognizes that in some cases this procedure may
adversely affect the results obtained for the Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and records
with respect to the securities transactions of each Series, and will furnish the
Board with such periodic and special reports as the Board reasonably may
request. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
Mitchell Hutchins hereby agrees that all records which it maintains for the
Trust are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Trust and which are required to be maintained by Rule 31a-1 under the 1940
Act and further agrees to surrender promptly to the Trust any records which it
maintains for the Trust upon request by the Trust.
(d) Mitchell Hutchins will oversee the computation of the net asset value
and the net income of each Series as described in the currently effective
registration statement of the Trust under the Securities Act of 1933, as
amended, and the 1940 Act and any supplements thereto ("Registration Statement")
or as more frequently requested by the Board.
(e) The Trust hereby authorizes Mitchell Hutchins and any entity or person
associated with Mitchell Hutchins which is a member of a national securities
exchange to effect any transaction on such exchange for the account of any
Series, which transaction is permitted by Section 11(a) of the 1934 Act, and the
Trust hereby consents to the retention of compensation by Mitchell Hutchins or
any person or entity associated with Mitchell Hutchins.
3. Duties as Administrator. Mitchell Hutchins will administer the affairs
-----------------------
of the Trust and each Series subject to the supervision of the Board and the
following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of the
Trust and each Series, including oversight of transfer agency, custodial and
accounting services, except as hereinafter set forth; provided, however, that
noting herein contained shall be deemed to relieve or deprive the Board of its
responsibility for and control of the conduct of the affairs of the Trust and
each Series.
(b) Mitchell Hutchins will provide the Trust and each Series with such
corporate, administrative and clerical personnel (including officers of the
Trust) and services as are reasonably deemed necessary or advisable by the
Board, including the maintenance of certain books and records of the Trust and
each Series.
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Trust's
Registration Statement, proxy material, tax returns and required reports to each
Series' shareholders and the Securities and Exchange Commission and other
appropriate federal or state regulatory authorities.
-2-
<PAGE>
(d) Mitchell Hutchins will provide the Trust and each Series with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. Further Duties. In all matters relating to the performance of this
--------------
Contract, Mitchell Hutchins will act in conformity with the Trust Instrument,
By-Laws and Registration Statement of the Trust and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations.
5. Delegation of Mitchell Hutchins' Duties as Investment Adviser and
-----------------------------------------------------------------
Administrator. With respect to any or all Series, Mitchell Hutchins may enter
- -------------
into one or more contracts ("Sub-Advisory or Sub-Administration Contract") with
a sub-adviser or sub-administrator in which Mitchell Hutchins delegates to such
sub-adviser or sub-administrator any or all its duties specified in Paragraphs 2
and 3 of this Contract, provided that each Sub-Advisory or Sub-Administration
Contract imposes on the sub-adviser or sub-administrator bound thereby all the
duties and conditions to which Mitchell Hutchins is subject by Paragraphs 2, 3
and 4 of this Contract, and further provided that each Sub-Advisory or Sub-
Administration Contract meets all requirements of the 1940 Act and rules
thereunder.
6. Services Not Exclusive. The services furnished by Mitchell Hutchins
----------------------
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a Trustee, officer or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
7. Expenses.
--------
(a) During the term of this Contract, each Series will bear all expenses,
not specifically assumed by Mitchell Hutchins, incurred in its operations and
the offering of its shares.
(b) Expenses borne by each Series will include but not be limited to the
following (or each Series' proportionate share of the following): (i) the cost
(including brokerage commissions) of securities purchased or sold by the Series
and any losses incurred in connection therewith; (ii) fees payable to and
expenses incurred on behalf of the Series by Mitchell Hutchins under this
Contract; (iii) expenses of organizing the Trust and the Series; (iv) filing
fees and expenses relating to the registrations and qualification of the Series'
shares and the Trust under federal and/or state securities laws and maintaining
such registration and qualifications; (v) fees and salaries payable to the
Trust's Trustees and officers who are not interested persons of the Trust or
Mitchell Hutchins;
-3-
<PAGE>
(vi) all expenses incurred in connection with the Trustees'
services, including travel expenses; (vii) taxes (including any income or
franchise taxes) and governmental fees; (viii) costs of any liability,
uncollectible items of deposit and other insurance and fidelity bonds; (ix) any
costs, expenses or losses arising out of a liability of or claim for damages or
other relief asserted against the Trust or Series for violation of any law; (x)
legal, accounting and auditing expenses, including legal fees of special counsel
for those Trustees of the Trust who are not interested persons of the Trust;
(xi) charges of custodians, transfer agents and other agents (including any
lending agent); (xii) costs of preparing share certificates; (xiii) expenses of
setting in type and printing prospectuses and supplements thereto, statements of
additional information and supplements thereto, reports and proxy materials for
existing shareholders; (xiv) costs of mailing prospectuses and supplements
thereto, statements of additional information and supplements thereto, reports
and proxy materials to existing shareholders; (xv) any extraordinary expenses
(including fees and disbursements of counsel, costs of actions, suits or
proceedings to which the Trust is a party and the expenses the Trust may incur
as a result of its legal obligation to provide indemnification to its officers,
Trustees, agents and shareholders) incurred by the Trust or Series; (xvi) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations; (xvii) the cost of mailing and tabulating
proxies and costs of meetings of shareholders, the Board and any committees
thereof; (xviii) the cost of investment company literature and other
publications provided by the Trust to its Trustees and officers; (xix) costs of
mailing, stationery and communications equipment; (xx) expenses incident to any
dividend, withdrawal or redemption options; (xxi) charges and expenses of any
outside pricing service used to value portfolio securities; (xxii) interest on
borrowings of the Fund; and (xxiii) fees or expenses related to license
agreements with respect to securities indices.
(c) Mitchell Hutchins will assume the cost of any compensation for services
provided to the Trust received by the officers of the Trust and by those
Trustees who are interested persons of the Trust.
(d) The payment or assumption by Mitchell Hutchins of any expenses of the
Trust or a Series that Mitchell Hutchins is not required by this Contract to pay
or assume shall not obligate Mitchell Hutchins to pay or assume the same or any
similar expense of the Trust or a Series on any subsequent occasion.
8. Compensation.
------------
(a) For the services provided and the expenses assumed pursuant to this
Contract, with respect to the PaineWebber S&P 500 Index Fund series, the Trust
will pay to Mitchell Hutchins a fee, computed daily and paid monthly, at an
annual rate of 0.20% of such Series' average daily net assets.
(b) For the services provided and the expenses assumed pursuant to this
Contract with respect to any Series hereafter established, the Trust will pay to
Mitchell Hutchins from the assets of such Series a fee in an amount to be agreed
upon in a written fee agreement ("Fee Agreement") executed by the Trust on
behalf of such Series and by Mitchell Hutchins. All such Fee Agreements shall
provide that they are subject to all terms and conditions of this Contract.
-4-
<PAGE>
(c) The fee shall be computed daily and paid monthly to Mitchell Hutchins
on or before the first business day of the next succeeding calendar month.
(d) If this Contract becomes effective or terminates before the end of any
month, the fee for the period from the effective day to the end of the month or
from the beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
9. Limitation of Liability of Mitchell Hutchins. Mitchell Hutchins and
--------------------------------------------
its delegates, including any Sub-Adviser or Sub-Administrator to any Series or
the Trust, shall not be liable for any error of judgment or mistake of law or
for any loss suffered by any Series, the Trust or any of its shareholders, in
connection with the matters to which this Contract relates, except to the extent
that such a loss results from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Contract. Any person, even though also an
officer, director, employee, or agent of Mitchell Hutchins, who may be or become
an officer, Trustee, employee or agent of the Trust shall be deemed, when
rendering services to any Series or the Trust or acting with respect to any
business of such Series or the Trust, to be rendering such service to or acting
solely for the Series or the Trust and not as an officer, director, employee, or
agent or one under the control or direction of Mitchell Hutchins even though
paid by it.
10. Duration and Termination.
------------------------
(a) This Contract shall become effective upon the date hereabove written
provided that, with respect to any Series, this Contract shall not take effect
unless it has first been approved (i) by a vote of a majority of those Trustees
of the Trust who are not parties to this Contract or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by vote of a majority of that Series' outstanding voting
securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if
not terminated, this Contract shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of those Trustees of the
Trust who are not parties to this Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or, with respect to any given Series, by vote of
a majority of the outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this Contract
may be terminated at any time, without the payment of any penalty, by vote of
the board or by a vote of a majority of the outstanding voting securities of
such Series on sixty days' written notice to Mitchell Hutchins or by Mitchell
Hutchins at any time, without the payment of any penalty, on sixty days' written
notice to the Trust. Termination of this Contract with respect to any given
Series shall in no way affect the continued validity of this Contract or the
performance thereunder with respect to any other Series. This Contract will
automatically terminate in the event of its assignment.
-5-
<PAGE>
11. Limitation of Liability of the Trustees and Shareholders of the Trust.
---------------------------------------------------------------------
The Trustees of the Trust and the shareholders of any Series shall not be liable
for any obligations of any Series or the Trust under this Contract, and Mitchell
Hutchins agrees that, in asserting any rights or claims under this Contract, if
shall look only to the assets and property of the Trust in settlement of such
right or claim, and not to such Trustees or shareholders.
12. Amendment of this Contract. No provision of this Contract may be
--------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Contract as to any
given Series shall be effective until approved by vote of a majority of such
Series' outstanding voting securities.
13. Governing Law. This Contract shall be construed in accordance with
-------------
the laws of the State of Delaware, without giving effect to the conflicts of
laws principles thereof, and in accordance with the 1940 Act.. To the extent
that the applicable laws of the State of Delaware conflict with the applicable
provisions of the 1940 Act, the latter shall control.
14. Miscellaneous. The captions in this Contract are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities", "affiliated person",
"interested person", "assignment", "broker", "investment adviser", "national
securities exchange", "net assets", "prospectus", "sale", "sell" and "security"
shall have the same meaning as such terms have in the 1940 Act, subject to such
exemption as may be granted by the Securities and Exchange Commission by any
rule, regulation or order. Where the effect of a requirement of the 1940 Act
reflected in any provision of this Contract is relaxed by a rule, regulation or
order of the Securities and Exchange Commission, whether of special or general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/ Evelyn Chieffo By /s/ Julian Sluyters
- ------------------ -------------------
Attest: PAINEWEBBER INDEX TRUST
/s/ Evelyn Chieffo By /s/ Dianne E. O'Donnell
- ------------------ -----------------------
-6-
<PAGE>
Exhibit No. 5(a)
PAINEWEBBER INDEX TRUST
DISTRIBUTION CONTRACT
CLASS A SHARES
CONTRACT made as of _____________________, 1998, between PAINEWEBBER INDEX
TRUST, a Delaware business trust ("Fund"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins").
WHEREAS the Fund is registered under the Investment Company Act of l940, as
amended ("l940 Act"), as an open-end management investment company and currently
has four distinct series of shares of beneficial interest ("Series"), which
correspond to distinct portfolios and have been designated as PaineWebber Bond
Index Fund, PaineWebber EAFE Index Fund, PaineWebber S&P 500 Index Fund and
PaineWebber Small Cap Index Fund; and
WHEREAS the Fund's board of trustees ("Board") has established an unlimited
number of shares of beneficial interest of the above-referenced Series as Class
A shares ("Class A Shares"); and
WHEREAS the Fund has adopted a Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act for its Class A Shares ("Plan") and desires to retain
Mitchell Hutchins as principal distributor in connection with the offering and
sale of the Class A Shares of the above-referenced Series and of such other
Series as may hereafter be designated by the Board and have Class A Shares
established; and
WHEREAS Mitchell Hutchins is willing to act as principal distributor of the
Class A Shares of each such Series on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Mitchell Hutchins as its exclusive
-----------
agent to be the principal distributor to sell and to arrange for the sale of the
Class A Shares on the terms and for the period set forth in this Contract.
Mitchell Hutchins hereby accepts such appointment and agrees to act hereunder.
It is understood, however, that this appointment does not preclude sales of the
Class A Shares directly through the Fund's transfer agent in the manner set
forth in the Registration Statement. As used in this Contract, the term
"Registration Statement" shall mean the currently effective registration
statement of the Fund, and any supplements thereto, under the Securities Act of
1933, as amended ("1933 Act"), and the 1940 Act.
<PAGE>
2. Services and Duties of Mitchell Hutchins.
----------------------------------------
(a) Mitchell Hutchins agrees to sell Class A Shares on a best efforts
basis from time to time during the term of this Contract as agent for the Fund
and upon the terms described in the Registration Statement.
(b) Upon the later of the date of this Contract or the initial offering
of the Class A Shares to the public by a Series, Mitchell Hutchins will hold
itself available to receive purchase orders, satisfactory to Mitchell Hutchins,
for Class A Shares of that Series and will accept such orders on behalf of the
Fund as of the time of receipt of such orders and promptly transmit such orders
as are accepted to the Fund's transfer agent. Purchase orders shall be deemed
effective at the time and in the manner set forth in the Registration Statement.
(c) Mitchell Hutchins in its discretion may enter into agreements to sell
Class A Shares to such registered and qualified retail dealers, including but
not limited to PaineWebber Incorporated ("PaineWebber"), as it may select. In
making agreements with such dealers, Mitchell Hutchins shall act only as
principal and not as agent for the Fund.
(d) The offering price of the Class A Shares of each Series shall be the
net asset value per Share as next determined by the Fund following receipt of an
order at Mitchell Hutchins' principal office plus the applicable initial sales
charge, if any, computed as set forth in the Registration Statement. The Fund
shall promptly furnish Mitchell Hutchins with a statement of each computation of
net asset value.
(e) Mitchell Hutchins shall not be obligated to sell any certain number of
Class A Shares.
(f) To facilitate redemption of Class A Shares by shareholders directly
or through dealers, Mitchell Hutchins is authorized but not required on behalf
of the Fund to repurchase Class A Shares presented to it by shareholders and
dealers at the price determined in accordance with, and in the manner set forth
in, the Registration Statement. Such price shall reflect the subtraction of the
contingent deferred sales charge, if any, computed in accordance with and in the
manner set forth in the Registration Statement.
(g) Mitchell Hutchins shall provide ongoing shareholder services, which
include responding to shareholder inquiries, providing shareholders with
information on their investments in the Class A Shares and any other services
now or hereafter deemed to be appropriate subjects for the payments of "service
fees" under Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD") (collectively, "service activities").
(h) Mitchell Hutchins shall have the right to use any list of
shareholders of the Fund or any other list of investors which it obtains in
connection with its provision of services under this Contract; provided,
however, that Mitchell Hutchins shall not sell or knowingly provide such list or
lists to any unaffiliated person.
3. Authorization to Enter into Exclusive Dealer Agreements and to Delegate
-----------------------------------------------------------------------
Duties as Distributor. With respect to the Class A Shares of any or all Series,
- ---------------------
Mitchell Hutchins may
-2-
<PAGE>
enter into an exclusive dealer agreement with PaineWebber any other registered
and qualified dealer with respect to sales of the Class A Shares or the
provision of service activities. In a separate contract or as part of any such
exclusive dealer agreement, Mitchell Hutchins also may delegate to PaineWebber
or another registered and qualified dealer ("sub-distributor") any or all of its
duties specified in this Contract, provided that such separate contract or
exclusive dealer agreement imposes on the sub-distributor bound thereby all
applicable duties and conditions to which Mitchell Hutchins is subject under
this Contract, and further provided that such separate contract or exclusive
dealer agreement meets all requirements of the 1940 Act and rules thereunder.
4. Services Not Exclusive. The services furnished by Mitchell Hutchins
----------------------
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a trustee, officer or employee of the Fund, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar or a dissimilar nature.
5. Compensation.
-------------
(a) As compensation for its service activities under this contract with
respect to the Class A Shares, Mitchell Hutchins shall receive from the Fund a
service fee at the rate and under the terms and conditions of the Plan adopted
by the Fund with respect to the Class A Shares of the Series, as such Plan is
amended from time to time, and subject to any further limitations on such fee as
the Board may impose.
(b) As compensation for its activities under this contract with respect
to the distribution of the Class A Shares, Mitchell Hutchins shall retain the
initial sales charge, if any, on purchases of Class A Shares as set forth in the
Registration Statement. Mitchell Hutchins is authorized to collect the gross
proceeds derived from the sale of the Class A Shares, remit the net asset value
thereof to the fund upon receipt of the proceeds and retain the initial sales
charge, if any.
(c) As compensation for its activities under this contract with respect
to the distribution of the Class A Shares, Mitchell Hutchins shall receive all
contingent deferred sales charges imposed on redemptions of Class A Shares of
each Series. Whether and at what rate a contingent deferred sales charge will be
imposed with respect to a redemption shall be determined in accordance with, and
in the manner set forth in, the Registration Statement.
(d) Mitchell Hutchins may reallow any or all of the initial sales
charges, contingent deferred sales charges, or service fees which it is paid
under this Contract to such dealers as Mitchell Hutchins may from time to time
determine.
-3-
<PAGE>
6. Duties of the Fund.
-------------------
(a) The Fund reserves the right at any time to withdraw offering Class A
Shares of any or all Series by written notice to Mitchell Hutchins at its
principal office.
(b) The Fund shall determine in its sole discretion whether certificates
shall be issued with respect to the Class A Shares. If the Fund has determined
that certificates shall be issued, the Fund will not cause certificates
representing Class A Shares to be issued unless so requested by shareholders. If
such request is transmitted by Mitchell Hutchins, the Fund will cause
certificates evidencing Class A Shares to be issued in such names and
denominations as Mitchell Hutchins shall from time to time direct .
(c) The Fund shall keep Mitchell Hutchins fully informed of its affairs
and shall make available to Mitchell Hutchins copies of all information,
financial statements, and other papers which Mitchell Hutchins may reasonably
request for use in connection with the distribution of Class A Shares,
including, without limitation, certified copies of any financial statements
prepared for the Fund by its independent public accountant and such reasonable
number of copies of the most current prospectus, statement of additional
information, and annual and interim reports of any Series as Mitchell Hutchins
may request, and the Fund shall cooperate fully in the efforts of Mitchell
Hutchins to sell and arrange for the sale of the Class A Shares of the Series
and in the performance of Mitchell Hutchins under this Contract.
(d) The Fund shall take, from time to time, all necessary action,
including payment of the related filing fee, as may be necessary to register the
Class A Shares under the 1933 Act to the end that there will be available for
sale such number of Class A Shares as Mitchell Hutchins may be expected to sell.
The Fund agrees to file, from time to time, such amendments, reports, and other
documents as may be necessary in order that there will be no untrue statement of
a material fact in the Registration Statement, nor any omission of a material
fact which omission would make the statements therein misleading.
(e) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of Class A Shares of each Series for sale
under the securities laws of such states or other jurisdictions as Mitchell
Hutchins and the Fund may approve, and, if necessary or appropriate in
connection therewith, to qualify and maintain the qualification of the Fund as a
broker or dealer in such jurisdictions; provided that the Fund shall not be
required to amend its Trust Instrument or By-Laws to comply with the laws of any
jurisdiction, to maintain an office in any jurisdiction, to change the terms of
the offering of the Class A Shares in any jurisdiction from the terms set forth
in its Registration Statement, to qualify as a foreign corporation in any
jurisdiction, or to consent to service of process in any jurisdiction other than
with respect to claims arising out of the offering of the Class A Shares.
Mitchell Hutchins shall furnish such information and other material relating to
its affairs and activities as may be required by the Fund in connection with
such qualifications.
7. Expenses of the Fund. The Fund shall bear all costs and expenses of
--------------------
registering the Class A Shares with the Securities and Exchange Commission and
qualifying the Class A shares with state and other regulatory bodies, and shall
assume expenses related to communications with shareholders of each Series,
-4-
<PAGE>
including (i) fees and disbursements of its counsel and independent public
accountant; (ii) the preparation, filing and printing of registration statements
and/or prospectuses or statements of additional information required under the
federal securities laws; (iii) the preparation and mailing of annual and interim
reports, prospectuses, statements of additional information and proxy materials
to shareholders; and (iv) the qualifications of Class A Shares for sale and of
the Fund as a broker or dealer under the securities laws of such jurisdictions
as shall be selected by the Fund and Mitchell Hutchins pursuant to Paragraph
6(e) hereof, and the costs and expenses payable to each such jurisdiction for
continuing qualification therein.
8. Expenses of Mitchell Hutchins. Mitchell Hutchins shall bear all costs and
-----------------------------
expenses of (i) preparing, printing and distributing any materials not prepared
by the Fund and other materials used by Mitchell Hutchins in connection with the
sale of Class A Shares under this Contract, including the additional cost of
printing copies of prospectuses, statements of additional information, and
annual and interim shareholder reports other than copies thereof required for
distribution to existing shareholders or for filing with any federal or state
securities authorities; (ii) any expenses of advertising incurred by Mitchell
Hutchins in connection with such offering; (iii) the expenses of registration or
qualification of Mitchell Hutchins as a broker or dealer under federal or state
laws and the expenses of continuing such registration or qualification; and (iv)
all compensation paid to Mitchell Hutchins' employees and others for selling
Class A Shares, and all expenses of Mitchell Hutchins, its employees and others
who engage in or support the sale of Class A Shares as may be incurred in
connection with their sales efforts.
9. Indemnification.
---------------
(a) The Fund agrees to indemnify, defend and hold Mitchell Hutchins, its
officers and directors, and any person who controls Mitchell Hutchins within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Mitchell Hutchins, its officers,
directors or any such controlling person may incur under the 1933 Act, or under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement or arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement or necessary to make the statements
therein not misleading, except insofar as such claims, demands, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information furnished in writing by Mitchell Hutchins to the Fund for use
in the Registration Statement; provided, however, that this indemnity agreement
shall not inure to the benefit of any person who is also an officer or trustee
of the Fund or who controls the Fund within the meaning of Section 15 of the
1933 Act, unless a court of competent jurisdiction shall determine, or it shall
have been determined by controlling precedent, that such result would not be
against public policy as expressed in the 1933 Act; and further provided, that
in no event shall anything contained herein be so construed as to protect
Mitchell Hutchins against any liability to the Fund or to the shareholders of
any Series to which Mitchell Hutchins would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations under this
-5-
<PAGE>
Contract. The Fund shall not be liable to Mitchell Hutchins under this indemnity
agreement with respect to any claim made against Mitchell Hutchins or any person
indemnified unless Mitchell Hutchins or other such person shall have notified
the Fund in writing of the claim within a reasonable time after the summons or
other first written notification giving information of the nature of the claim
shall have been served upon Mitchell Hutchins or such other person (or after
Mitchell Hutchins or the person shall have received notice of service on any
designated agent). However, failure to notify the Fund of any claim shall not
relieve the Fund from any liability which it may have to Mitchell Hutchins or
any person against whom such action is brought otherwise than on account of this
indemnity agreement. The Fund shall be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of any suit
brought to enforce any claims subject to this indemnity agreement. If the Fund
elects to assume the defense of any such claim, the defense shall be conducted
by counsel chosen by the Fund and satisfactory to indemnified defendants in the
suit whose approval shall not be unreasonably withheld. In the event that the
Fund elects to assume the defense of any suit and retain counsel, the
indemnified defendants shall bear the fees and expenses of any additional
counsel retained by them. If the Fund does not elect to assume the defense of a
suit, it will reimburse the indemnified defendants for the reasonable fees and
expenses of any counsel retained by the indemnified defendants. The Fund agrees
to notify Mitchell Hutchins promptly of the commencement of any litigation or
proceedings against it or any of its officers or trustees in connection with the
issuance or sale of any of its Class A Shares.
(b) Mitchell Hutchins agrees to indemnify, defend, and hold the Fund, its
officers and trustees and any person who controls the Fund within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending against such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which the Fund, its trustees or officers, or
any such controlling person may incur under the 1933 Act or under common law or
otherwise arising out of or based upon any alleged untrue statement of a
material fact contained in information furnished in writing by Mitchell Hutchins
to the Fund for use in the Registration Statement, arising out of or based upon
any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement necessary to
make such information not misleading, or arising out of any agreement between
Mitchell Hutchins and any retail dealer, or arising out of any supplemental
sales literature or advertising used by Mitchell Hutchins in connection with its
duties under this Contract. Mitchell Hutchins shall be entitled to participate,
at its own expense, in the defense or, if it so elects, to assume the defense of
any suit brought to enforce the claim, but if Mitchell Hutchins elects to assume
the defense, the defense shall be conducted by counsel chosen by Mitchell
Hutchins and satisfactory to the indemnified defendants whose approval shall not
be unreasonably withheld. In the event that Mitchell Hutchins elects to assume
the defense of any suit and retain counsel, the defendants in the suit shall
bear the fees and expenses of any additional counsel retained by them. If
Mitchell Hutchins does not elect to assume the defense of any suit, it will
reimburse the indemnified defendants in the suit for the reasonable fees and
expenses of any counsel retained by them.
10. Limitation of Liability of the Trustees and Shareholders of the Fund.
--------------------------------------------------------------------
The trustees of the Fund and the shareholders of any Series shall not be liable
for any obligations of the Fund or any Series under this Contract, and Mitchell
Hutchins agrees that, in asserting any rights or claims under this Contract, it
-6-
<PAGE>
shall look only to the assets and property of the Fund or the particular Series
in settlement of such right or claims, and not to such trustees or shareholders.
11. Services Provided to the Fund by Employees of Mitchell Hutchins. Any
---------------------------------------------------------------
person, even though also an officer, director, employee or agent of Mitchell
Hutchins, who may be or become an officer, trustee, employee or agent of the
Fund, shall be deemed, when rendering services to the Fund or acting in any
business of the Fund, to be rendering such services to or acting solely for the
Fund and not as an officer, director, employee or agent or one under the control
or direction of Mitchell Hutchins even though paid by Mitchell Hutchins.
12. Duration and Termination.
------------------------
(a) This Contract shall become effective upon the date written above,
provided that, with respect to any Series, this Contract shall not take effect
unless such action has first been approved by vote of a majority of the Board
and by vote of a majority of those trustees of the Fund who are not interested
persons of the Fund, and have no direct or indirect financial interest in the
operation of the Plan relating to the Series or in any agreements related
thereto (all such trustees collectively being referred to herein as the
"Independent Trustees") cast in person at a meeting called for the purpose of
voting on such action.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for one year from the above written date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or with respect to any given Series by vote of a majority of the
outstanding voting securities of the Class A Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board, by vote of a majority of the Independent Trustees or by vote
of a majority of the outstanding voting securities of the Class A Shares of such
Series on sixty days' written notice to Mitchell Hutchins or by Mitchell
Hutchins at any time, without the payment of any penalty, on sixty days' written
notice to the Fund or such Series. This Contract will automatically terminate in
the event of its assignment.
(d) Termination of this Contract with respect to any given Series shall
in no way affect the continued validity of this Contract or the performance
thereunder with respect to any other Series.
13. Amendment of this Contract. No provision of this Contract may be
--------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
-7-
<PAGE>
14. Governing Law. This Contract shall be construed in accordance with the
-------------
laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the l940 Act, the latter shall control.
15. Notice. Any notice required or permitted to be given by either party to
------
the other shall be deemed sufficient upon receipt in writing at the other
party's principal offices.
16. Miscellaneous. The captions in this Contract are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person"
and "assignment" shall have the same meaning as such terms have in the l940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
ATTEST: PAINEWEBBER INDEX TRUST
--------------------------- --------------------------
By:
ATTEST: MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
--------------------------- --------------------------
By:
-8-
<PAGE>
Exhibit No. 5(b)
PAINEWEBBER INDEX TRUST
DISTRIBUTION CONTRACT
CLASS C SHARES
CONTRACT made as of _____________________, 1998 between PAINEWEBBER INDEX
TRUST, a Delaware business trust ("Fund"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins").
WHEREAS the Fund is registered under the Investment Company Act of l940, as
amended ("l940 Act"), as an open-end management investment company and currently
has four distinct series of shares of beneficial interest ("Series"), which
correspond to distinct portfolios and have been designated as PaineWebber Bond
Index Fund, PaineWebber EAFE Index Fund, PaineWebber S&P 500 Index Fund and
PaineWebber Small Cap Index Fund; and
WHEREAS the Fund's board of trustees ("Board") has established an unlimited
number of shares of beneficial interest of the above-referenced Series as Class
C shares ("Class C Shares"); and
WHEREAS the Fund has adopted a Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act for its Class C Shares ("Plan") and desires to retain
Mitchell Hutchins as principal distributor in connection with the offering and
sale of the Class C Shares of the above-referenced Series and of such other
Series as may hereafter be designated by the Board and have Class C Shares
established; and
WHEREAS Mitchell Hutchins is willing to act as principal distributor of the
Class C Shares of each such Series on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Mitchell Hutchins as its exclusive
-----------
agent to be the principal distributor to sell and to arrange for the sale of the
Class C Shares on the terms and for the period set forth in this Contract.
Mitchell Hutchins hereby accepts such appointment and agrees to act hereunder.
It is understood, however, that this appointment does not preclude sales of the
Class C Shares directly through the Fund's transfer agent in the manner set
forth in the Registration Statement. As used in this Contract, the term
"Registration Statement" shall mean the currently effective registration
statement of the Fund, and any supplements thereto, under the Securities Act of
1933, as amended ("1933 Act"), and the 1940 Act.
2. Services and Duties of Mitchell Hutchins.
----------------------------------------
(a) Mitchell Hutchins agrees to sell Class C Shares on a best efforts
basis from time to time during the term of this Contract as agent for the
Fund and upon the terms described in the Registration Statement.
-1-
<PAGE>
(b) Upon the later of the date of this Contract or the initial offering of
the Class C Shares to the public by a Series, Mitchell Hutchins will hold itself
available to receive purchase orders, satisfactory to Mitchell Hutchins, for
Class C Shares of that Series and will accept such orders on behalf of the Fund
as of the time of receipt of such orders and promptly transmit such orders as
are accepted to the Fund's transfer agent. Purchase orders shall be deemed
effective at the time and in the manner set forth in the Registrati on
Statement.
(c) Mitchell Hutchins in its discretion may enter into agreements to
sell Class C Shares to such registered and qualified retail dealers, including
but not limited to PaineWebber Incorporated ("PaineWebber"), as it may select.
In making agreements with such dealers, Mitchell Hutchins shall act only as
principal and not as agent for the Fund.
(d) The offering price of the Class C Shares of each Series shall be the
net asset value per Share as next determined by the Fund following receipt of an
order at Mitchell Hutchins' principal office. The Fund shall promptly furnish
Mitchell Hutchins with a statement of each computation of net asset value.
(e) Mitchell Hutchins shall not be obligated to sell any certain number of
Class C Shares.
(f) To facilitate redemption of Class C Shares by shareholders directly or
through dealers, Mitchell Hutchins is authorized but not required on behalf of
the Fund to repurchase Class C Shares presented to it by shareholders and
dealers at the price determined in accordance with, and in the manner set forth
in, the Registration Statement. Such price shall reflect the subtraction of the
contingent deferred sales charge, if any, computed in accordance with and in the
manner set forth in the Registration Statement.
(g) Mitchell Hutchins shall provide ongoing shareholder services, which
include responding to shareholder inquiries, providing shareholders with
information on their investments in the Class C Shares and any other services
now or hereafter deemed to be appropriate subjects for the payments of "service
fees" under Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD") (collectively, "service activities").
(h) Mitchell Hutchins shall have the right to use any list of shareholders
of the Fund or any other list of investors which it obtains in connection with
its provision of services under this Contract; provided, however, that Mitchell
Hutchins shall not sell or knowingly provide such list or lists to any
unaffiliated person.
3. Authorization to Enter into Exclusive Dealer Agreements and to Delegate
-----------------------------------------------------------------------
Duties as Distributor. With respect to the Class C Shares of any or all Series,
- ---------------------
Mitchell Hutchins may enter into an exclusive dealer agreement with PaineWebber
or any other registered and qualified dealer with respect to sales of the Class
C Shares or the provision of service activities. In a separate contract or as
part of any such exclusive dealer agreement, Mitchell Hutchins also may delegate
to PaineWebber or another registered and qualified dealer ("sub-distributor")
any or all of its duties specified in this Contract, provided that such separate
contract or exclusive dealer agreement imposes on the sub-distributor bound
thereby all applicable duties and conditions to
-2-
<PAGE>
which Mitchell Hutchins is subject under this Contract, and further provided
that such separate contract or exclusive dealer agreement meets all requirements
of the 1940 Act and rules thereunder.
4. Services Not Exclusive. The services furnished by Mitchell Hutchins
----------------------
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a trustee, officer or employee of the Fund, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar or a dissimilar nature.
5. Compensation.
-------------
(a) As compensation for its service activities under this contract with
respect to the Class C Shares, Mitchell Hutchins shall receive from the Fund a
service fee at the rate and under the terms and conditions of the Plan adopted
by the Fund with respect to the Class C Shares of the Series, as such Plan is
amended from time to time, and subject to any further limitations on such fee as
the Board may impose.
(b) As compensation for its activities under this contract with respect to
the distribution of the Class C Shares, Mitchell Hutchins shall receive from the
Fund a distribution fee at the rate and under the terms and conditions of the
Plan adopted by the Fund with respect to the Class C Shares of the Series, as
such Plan is amended from time to time, and subject to any further limitations
on such fee as the Board may impose.
(c) As compensation for its activities under this contract with respect
to the distribution of the Class C Shares, Mitchell Hutchins shall receive all
contingent deferred sales charges imposed on redemptions of Class C Shares
of each Series. Whether and at what rate a contingent deferred sales
charge will be imposed with respect to a redemption shall be determined in
accordance with, and in the manner set forth in, the Registration
Statement.
(d) Mitchell Hutchins may reallow any or all of the distribution fees,
contingent deferred sales charges, or service fees which it is paid under
this Contract to such dealers as Mitchell Hutchins may from time to time
determine.
6. Duties of the Fund.
-------------------
(a) The Fund reserves the right at any time to withdraw offering Class C
Shares of any or all Series by written notice to Mitchell Hutchins at its
principal office.
(b) The Fund shall determine in its sole discretion whether certificates
shall be issued with respect to the Class C Shares. If the Fund has
determined that certificates shall be issued, the Fund will not cause
certificates representing Class C Shares to be issued unless so requested
by shareholders. If such request is transmitted by Mitchell Hutchins, the
Fund will cause certificates evidencing Class C Shares to be issued in such
names and denominations as Mitchell Hutchins shall from time to time
direct.
-3-
<PAGE>
(c) The Fund shall keep Mitchell Hutchins fully informed of its affairs
and shall make available to Mitchell Hutchins copies of all information,
financial statements, and other papers which Mitchell Hutchins may
reasonably request for use in connection with the distribution of Class C
Shares, including, without limitation, certified copies of any financial
statements prepared for the Fund by its independent public accountant and
such reasonable number of copies of the most current prospectus, statement
of additional information, and annual and interim reports of any Series as
Mitchell Hutchins may request, and the Fund shall cooperate fully in the
efforts of Mitchell Hutchins to sell and arrange for the sale of the Class
C Shares of the Series and in the performance of Mitchell Hutchins under
this Contract.
(d) The Fund shall take, from time to time, all necessary action, including
payment of the related filing fee, as may be necessary to register the Class C
Shares under the 1933 Act to the end that there will be available for sale such
number of Class C Shares as Mitchell Hutchins may be expected to sell. The Fund
agrees to file, from time to time, such amendments, reports, and other documents
as may be necessary in order that there will be no untrue statement of a
material fact in the Registration Statement, nor any omission of a material fact
which omission would make the statements therein misleading.
(e) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of Class C Shares of each Series for
sale under the securities laws of such states or other jurisdictions as
Mitchell Hutchins and the Fund may approve, and, if necessary or
appropriate in connection therewith, to qualify and maintain the
qualification of the Fund as a broker or dealer in such jurisdictions;
provided that the Fund shall not be required to amend its Trust Instrument
or By-Laws to comply with the laws of any jurisdiction, to maintain an
office in any jurisdiction, to change the terms of the offering of the
Class C Shares in any jurisdiction from the terms set forth in its
Registration Statement, to qualify as a foreign corporation in any
jurisdiction, or to consent to service of process in any jurisdiction other
than with respect to claims arising out of the offering of the Class C
Shares. Mitchell Hutchins shall furnish such information and other
material relating to its affairs and activities as may be required by the
Fund in connection with such qualifications.
7. Expenses of the Fund. The Fund shall bear all costs and expenses of
--------------------
registering the Class C Shares with the Securities and Exchange Commission and
qualifying the Class C shares with state and other regulatory bodies, and shall
assume expenses related to communications with shareholders of each Series,
including (i) fees and disbursements of its counsel and independent public
accountant; (ii) the preparation, filing and printing of registration statements
and/or prospectuses or statements of additional information required under the
federal securities laws; (iii) the preparation and mailing of annual and interim
reports, prospectuses, statements of additional information and proxy materials
to shareholders; and (iv) the qualifications of Class C Shares for sale and of
the Fund as a broker or dealer under the securities laws of such jurisdictions
as shall be selected by the Fund and Mitchell Hutchins pursuant to Paragraph
6(e) hereof, and the costs and expenses payable to each such jurisdiction for
continuing qualification therein.
8. Expenses of Mitchell Hutchins. Mitchell Hutchins shall bear all costs and
-----------------------------
expenses of (i) preparing, printing and distributing any materials not prepared
by the Fund and other
-4-
<PAGE>
materials used by Mitchell Hutchins in connection with the
sale of Class C Shares under this Contract, including the additional cost of
printing copies of prospectuses, statements of additional information, and
annual and interim shareholder reports other than copies thereof required for
distribution to existing shareholders or for filing with any federal or state
securities authorities; (ii) any expenses of advertising incurred by Mitchell
Hutchins in connection with such offering; (iii) the expenses of registration or
qualification of Mitchell Hutchins as a broker or dealer under federal or state
laws and the expenses of continuing such registration or qualification; and (iv)
all compensation paid to Mitchell Hutchins' employees and others for selling
Class C Shares, and all expenses of Mitchell Hutchins, its employees and others
who engage in or support the sale of Class C Shares as may be incurred in
connection with their sales efforts.
9. Indemnification.
---------------
(a) The Fund agrees to indemnify, defend and hold Mitchell Hutchins, its
officers and directors, and any person who controls Mitchell Hutchins
within the meaning of Section 15 of the 1933 Act, free and harmless from
and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which
Mitchell Hutchins, its officers, directors or any such controlling person
may incur under the 1933 Act, or under common law or otherwise, arising out
of or based upon any alleged untrue statement of a material fact contained
in the Registration Statement or arising out of or based upon any alleged
omission to state a material fact required to be stated in the Registration
Statement or necessary to make the statements therein not misleading,
except insofar as such claims, demands, liabilities or expenses arise out
of or are based upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information furnished in writing by Mitchell Hutchins to the Fund for use
in the Registration Statement; provided, however, that this indemnity
agreement shall not inure to the benefit of any person who is also an
officer or trustee of the Fund or who controls the Fund within the meaning
of Section 15 of the 1933 Act, unless a court of competent jurisdiction
shall determine, or it shall have been determined by controlling precedent,
that such result would not be against public policy as expressed in the
1933 Act; and further provided, that in no event shall anything contained
herein be so construed as to protect Mitchell Hutchins against any
liability to the Fund or to the shareholders of any Series to which
Mitchell Hutchins would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations under this
Contract. The Fund shall not be liable to Mitchell Hutchins under this
indemnity agreement with respect to any claim made against Mitchell
Hutchins or any person indemnified unless Mitchell Hutchins or other such
person shall have notified the Fund in writing of the claim within a
reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon
Mitchell Hutchins or such other person (or after Mitchell Hutchins or the
person shall have received notice of service on any designated agent).
However, failure to notify the Fund of any claim shall not relieve the Fund
from any liability which it may have to Mitchell Hutchins or any person
against whom such action is brought otherwise than on account of this
indemnity agreement. The Fund shall be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of any
suit brought to enforce any claims subject to this indemnity agreement. If
the Fund elects to assume the defense of any such claim, the defense shall
be conducted by counsel chosen by the Fund and
-5-
<PAGE>
satisfactory to indemnified defendants in the suit whose approval shall not be
unreasonably withheld. In the event that the Fund elects to assume the defense
of any suit and retain counsel, the indemnified defendants shall bear the fees
and expenses of any additional counsel retained by them. If the Fund does not
elect to assume the defense of a suit, it will reimburse the indemnified
defendants for the reasonable fees and expenses of any counsel retained by the
indemnified defendants. The Fund agrees to notify Mitchell Hutchins promptly of
the commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of any of its Class
C Shares.
(b) Mitchell Hutchins agrees to indemnify, defend, and hold the Fund, its
officers and trustees and any person who controls the Fund within the
meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost
of investigating or defending against such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the Fund, its
trustees or officers, or any such controlling person may incur under the
1933 Act or under common law or otherwise arising out of or based upon any
alleged untrue statement of a material fact contained in information
furnished in writing by Mitchell Hutchins to the Fund for use in the
Registration Statement, arising out of or based upon any alleged omission
to state a material fact in connection with such information required to be
stated in the Registration Statement necessary to make such information not
misleading, or arising out of any agreement between Mitchell Hutchins and
any retail dealer, or arising out of any supplemental sales literature or
advertising used by Mitchell Hutchins in connection with its duties under
this Contract. Mitchell Hutchins shall be entitled to participate, at its
own expense, in the defense or, if it so elects, to assume the defense of
any suit brought to enforce the claim, but if Mitchell Hutchins elects to
assume the defense, the defense shall be conducted by counsel chosen by
Mitchell Hutchins and satisfactory to the indemnified defendants whose
approval shall not be unreasonably withheld. In the event that Mitchell
Hutchins elects to assume the defense of any suit and retain counsel, the
defendants in the suit shall bear the fees and expenses of any additional
counsel retained by them. If Mitchell Hutchins does not elect to assume
the defense of any suit, it will reimburse the indemnified defendants in
the suit for the reasonable fees and expenses of any counsel retained by
them.
10. Limitation of Liability of the Trustees and Shareholders of the Fund.
--------------------------------------------------------------------
The trustees of the Fund and the shareholders of any Series shall not be liable
for any obligations of the Fund or any Series under this Contract, and Mitchell
Hutchins agrees that, in asserting any rights or claims under this Contract, it
shall look only to the assets and property of the Fund or the particular Series
in settlement of such right or claims, and not to such trustees or shareholders.
11. Services Provided to the Fund by Employees of Mitchell Hutchins. Any
---------------------------------------------------------------
person, even though also an officer, director, employee or agent of Mitchell
Hutchins, who may be or become an officer, trustee, employee or agent of the
Fund, shall be deemed, when rendering services to the Fund or acting in any
business of the Fund, to be rendering such services to or acting solely for the
Fund and not as an officer, director, employee or agent or one under the control
or direction of Mitchell Hutchins even though paid by Mitchell Hutchins.
-6-
<PAGE>
12. Duration and Termination.
------------------------
(a) This Contract shall become effective upon the date written above,
provided that, with respect to any Series, this Contract shall not take effect
unless such action has first been approved by vote of a majority of the Board
and by vote of a majority of those trustees of the Fund who are not interested
persons of the Fund, and have no direct or indirect financial interest in the
operation of the Plan relating to the Series or in any agreements related
thereto (all such trustees collectively being referred to herein as the
"Independent Trustees"), cast in person at a meeting called for the purpose of
voting on such action.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for one year from the above written date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or with respect to any given Series by vote of a majority of the
outstanding voting securities of the Class C Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board, by vote of a majority of the Independent Trustees or by vote
of a majority of the outstanding voting securities of the Class C Shares of such
Series on sixty days' written notice to Mitchell Hutchins or by Mitchell
Hutchins at any time, without the payment of any penalty, on sixty days' written
notice to the Fund or such Series. This Contract will automatically terminate in
the event of its assignment.
(d) Termination of this Contract with respect to any given Series shall
in no way affect the continued validity of this Contract or the performance
thereunder with respect to any other Series.
13. Amendment of this Contract. No provision of this Contract may be
--------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
14. Governing Law. This Contract shall be construed in accordance with the
-------------
laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the l940 Act, the latter shall control.
15. Notice. Any notice required or permitted to be given by either party to
------
the other shall be deemed sufficient upon receipt in writing at the other
party's principal offices.
16. Miscellaneous. The captions in this Contract are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto
-7-
<PAGE>
and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person"
and "assignment" shall have the same meaning as such terms have in the l940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
ATTEST: PAINEWEBBER INDEX TRUST
------------------- By:--------------------
ATTEST: MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
------------------ By:--------------------
-8-
<PAGE>
Exhibit No. 5(c)
PAINEWEBBER INDEX TRUST
DISTRIBUTION CONTRACT
CLASS Y SHARES
CONTRACT made as of ____________________, 1998 between PAINEWEBBER INDEX
TRUST, a Delaware business trust ("Fund"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins").
WHEREAS the Fund is registered under the Investment Company Act of l940, as
amended ("l940 Act"), as an open-end management investment company and currently
has four distinct series of shares of beneficial interest ("Series"), which
correspond to distinct portfolios and have been designated as PaineWebber Bond
Index Fund, PaineWebber EAFE Index Fund, PaineWebber S&P 500 Index Fund and
PaineWebber Small Cap Index Fund; and
WHEREAS the Fund's board of trustees ("Board") has established an unlimited
number of shares of beneficial interest of the above-referenced Series as Class
Y shares ("Class Y Shares"); and
WHEREAS the Fund desires to retain Mitchell Hutchins as principal distributor
in connection with the offering and sale of the Class Y Shares of the above-
referenced Series and of such other Series as may hereafter be designated by the
Board and have Class Y Shares established; and
WHEREAS Mitchell Hutchins is willing to act as principal distributor of the
Class Y Shares of each such Series on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Mitchell Hutchins as its exclusive
-----------
agent to be the principal distributor to sell and to arrange for the sale of the
Class Y Shares on the terms and for the period set forth in this Contract.
Mitchell Hutchins hereby accepts such appointment and agrees to act hereunder.
It is understood, however, that this appointment does not preclude sales of the
Class Y Shares directly through the Fund's transfer agent in the manner set
forth in the Registration Statement. As used in this Contract, the term
"Registration Statement" shall mean the currently effective registration
statement of the Fund, and any supplements thereto, under the Securities Act of
1933, as amended ("1933 Act"), and the 1940 Act.
<PAGE>
2. Services and Duties of Mitchell Hutchins.
----------------------------------------
(a) Mitchell Hutchins agrees to sell Class Y Shares on a best efforts basis
from time to time during the term of this Contract as agent for the Fund and
upon the terms described in the Registration Statement.
(b) Upon the later of the date of this Contract or the initial offering of
the Class Y Shares by a Series, Mitchell Hutchins will hold itself available to
receive purchase orders, satisfactory to Mitchell Hutchins, for Class Y Shares
of that Series and will accept such orders on behalf of the Fund as of the time
of receipt of such orders and promptly transmit such orders as are accepted to
the Fund's transfer agent. Purchase orders shall be deemed effective at the time
and in the manner set forth in the Registration Statement.
(c) Mitchell Hutchins in its discretion may enter into agreements to sell
Class Y Shares to such registered and qualified retail dealers, including but
not limited to PaineWebber Incorporated ("PaineWebber"), as it may select. In
making agreements with such dealers, Mitchell Hutchins shall act only as
principal and not as agent for the Fund.
(d) The offering price of the Class Y Shares of each Series shall be the
net asset value per Share as next determined by the Fund following receipt of an
order at Mitchell Hutchins' principal office. The Fund shall promptly furnish
Mitchell Hutchins with a statement of each computation of net asset value.
(e) Mitchell Hutchins shall not be obligated to sell any certain number of
Class Y Shares.
(f) To facilitate redemption of Class Y Shares by shareholders directly or
through dealers, Mitchell Hutchins is authorized but not required on behalf of
the Fund to repurchase Class Y Shares presented to it by shareholders and
dealers at the price determined in accordance with, and in the manner set forth
in, the Registration Statement.
(g) Mitchell Hutchins shall have the right to use any list of shareholders
of the Fund or any other list of investors which it obtains in connection with
its provision of services under this Contract; provided, however, that Mitchell
Hutchins shall not sell or knowingly provide such list or lists to any
unaffiliated person.
3. Authorization to Enter into Exclusive Dealer Contracts and to Delegate
----------------------------------------------------------------------
Duties as Distributor. With respect to the Class Y Shares of any or all Series,
- ---------------------
Mitchell Hutchins may enter into an exclusive dealer agreement with PaineWebber
or any other registered and qualified dealer with respect to sales of the Class
Y Shares. In a separate contract or as part of any such exclusive dealer
agreement, Mitchell Hutchins also may delegate to PaineWebber or another
registered and qualified dealer ("sub-distributor") any or all of its duties
specified in this Contract, provided that such separate contract or exclusive
dealer agreement imposes on the sub-distributor bound thereby all applicable
duties and conditions to which Mitchell Hutchins is subject under this Contract,
and further provided that such separate contract or exclusive dealer agreement
meets all requirements of the 1940 Act and rules thereunder.
-2-
<PAGE>
4. Services Not Exclusive. The services furnished by Mitchell Hutchins
----------------------
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a trustee, officer or employee of the Fund, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar or a dissimilar nature.
5. Compensation and Reimbursement of Distribution Expenses. The Fund shall
-------------------------------------------------------
have no obligation to compensate or reimburse Mitchell Hutchins for any services
performed by it hereunder.
6. Duties of the Fund.
-------------------
(a) The Fund reserves the right at any time to withdraw offering Class Y
Shares of any or all Series by written notice to Mitchell Hutchins at its
principal office.
(b) The Fund shall determine in its sole discretion whether certificates
shall be issued with respect to the Class Y Shares. If the Fund has determined
that certificates shall be issued, the Fund will not cause certificates
representing Class Y Shares to be issued unless so requested by shareholders. If
such request is transmitted by Mitchell Hutchins, the Fund will cause
certificates evidencing Class Y Shares to be issued in such names and
denominations as Mitchell Hutchins shall from time to time direct.
(c) The Fund shall keep Mitchell Hutchins fully informed of its affairs
and shall make available to Mitchell Hutchins copies of all information,
financial statements, and other papers which Mitchell Hutchins may reasonably
request for use in connection with the distribution of Class Y Shares,
including, without limitation, certified copies of any financial statements
prepared for the Fund by its independent public accountant and such reasonable
number of copies of the most current prospectus, statement of additional
information, and annual and interim reports of any Series as Mitchell Hutchins
may request, and the Fund shall cooperate fully in the efforts of Mitchell
Hutchins to sell and arrange for the sale of the Class Y Shares of the Series
and in the performance of Mitchell Hutchins under this Contract.
(d) The Fund shall take, from time to time, all necessary action,
including payment of the related filing fee, as may be necessary to register the
Class Y Shares under the 1933 Act to the end that there will be available for
sale such number of Class Y Shares as Mitchell Hutchins may be expected to sell.
The Fund agrees to file, from time to time, such amendments, reports, and other
documents as may be necessary in order that there will be no untrue statement of
a material fact in the Registration Statement, nor any omission of a material
fact which omission would make the statements therein misleading.
(e) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of Class Y Shares of each Series for sale
under the securities laws of such states or other jurisdictions as Mitchell
Hutchins and the Fund may approve, and, if necessary or appropriate in
connection therewith, to qualify and maintain the qualification of the
-3-
<PAGE>
Fund as a broker or dealer in such jurisdictions; provided that the Fund shall
not be required to amend its Trust Instrument or By-Laws to comply with the laws
of any jurisdiction, to maintain an office in any jurisdiction, to change the
terms of the offering of the Class Y Shares in any jurisdiction from the terms
set forth in its Registration Statement, to qualify as a foreign corporation in
any jurisdiction, or to consent to service of process in any jurisdiction other
than with respect to claims arising out of the offering of the Class Y Shares.
Mitchell Hutchins shall furnish such information and other material relating to
its affairs and activities as may be required by the Fund in connection with
such qualifications.
7. Expenses of the Fund. The Fund shall bear all costs and expenses of
---------------------
registering the Class Y Shares with the Securities and Exchange Commission and
qualifying the Class Y shares with state and other regulatory bodies, and shall
assume expenses related to communications with shareholders of each Series,
including (i) fees and disbursements of its counsel and independent public
accountant; (ii) the preparation, filing and printing of registration statements
and/or prospectuses or statements of additional information required under the
federal securities laws; (iii) the preparation and mailing of annual and interim
reports, prospectuses, statements of additional information and proxy materials
to shareholders; and (iv) the qualifications of Class Y Shares for sale and of
the Fund as a broker or dealer under the securities laws of such jurisdictions
as shall be selected by the Fund and Mitchell Hutchins pursuant to Paragraph
6(e) hereof, and the costs and expenses payable to each such jurisdiction for
continuing qualification therein.
8. Expenses of Mitchell Hutchins. Mitchell Hutchins shall bear all costs and
-----------------------------
expenses of (i) preparing, printing and distributing any materials not prepared
by the Fund and other materials used by Mitchell Hutchins in connection with the
sale of Class Y Shares under this Contract, including the additional cost of
printing copies of prospectuses, statements of additional information, and
annual and interim shareholder reports other than copies thereof required for
distribution to existing shareholders or for filing with any federal or state
securities authorities; (ii) any expenses of advertising incurred by Mitchell
Hutchins in connection with such offering; (iii) the expenses of registration or
qualification of Mitchell Hutchins as a broker or dealer under federal or state
laws and the expenses of continuing such registration or qualification; and (iv)
all compensation paid to Mitchell Hutchins' employees and others for selling
Class Y Shares, and all expenses of Mitchell Hutchins, its employees and others
who engage in or support the sale of Class Y Shares as may be incurred in
connection with their sales efforts.
9. Indemnification.
---------------
(a) The Fund agrees to indemnify, defend and hold Mitchell Hutchins, its
officers and directors, and any person who controls Mitchell Hutchins within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Mitchell Hutchins, its officers,
directors or any such controlling person may incur under the 1933 Act, or under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement or arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement or necessary to make the
-4-
<PAGE>
statements therein not misleading, except insofar as such claims, demands,
liabilities or expenses arise out of or are based upon any such untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by Mitchell Hutchins to the
Fund for use in the Registration Statement; provided, however, that this
indemnity agreement shall not inure to the benefit of any person who is also an
officer or trustee of the Fund or who controls the Fund within the meaning of
Section 15 of the 1933 Act, unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling precedent, that such
result would not be against public policy as expressed in the 1933 Act; and
further provided, that in no event shall anything contained herein be so
construed as to protect Mitchell Hutchins against any liability to the Fund or
to the shareholders of any Series to which Mitchell Hutchins would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations under this Contract. The Fund shall not be liable to Mitchell
Hutchins under this indemnity agreement with respect to any claim made against
Mitchell Hutchins or any person indemnified unless Mitchell Hutchins or other
such person shall have notified the Fund in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon Mitchell
Hutchins or such other person (or after Mitchell Hutchins or the person shall
have received notice of service on any designated agent). However, failure to
notify the Fund of any claim shall not relieve the Fund from any liability which
it may have to Mitchell Hutchins or any person against whom such action is
brought otherwise than on account of this indemnity agreement. The Fund shall be
entitled to participate at its own expense in the defense or, if it so elects,
to assume the defense of any suit brought to enforce any claims subject to this
indemnity agreement. If the Fund elects to assume the defense of any such claim,
the defense shall be conducted by counsel chosen by the Fund and satisfactory to
indemnified defendants in the suit whose approval shall not be unreasonably
withheld. In the event that the Fund elects to assume the defense of any suit
and retain counsel, the indemnified defendants shall bear the fees and expenses
of any additional counsel retained by them. If the Fund does not elect to assume
the defense of a suit, it will reimburse the indemnified defendants for the
reasonable fees and expenses of any counsel retained by the indemnified
defendants. The Fund agrees to notify Mitchell Hutchins promptly of the
commencement of any litigation or proceedings against it or any of its officers
or trustees in connection with the issuance or sale of any of its Class Y
Shares.
(b) Mitchell Hutchins agrees to indemnify, defend, and hold the Fund, its
officers and trustees, and any person who controls the Fund within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending against such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which the Fund, its trustees or officers, or
any such controlling person may incur under the 1933 Act or under common law or
otherwise arising out of or based upon any alleged untrue statement of a
material fact contained in information furnished in writing by Mitchell Hutchins
to the Fund for use in the Registration Statement, arising out of or based upon
any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement necessary to
make such information not misleading, or arising out of any agreement between
Mitchell Hutchins and any retail dealer, or arising out of any supplemental
sales literature or advertising used by Mitchell
-5-
<PAGE>
Hutchins in connection with its duties under this Contract. Mitchell Hutchins
shall be entitled to participate, at its own expense, in the defense or, if it
so elects, to assume the defense of any suit brought to enforce the claim, but
if Mitchell Hutchins elects to assume the defense, the defense shall be
conducted by counsel chosen by Mitchell Hutchins and satisfactory to the
indemnified defendants whose approval shall not be unreasonably withheld. In the
event that Mitchell Hutchins elects to assume the defense of any suit and retain
counsel, the defendants in the suit shall bear the fees and expenses of any
additional counsel retained by them. If Mitchell Hutchins does not elect to
assume the defense of any suit, it will reimburse the indemnified defendants in
the suit for the reasonable fees and expenses of any counsel retained by them.
10. Limitation of Liability of the Trustees and Shareholders of the Fund.
--------------------------------------------------------------------
The trustees of the Fund and the shareholders of any Series shall not be liable
for any obligations of the Fund or any Series under this Contract, and Mitchell
Hutchins agrees that, in asserting any rights or claims under this Contract, it
shall look only to the assets and property of the Fund or the particular Series
in settlement of such right or claims, and not to such trustees or shareholders.
11. Services Provided to the Fund by Employees of Mitchell Hutchins. Any
---------------------------------------------------------------
person, even though also an officer, director, employee or agent of Mitchell
Hutchins, who may be or become an officer, trustee, employee or agent of the
Fund, shall be deemed, when rendering services to the Fund or acting in any
business of the Fund, to be rendering such services to or acting solely for the
Fund and not as an officer, director, employee or agent or one under the control
or direction of Mitchell Hutchins even though paid by Mitchell Hutchins.
12. Duration and Termination.
------------------------
(a) This Contract shall become effective upon the date written above,
provided that, with respect to any Series, this Contract shall not take effect
unless such action has first been approved by vote of a majority of the Board
and by vote of a majority of those trustees of the Fund who are not interested
persons of the Fund, and have no direct or indirect financial interest in this
Contract or in any agreements related thereto (all such Trustees collectively
being referred to herein as the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for one year from the above written date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or with respect to any given Series by vote of a majority of the
outstanding voting securities of the Class Y Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board, by vote of a majority of the Independent Trustees or by vote
of a majority of the outstanding voting securities of the Class Y Shares of such
Series on sixty days' written
-6-
<PAGE>
notice to Mitchell Hutchins or by Mitchell Hutchins at any time, without the
payment of any penalty, on sixty days' written notice to the Fund or such
Series. This Contract will automatically terminate in the event of its
assignment.
(d) Termination of this Contract with respect to any given Series shall
in no way affect the continued validity of this Contract or the performance
thereunder with respect to any other Series.
13. Amendment of this Contract. No provision of this Contract may be
--------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
14. Governing Law. This Contract shall be construed in accordance with the
-------------
laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the l940 Act, the latter shall control.
15. Notice. Any notice required or permitted to be given by either party to
------
the other shall be deemed sufficient upon receipt in writing at the other
party's principal offices.
16. Miscellaneous. The captions in this Contract are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person"
and "assignment" shall have the same meaning as such terms have in the l940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
ATTEST: PAINEWEBBER INDEX TRUST
By:
------------------------- ------------------------
ATTEST: MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
By:
------------------------- ------------------------
-7-
<PAGE>
Exhibit No. 5(d)
EXCLUSIVE DEALER AGREEMENT
CLASS A SHARES OF PAINEWEBBER INDEX TRUST
AGREEMENT made as of _____________________, 1998, between Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), a Delaware corporation, and
PaineWebber Incorporated ("PaineWebber"), a Delaware corporation.
WHEREAS PaineWebber Index Trust ("Fund") is a Delaware business trust
registered under the Investment Company Act of 1940, as amended ("1940 Act"), as
an open-end management investment company; and
WHEREAS the Fund currently has four distinct series of shares of beneficial
interest ("Series"), which correspond to distinct portfolios and have been
designated as PaineWebber Bond Index Fund, PaineWebber EAFE Index Fund,
PaineWebber S&P 500 Index Fund and PaineWebber Small Cap Index Fund; and
WHEREAS the Fund's board of trustees ("Board") has established an unlimited
number of shares of beneficial interest of the above-referenced Series as Class
A shares ("Class A Shares") and has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the 1940 Act ("Plan") with respect to the Class A Shares of the
above-referenced Series and of such other Series as may hereafter be designated
by the Board and have Class A Shares established; and
WHEREAS Mitchell Hutchins has entered into a Distribution Contract with the
Fund ("Distribution Contract") pursuant to which Mitchell Hutchins serves as
principal distributor in connection with the offering and sale of the Class A
Shares of each such Series; and
WHEREAS Mitchell Hutchins desires to retain PaineWebber as its exclusive agent
in connection with the offering and sale of the Class A Shares of each Series
and to delegate to PaineWebber performance of certain of the services which
Mitchell Hutchins provides to the Fund under the Distribution Contract; and
WHEREAS PaineWebber is willing to act as Mitchell Hutchins' exclusive agent in
connection with the offering and sale of such Class A Shares and to perform such
services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, Mitchell Hutchins and PaineWebber agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints PaineWebber as its
-----------
exclusive agent to sell and to arrange for the sale of the Class A Shares on the
terms and for the period set forth in this Agreement. Mitchell Hutchins also
appoints PaineWebber as its agent for the performance of certain other services
set forth herein which Mitchell Hutchins provides to the
<PAGE>
Fund under the Distribution Contract. PaineWebber hereby accepts such
appointments and agrees to act hereunder. It is understood, however, that these
appointments do not preclude sales of Class A Shares directly through the Fund's
transfer agent in the manner set forth in the Registration Statement. As used in
this Agreement, the term "Registration Statement" shall mean the currently
effective Registration Statement of the Fund, and any supplements thereto, under
the Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act.
2. Services, Duties and Representations of PaineWebber.
---------------------------------------------------
(a) PaineWebber agrees to sell the Class A Shares on a best efforts basis
from time to time during the term of this Agreement as agent for Mitchell
Hutchins and upon the terms described in this Agreement and the Registration
Statement.
(b) Upon the later of the date of this Agreement or the initial offering
of Class A Shares by a Series to the public, PaineWebber will hold itself
available to receive orders, satisfactory to PaineWebber and Mitchell Hutchins,
for the purchase of Class A Shares and will accept such orders on behalf of
Mitchell Hutchins and the Fund as of the time of receipt of such orders and will
promptly transmit such orders as are accepted to the Fund's transfer agent.
Purchase orders shall be deemed effective at the time and in the manner set
forth in the Registration Statement.
(c) PaineWebber in its discretion may sell Class A Shares to (i) its
correspondent firms and customers of such firms and (ii) such other registered
and qualified retail dealers as it may select, subject to the approval of
Mitchell Hutchins. In making agreements with such dealers, PaineWebber shall act
only as principal and not as agent for Mitchell Hutchins or the Fund.
(d) The offering price of the Class A Shares of each Series shall be the
net asset value per Share as next determined by the Fund following receipt of an
order at PaineWebber's principal office, plus the applicable initial sales
charge, if any, as set forth in the Registration Statement. Mitchell Hutchins
shall promptly furnish or arrange for the furnishing to PaineWebber of a
statement of each computation of net asset value.
(e) PaineWebber shall not be obligated to sell any certain number of
Class A Shares.
(f) To facilitate redemption of Class A Shares by shareholders directly or
through dealers, PaineWebber is authorized but not required on behalf of
Mitchell Hutchins and the Fund to repurchase Class A Shares presented to it by
shareholders, its correspondent firms and other dealers at the price determined
in accordance with, and in the manner set forth in, the Registration Statement.
Such price shall reflect the subtraction of the applicable contingent deferred
sales charge, if any, computed in accordance with and in the manner set forth in
the Registration Statement.
(g) PaineWebber shall provide ongoing shareholder services, which include
responding to shareholder inquiries, providing shareholders with information on
their investments
-2-
<PAGE>
in the Class A Shares and any other services now or hereafter deemed to be
appropriate subjects for the payments of "service fees" under Rule 2830 of the
Conduct Rules of the National Association of Securities Dealers, Inc. ("NASD")
(collectively, "service activities").
(h) PaineWebber represents and warrants that: (i) it is a member in good
standing of the NASD and agrees to abide by the Conduct Rules of the NASD; (ii)
it is registered as a broker-dealer with the Securities and Exchange Commission;
(iii) it will maintain any filings and licenses required by federal and state
laws to conduct the business contemplated under this Agreement; and (iv) it will
comply with all federal and state laws and regulations applicable to the offer
and sale of the Class A Shares.
(i) PaineWebber shall not incur any debts or obligations on behalf of
Mitchell Hutchins or the Fund. PaineWebber shall bear all costs that it incurs
in selling the Class A Shares and in complying with the terms and conditions of
this Agreement as more specifically set forth in paragraph 8.
(j) PaineWebber shall not permit any employee or agent to offer or sell
Class A Shares to the public unless such person is duly licensed under
applicable federal and state laws and regulations.
(k) PaineWebber shall not (i) furnish any information or make any
representations concerning the Class A Shares other than those contained in the
Registration Statement or in sales literature or advertising that has been
prepared or approved by Mitchell Hutchins as provided in paragraph 6 or (ii)
offer or sell the Class A Shares in jurisdictions in which they have not been
approved for offer and sale.
3. Services Not Exclusive. The services furnished by PaineWebber hereunder
----------------------
are not to be deemed exclusive and PaineWebber shall be free to furnish similar
services to others so long as its services under this Agreement are not impaired
thereby. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of PaineWebber who may also be a director,
trustee, officer or employee of Mitchell Hutchins or the Fund, to engage in any
other business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar or a
dissimilar nature.
4. Compensation.
------------
(a) As compensation for its service activities under this Agreement with
respect to the Class A Shares, Mitchell Hutchins shall pay to PaineWebber
service fees with respect to Class A Shares maintained in shareholder accounts
serviced by PaineWebber employees, correspondent firms and other dealers in such
amounts as Mitchell Hutchins and PaineWebber may from time to time agree upon.
(b) As compensation for its activities under this Agreement with respect
to the distribution of the Class A Shares, PaineWebber shall retain that portion
of the offering price constituting the Discount to Selected Dealers
("Discount"), if any, set forth in the Registration Statement for Class A shares
sold with an initial sales charge under this Agreement. PaineWebber
-3-
<PAGE>
is authorized to collect the gross proceeds derived from the sale of such Class
A Shares; remit the net asset value thereof to the Fund's Transfer Agent; remit
to Mitchell Hutchins the difference between the offering price of the Class A
Shares and the applicable Discount; and retain said Discount. Whether the
offering price of the Class A Shares includes any initial sales charge out of
which a Discount may be retained by PaineWebber shall be determined in
accordance with the Registration Statement.
(c) Mitchell Hutchins shall pay to PaineWebber such commissions and other
compensation for sales of the Class A Shares by PaineWebber employees,
correspondent firms and other dealers as Mitchell Hutchins and PaineWebber may
from time to time agree upon.
(d) Mitchell Hutchins' obligation to pay compensation to PaineWebber as
agreed upon pursuant to this paragraph 4 is not contingent upon receipt by
Mitchell Hutchins of any compensation from the Fund or Series. Mitchell Hutchins
shall advise the Board of any agreements or revised agreements as to
compensation to be paid by Mitchell Hutchins to PaineWebber at their first
regular meeting held after such agreement but shall not be required to obtain
prior approval for such agreements from the Board.
(e) PaineWebber may reallow all or any part of the service fees,
commissions or other compensation which it is paid under this Agreement to its
correspondent firms or other dealers, in such amounts as PaineWebber may from
time to time determine.
5. Duties of Mitchell Hutchins.
---------------------------
(a) It is understood that the Fund reserves the right at any time to
withdraw all offerings of Class A Shares of any or all Series by written notice
to Mitchell Hutchins.
(b) Mitchell Hutchins shall keep PaineWebber fully informed of the Fund's
affairs and shall make available to PaineWebber copies of all information,
financial statements and other papers which PaineWebber may reasonably request
for use in connection with the distribution of Class A Shares, including,
without limitation, certified copies of any financial statements prepared for
the Fund by its independent public accountant and such reasonable number of
copies of the most current prospectus, statement of additional information, and
annual and interim reports of any Series as PaineWebber may request, and
Mitchell Hutchins shall cooperate fully in the efforts of PaineWebber to sell
and arrange for the sale of the Class A Shares and in the performance of
PaineWebber under this Agreement.
(c) Mitchell Hutchins shall comply with all state and federal laws and
regulations applicable to a distributor of the Class A Shares.
6. Advertising. Mitchell Hutchins agrees to make available such sales and
-----------
advertising materials relating to the Class A Shares as Mitchell Hutchins in its
discretion determines appropriate. PaineWebber agrees to submit all sales and
advertising materials developed by it relating to the Class A Shares to Mitchell
Hutchins for approval. PaineWebber agrees not to publish or distribute such
materials to the public without first receiving such approval in writing.
-4-
<PAGE>
Mitchell Hutchins shall assist PaineWebber in obtaining any regulatory approvals
of such materials that may be required of or desired by PaineWebber.
7. Records. PaineWebber agrees to maintain all records required by
-------
applicable state and federal laws and regulations relating to the offer and sale
of the Class A Shares. Mitchell Hutchins and its representatives shall have
access to such records during normal business hours for review or copying.
8. Expenses of PaineWebber. PaineWebber shall bear all costs and expenses of
-----------------------
(i) preparing, printing, and distributing any materials not prepared by the Fund
or Mitchell Hutchins and other materials used by PaineWebber in connection with
its offering of Class A Shares for sale to the public; (ii) any expenses of
advertising incurred by PaineWebber in connection with such offering; (iii) the
expenses of registration or qualification of PaineWebber as a dealer or broker
under federal or state laws and the expenses of continuing such registration or
qualification; and (iv) all compensation paid to PaineWebber's Investment
Executives or other employees and others for selling Class A Shares, and all
expenses of PaineWebber, its Investment Executives and employees and others who
engage in or support the sale of Class A Shares as may be incurred in connection
with their sales efforts. PaineWebber shall bear such additional costs and
expenses as it and Mitchell Hutchins may agree upon, such agreement to be
evidenced in a writing signed by both parties. Mitchell Hutchins shall advise
the Board of any such agreement as to additional costs and expenses borne by
PaineWebber at their first regular meeting held after such agreement but shall
not be required to obtain prior approval for such agreements from the Board.
9. Indemnification.
---------------
(a) Mitchell Hutchins agrees to indemnify, defend, and hold PaineWebber,
its officers and directors, and any person who controls PaineWebber within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands, or liabilities and any counsel
fees incurred in connection therewith) which PaineWebber, its officers,
directors, or any such controlling person may incur under the 1933 Act, under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement; arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement thereof or necessary to make the
statements in the Registration Statement thereof not misleading; or arising out
of any sales or advertising materials with respect to the Class A Shares
provided by Mitchell Hutchins to PaineWebber. However, this indemnity agreement
shall not apply to any claims, demands, liabilities, or expenses that arise out
of or are based upon any such untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
furnished in writing by PaineWebber to Mitchell Hutchins or the Fund for use in
the Registration Statement or in any sales or advertising material; and further
provided, that in no event shall anything contained herein be so construed as to
protect PaineWebber against any liability to Mitchell Hutchins or the Fund or to
the shareholders of any Series to which PaineWebber would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement.
-5-
<PAGE>
(b) PaineWebber agrees to indemnify, defend, and hold Mitchell Hutchins
and its officers and directors, the Fund, its officers and trustees, and any
person who controls Mitchell Hutchins or the Fund within the meaning of Section
15 of the 1933 Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of investigating or
defending against such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which Mitchell Hutchins or its officers or
directors or the Fund, its officers or trustees, or any such controlling person
may incur under the 1933 Act, under common law or otherwise arising out of or
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by PaineWebber to Mitchell Hutchins or the Fund
for use in the Registration Statement; arising out of or based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration Statement or necessary to make such information
not misleading; or arising out of any agreement between PaineWebber and a
correspondent firm or any other retail dealer; or arising out of any sales or
advertising material used by PaineWebber in connection with its duties under
this Agreement.
10. Duration and Termination.
------------------------
(a) This Agreement shall become effective upon the date written above,
provided that, with respect to any Series, this Contract shall not take effect
unless such action has first been approved by vote of a majority of the Board
and by vote of a majority of those trustees of the Fund who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements related thereto (all such trustees
collectively being referred to herein as the "Independent Trustees"), cast in
person at a meeting called for the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for one year from the above written date. Thereafter, if not
terminated, this Agreement shall continue automatically for successive periods
of twelve months each, provided that such continuance is specifically approved
at least annually (i) by a vote of a majority of the Independent Trustees, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or with respect to any given Series by vote of a majority of
the outstanding voting securities of the Class A Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Agreement may be terminated at any time, without the payment of any penalty, by
either party, upon the giving of 30 days' written notice. Such notice shall be
deemed to have been given on the date it is received in writing by the other
party or any officer thereof. This Agreement may also be terminated at any time,
without the payment of any penalty, by vote of the Board, by vote of a majority
of the Independent Trustees or by vote of a majority of the outstanding voting
securities of the Class A Shares of such Series on 30 days' written notice to
Mitchell Hutchins and PaineWebber.
(d) Termination of this Agreement with respect to any given Series shall
in no way affect the continued validity of this Agreement or the performance
thereunder with respect to
-6-
<PAGE>
any other Series. This Agreement will automatically terminate in the event of
its assignment or in the event that the Distribution Contract is terminated.
(e) Notwithstanding the foregoing, Mitchell Hutchins may terminate this
Agreement without penalty, such termination to be effective upon the giving of
written notice to PaineWebber in the event that the Plan is terminated or is
amended to reduce the compensation payable to Mitchell Hutchins thereunder or in
the event that the Registration Statement is amended so as to reduce the amount
of compensation payable to Mitchell Hutchins under the Distribution Contract,
provided that Mitchell Hutchins gives notice of termination pursuant to this
provision within 90 days of such amendment or termination of the Plan or
amendment of the Registration Statement.
11. Amendment of this Agreement. No provision of this Agreement may be
---------------------------
amended, changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
12. Use of PaineWebber Name. PaineWebber hereby authorizes Mitchell Hutchins
-----------------------
to use the name "PaineWebber Incorporated" or any name derived therefrom in any
sales or advertising materials prepared and/or used by Mitchell Hutchins in
connection with its duties as distributor of the Class A Shares, but only for so
long as this Agreement or any extension, renewal or amendment hereof remains in
effect, including any similar agreement with any organization which shall have
succeeded to the business of PaineWebber.
13. Governing Law. This Agreement shall be construed in accordance with the
-------------
laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the 1940 Act, the latter shall control.
14. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meaning as such terms
have in the 1940 Act.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first written
above.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: By:
--------------------------- ----------------------
PAINEWEBBER INCORPORATED
Attest: By:
--------------------------- ----------------------
-8-
<PAGE>
Exhibit No. 5(e)
EXCLUSIVE DEALER AGREEMENT
CLASS C SHARES OF PAINEWEBBER INDEX TRUST
AGREEMENT made as of _____________________, 1998, between Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), a Delaware corporation, and
PaineWebber Incorporated ("PaineWebber"), a Delaware corporation.
WHEREAS PaineWebber Index Trust ("Fund") is a Delaware business trust
registered under the Investment Company Act of 1940, as amended ("1940 Act"), as
an open-end management investment company; and
WHEREAS the Fund currently has four distinct series of shares of
beneficial interest ("Series"), which correspond to distinct portfolios and have
been designated as PaineWebber Bond Index Fund, PaineWebber EAFE Index Fund,
PaineWebber S&P 500 Index Fund and PaineWebber Small Cap Index Fund; and
WHEREAS the Fund's board of trustees ("Board") has established an unlimited
number of shares of beneficial interest of the above-referenced Series as Class
C shares ("Class C Shares") and has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the 1940 Act ("Plan") with respect to the Class C Shares of the
above-referenced Series and of such other Series as may hereafter be designated
by the Board and have Class C Shares established; and
WHEREAS Mitchell Hutchins has entered into a Distribution Contract with the
Fund ("Distribution Contract") pursuant to which Mitchell Hutchins serves as
principal distributor in connection with the offering and sale of the Class C
Shares of each such Series; and
WHEREAS Mitchell Hutchins desires to retain PaineWebber as its exclusive agent
in connection with the offering and sale of the Class C Shares of each Series
and to delegate to PaineWebber performance of certain of the services which
Mitchell Hutchins provides to the Fund under the Distribution Contract; and
WHEREAS PaineWebber is willing to act as Mitchell Hutchins' exclusive agent in
connection with the offering and sale of such Class C Shares and to perform such
services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, Mitchell Hutchins and PaineWebber agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints PaineWebber as its
-----------
exclusive agent to sell and to arrange for the sale of the Class C Shares on the
terms and for the period set forth in this Agreement. Mitchell Hutchins also
appoints PaineWebber as its agent for the performance of certain other services
set forth herein which Mitchell Hutchins provides to the
<PAGE>
Fund under the Distribution Contract. PaineWebber hereby accepts such
appointments and agrees to act hereunder. It is understood, however, that these
appointments do not preclude sales of Class C Shares directly through the Fund's
transfer agent in the manner set forth in the Registration Statement. As used in
this Agreement, the term "Registration Statement" shall mean the currently
effective Registration Statement of the Fund, and any supplements thereto, under
the Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act.
2. Services, Duties and Representations of PaineWebber.
---------------------------------------------------
(a) PaineWebber agrees to sell the Class C Shares on a best efforts basis
from time to time during the term of this Agreement as agent for Mitchell
Hutchins and upon the terms described in this Agreement and the Registration
Statement.
(b) Upon the later of the date of this Agreement or the initial offering
of Class C Shares by a Series to the public, PaineWebber will hold itself
available to receive orders, satisfactory to PaineWebber and Mitchell Hutchins,
for the purchase of Class C Shares and will accept such orders on behalf of
Mitchell Hutchins and the Fund as of the time of receipt of such orders and will
promptly transmit such orders as are accepted to the Fund's transfer agent.
Purchase orders shall be deemed effective at the time and in the manner set
forth in the Registration Statement.
(c) PaineWebber in its discretion may sell Class C Shares to (i) its
correspondent firms and customers of such firms and (ii) such other registered
and qualified retail dealers as it may select, subject to the approval of
Mitchell Hutchins. In making agreements with such dealers, PaineWebber shall act
only as principal and not as agent for Mitchell Hutchins or the Fund.
(d) The offering price of the Class C Shares of each Series shall be the
net asset value per Share as next determined by the Fund following receipt of an
order at PaineWebber's principal office. Mitchell Hutchins shall promptly
furnish or arrange for the furnishing to PaineWebber of a statement of each
computation of net asset value.
(e) PaineWebber shall not be obligated to sell any certain number of Class
C Shares.
(f) To facilitate redemption of Class C Shares by shareholders directly or
through dealers, PaineWebber is authorized but not required on behalf of
Mitchell Hutchins and the Fund to repurchase Class C Shares presented to it by
shareholders, its correspondent firms and other dealers at the price determined
in accordance with, and in the manner set forth in, the Registration Statement.
Such price shall reflect the subtraction of the applicable contingent deferred
sales charge, if any, computed in accordance with and in the manner set forth in
the Registration Statement.
(g) PaineWebber shall provide ongoing shareholder services, which include
responding to shareholder inquiries, providing shareholders with information on
their investments in the Class C Shares and any other services now or hereafter
deemed to be appropriate subjects
2
<PAGE>
for the payments of "service fees" under Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc. ("NASD") (collectively,
"service activities").
(h) PaineWebber represents and warrants that: (i) it is a member in good
standing of the NASD and agrees to abide by the Conduct Rules of the NASD; (ii)
it is registered as a broker-dealer with the Securities and Exchange Commission;
(iii) it will maintain any filings and licenses required by federal and state
laws to conduct the business contemplated under this Agreement; and (iv) it will
comply with all federal and state laws and regulations applicable to the offer
and sale of the Class C Shares.
(i) PaineWebber shall not incur any debts or obligations on behalf of
Mitchell Hutchins or the Fund. PaineWebber shall bear all costs that it incurs
in selling the Class C Shares and in complying with the terms and conditions of
this Agreement as more specifically set forth in paragraph 8.
(j) PaineWebber shall not permit any employee or agent to offer or sell
Class C Shares to the public unless such person is duly licensed under
applicable federal and state laws and regulations.
(k) PaineWebber shall not (i) furnish any information or make any
representations concerning the Class C Shares other than those contained in the
Registration Statement or in sales literature or advertising that has been
prepared or approved by Mitchell Hutchins as provided in paragraph 6 or (ii)
offer or sell the Class C Shares in jurisdictions in which they have not been
approved for offer and sale.
3. Services Not Exclusive. The services furnished by PaineWebber hereunder
----------------------
are not to be deemed exclusive and PaineWebber shall be free to furnish similar
services to others so long as its services under this Agreement are not impaired
thereby. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of PaineWebber who may also be a director,
trustee, officer or employee of Mitchell Hutchins or the Fund, to engage in any
other business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar or a
dissimilar nature.
4. Compensation.
------------
(a) As compensation for its service activities under this Agreement with
respect to the Class C Shares, Mitchell Hutchins shall pay to PaineWebber
service fees with respect to Class C Shares maintained in shareholder accounts
serviced by PaineWebber employees, correspondent firms and other dealers in such
amounts as Mitchell Hutchins and PaineWebber may from time to time agree upon.
(b) As compensation for its activities under this Agreement with respect to
the distribution of the Class C Shares, Mitchell Hutchins shall pay to
PaineWebber such commissions for sales of the Class C shares by PaineWebber
employees, correspondent firms and other dealers and such other compensation as
Mitchell Hutchins and PaineWebber may from time to time agree upon.
3
<PAGE>
(c) Mitchell Hutchins' obligation to pay compensation to PaineWebber as
agreed upon pursuant to this paragraph 4 is not contingent upon receipt by
Mitchell Hutchins of any compensation from the Fund or Series. Mitchell Hutchins
shall advise the Board of any agreements or revised agreements as to
compensation to be paid by Mitchell Hutchins to PaineWebber at their first
regular meeting held after such agreement but shall not be required to obtain
prior approval for such agreements from the Board.
(d) PaineWebber may reallow all or any part of the service fees,
commissions or other compensation which it is paid under this Agreement to its
correspondent firms or other dealers, in such amounts as PaineWebber may from
time to time determine.
5. Duties of Mitchell Hutchins.
---------------------------
(a) It is understood that the Fund reserves the right at any time to
withdraw all offerings of Class C Shares of any or all Series by written notice
to Mitchell Hutchins.
(b) Mitchell Hutchins shall keep PaineWebber fully informed of the Fund's
affairs and shall make available to PaineWebber copies of all information,
financial statements and other papers which PaineWebber may reasonably request
for use in connection with the distribution of Class C Shares, including,
without limitation, certified copies of any financial statements prepared for
the Fund by its independent public accountant and such reasonable number of
copies of the most current prospectus, statement of additional information, and
annual and interim reports of any Series as PaineWebber may request, and
Mitchell Hutchins shall cooperate fully in the efforts of PaineWebber to sell
and arrange for the sale of the Class C Shares and in the performance of
PaineWebber under this Agreement.
(c) Mitchell Hutchins shall comply with all state and federal laws and
regulations applicable to a distributor of the Class C Shares.
6. Advertising. Mitchell Hutchins agrees to make available such sales and
-----------
advertising materials relating to the Class C Shares as Mitchell Hutchins in its
discretion determines appropriate. PaineWebber agrees to submit all sales and
advertising materials developed by it relating to the Class C Shares to Mitchell
Hutchins for approval. PaineWebber agrees not to publish or distribute such
materials to the public without first receiving such approval in writing.
Mitchell Hutchins shall assist PaineWebber in obtaining any regulatory approvals
of such materials that may be required of or desired by PaineWebber.
7. Records. PaineWebber agrees to maintain all records required by
-------
applicable state and federal laws and regulations relating to the offer and sale
of the Class C Shares. Mitchell Hutchins and its representatives shall have
access to such records during normal business hours for review or copying.
8. Expenses of PaineWebber. PaineWebber shall bear all costs and expenses of
-----------------------
(i) preparing, printing, and distributing any materials not prepared by the Fund
or Mitchell Hutchins and other materials used by PaineWebber in connection with
its offering of Class C Shares for sale to the public; (ii) any expenses of
advertising incurred by PaineWebber in
4
<PAGE>
connection with such offering; (iii) the expenses of registration or
qualification of PaineWebber as a dealer or broker under federal or state laws
and the expenses of continuing such registration or qualification; and (iv) all
compensation paid to PaineWebber's Investment Executives or other employees and
others for selling Class C Shares, and all expenses of PaineWebber, its
Investment Executives and employees and others who engage in or support the sale
of Class C Shares as may be incurred in connection with their sales efforts.
PaineWebber shall bear such additional costs and expenses as it and Mitchell
Hutchins may agree upon, such agreement to be evidenced in a writing signed by
both parties. Mitchell Hutchins shall advise the Board of any such agreement as
to additional costs and expenses borne by PaineWebber at their first regular
meeting held after such agreement but shall not be required to obtain prior
approval for such agreements from the Board.
9. Indemnification.
---------------
(a) Mitchell Hutchins agrees to indemnify, defend, and hold PaineWebber,
its officers and directors, and any person who controls PaineWebber within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands, or liabilities and any counsel
fees incurred in connection therewith) which PaineWebber, its officers,
directors, or any such controlling person may incur under the 1933 Act, under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement; arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement thereof or necessary to make the
statements in the Registration Statement thereof not misleading; or arising out
of any sales or advertising materials with respect to the Class C Shares
provided by Mitchell Hutchins to PaineWebber. However, this indemnity agreement
shall not apply to any claims, demands, liabilities, or expenses that arise out
of or are based upon any such untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
furnished in writing by PaineWebber to Mitchell Hutchins or the Fund for use in
the Registration Statement or in any sales or advertising material; and further
provided, that in no event shall anything contained herein be so construed as to
protect PaineWebber against any liability to Mitchell Hutchins or the Fund or to
the shareholders of any Series to which PaineWebber would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement.
(b) PaineWebber agrees to indemnify, defend, and hold Mitchell Hutchins
and its officers and directors, the Fund, its officers and trustees, and any
person who controls Mitchell Hutchins or the Fund within the meaning of Section
15 of the 1933 Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of investigating or
defending against such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which Mitchell Hutchins or its officers or
directors or the Fund, its officers or trustees, or any such controlling person
may incur under the 1933 Act, under common law or otherwise arising out of or
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by PaineWebber to Mitchell Hutchins or the Fund
for use in the Registration Statement; arising out of or based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration
5
<PAGE>
Statement or necessary to make such information not misleading; or arising out
of any agreement between PaineWebber and a correspondent firm or any other
retail dealer; or arising out of any sales or advertising material used by
PaineWebber in connection with its duties under this Agreement.
10. Duration and Termination.
------------------------
(a) This Agreement shall become effective upon the date written above,
provided that, with respect to any Series, this Contract shall not take effect
unless such action has first been approved by vote of a majority of the Board
and by vote of a majority of those trustees of the Fund who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements related thereto (all such trustees
collectively being referred to herein as the "Independent Trustees") cast in
person at a meeting called for the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for one year from the above written date. Thereafter, if not
terminated, this Agreement shall continue automatically for successive periods
of twelve months each, provided that such continuance is specifically approved
at least annually (i) by a vote of a majority of the Independent Trustees, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or with respect to any given Series by vote of a majority of
the outstanding voting securities of the Class C Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Agreement may be terminated at any time, without the payment of any penalty, by
either party, upon the giving of 30 days' written notice. Such notice shall be
deemed to have been given on the date it is received in writing by the other
party or any officer thereof. This Agreement may also be terminated at any time,
without the payment of any penalty, by vote of the Board, by vote of a majority
of the Independent Trustees or by vote of a majority of the outstanding voting
securities of the Class C Shares of such Series on 30 days' written notice to
Mitchell Hutchins and PaineWebber.
(d) Termination of this Agreement with respect to any given Series shall
in no way affect the continued validity of this Agreement or the performance
thereunder with respect to any other Series. This Agreement will automatically
terminate in the event of its assignment or in the event that the Distribution
Contract is terminated.
(e) Notwithstanding the foregoing, Mitchell Hutchins may terminate this
Agreement without penalty, such termination to be effective upon the giving of
written notice to PaineWebber in the event that the Plan is terminated or is
amended to reduce the compensation payable to Mitchell Hutchins thereunder or in
the event that the Registration Statement is amended so as to reduce the amount
of compensation payable to Mitchell Hutchins under the Distribution Contract,
provided that Mitchell Hutchins gives notice of termination pursuant to this
provision within 90 days of such amendment or termination of the Plan or
amendment of the Registration Statement.
6
<PAGE>
11. Amendment of this Agreement. No provision of this Agreement may be
---------------------------
amended, changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
12. Use of PaineWebber Name. PaineWebber hereby authorizes Mitchell Hutchins
-----------------------
to use the name "PaineWebber Incorporated" or any name derived therefrom in any
sales or advertising materials prepared and/or used by Mitchell Hutchins in
connection with its duties as distributor of the Class C Shares, but only for so
long as this Agreement or any extension, renewal or amendment hereof remains in
effect, including any similar agreement with any organization which shall have
succeeded to the business of PaineWebber.
13. Governing Law. This Agreement shall be construed in accordance with the
-------------
laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the 1940 Act, the latter shall control.
14. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meaning as such terms
have in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first written
above.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: _________________________ By: ___________________________
PAINEWEBBER INCORPORATED
Attest: _________________________ By: ___________________________
7
<PAGE>
Exhibit No. 5(f)
EXCLUSIVE DEALER AGREEMENT
CLASS Y SHARES OF MITCHELL HUTCHINS PORTFOLIOS
AGREEMENT made as _____________________, 1998 between Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a Delaware corporation, and PaineWebber
Incorporated ("PaineWebber"), a Delaware corporation.
WHEREAS Mitchell Hutchins Portfolios ("Fund") is a Delaware business trust
registered under the Investment Company Act of 1940, as amended ("1940 Act"), as
an open-end management investment company; and
WHEREAS the Fund currently has three distinct series of shares of beneficial
interest ("Series"), which correspond to distinct portfolios and have been
designated as the Mitchell Hutchins Aggressive Portfolio, Mitchell Hutchins
Moderate Portfolio and Mitchell Hutchins Conservative Portfolio; and
WHEREAS the Fund's board of trustees ("Board") has established an unlimited
number of shares of beneficial interest of the above-referenced Series as Class
Y shares ("Class Y Shares"); and
WHEREAS Mitchell Hutchins has entered into a Distribution Contract with the
Fund ("Distribution Contract") pursuant to which Mitchell Hutchins serves as
principal distributor in connection with the offering and sale of the Class Y
Shares of the above-referenced Series and of such other Series as may hereafter
be designated by the Board and have Class Y Shares established; and
WHEREAS Mitchell Hutchins desires to retain PaineWebber as its exclusive agent
in connection with the offering and sale of the Class Y Shares of each such
Series and to delegate to PaineWebber performance of certain of the services
which Mitchell Hutchins provides to the Fund under the Distribution Contract;
and
WHEREAS PaineWebber is willing to act as Mitchell Hutchins' exclusive agent in
connection with the offering and sale of such Class Y Shares and to perform such
services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, Mitchell Hutchins and PaineWebber agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints PaineWebber as its
-----------
exclusive agent to sell and to arrange for the sale of the Class Y Shares on the
terms and for the period set forth in this Contract. Mitchell Hutchins also
appoints PaineWebber as its agent for the performance of certain other services
set forth herein which Mitchell Hutchins provides to the Fund under the
Distribution Contract. PaineWebber hereby accepts such appointments and agrees
to act hereunder. It is understood, however, that these appointments do not
preclude sales
<PAGE>
of Class Y Shares directly through the Fund's transfer agent in the manner set
forth in the Registration Statement. As used in this Contract, the term
"Registration Statement" shall mean the currently effective Registration
Statement of the Fund, and any supplements thereto, under the Securities Act of
1933, as amended ("1933 Act"), and the 1940 Act.
2. Services, Duties and Representations of PaineWebber.
---------------------------------------------------
(a) PaineWebber agrees to sell the Class Y Shares on a best efforts basis
from time to time during the term of this Agreement as agent for Mitchell
Hutchins and upon the terms described in this Contract and the Registration
Statement.
(b) Upon the later of the date of this Contract or the initial offering
of Class Y Shares by a Series, PaineWebber will hold itself available to receive
orders, satisfactory to PaineWebber and Mitchell Hutchins, for the purchase of
Class Y Shares and will accept such orders on behalf of Mitchell Hutchins and
the Fund as of the time of receipt of such orders and will promptly transmit
such orders as are accepted to the Fund's transfer agent. Purchase orders shall
be deemed effective at the time and in the manner set forth in the Registration
Statement.
(c) PaineWebber in its discretion may sell Class Y Shares to (i) its
correspondent firms and customers of such firms and (ii) such other registered
and qualified retail dealers as it may select, subject to the approval of
Mitchell Hutchins. In making agreements with such dealers, PaineWebber shall act
only as principal and not as agent for Mitchell Hutchins or the Fund.
(d) The offering price of the Class Y Shares of each Series shall be the
net asset value per Share as next determined by the Fund following receipt of an
order at PaineWebber's principal office. Mitchell Hutchins shall promptly
furnish or arrange for the furnishing to PaineWebber of a statement of each
computation of net asset value.
(e) PaineWebber shall not be obligated to sell any certain number of
Class Y Shares.
(f) To facilitate redemption of Class Y Shares by shareholders directly
or through dealers, PaineWebber is authorized but not required on behalf of
Mitchell Hutchins and the Fund to repurchase Class Y Shares presented to it by
shareholders, its correspondent firms and other dealers at the price determined
in accordance with, and in the manner set forth in, the Registration Statement.
(g) PaineWebber represents and warrants that: (i) it is a member in good
standing of the National Association of Securities Dealers, Inc. and agrees to
abide by the Conduct Rules of such Association; (ii) it is registered as a
broker-dealer with the Securities and Exchange Commission; (iii) it will
maintain any filings and licenses required by federal and state laws to conduct
the business contemplated under this Agreement; and (iv) it will comply with all
federal and state laws and regulations applicable to the offer and sale of the
Class Y Shares.
(h) PaineWebber shall not incur any debts or obligations on behalf of
Mitchell Hutchins or the Fund. PaineWebber shall bear all costs that it incurs
in selling the Class Y Shares
- 2 -
<PAGE>
and in complying with the terms and conditions of this Contract as more
specifically set forth in paragraph 8.
(i) PaineWebber shall not permit any employee or agent to offer or sell
Class Y Shares unless such person is duly licensed under applicable federal and
state laws and regulations.
(j) PaineWebber shall not (i) furnish any information or make any
representations concerning the Class Y Shares other than those contained in the
Registration Statement or in sales literature or advertising that has been
prepared or approved by Mitchell Hutchins as provided in paragraph 6 or (ii)
offer or sell the Class Y Shares in jurisdictions in which they have not been
approved for offer and sale.
3. Services Not Exclusive. The services furnished by PaineWebber hereunder
----------------------
are not to be deemed exclusive and PaineWebber shall be free to furnish similar
services to others so long as its services under this Contract are not impaired
thereby. Nothing in this Contract shall limit or restrict the right of any
director, officer or employee of PaineWebber who may also be a director,
trustee, officer or employee of Mitchell Hutchins or the Fund, to engage in any
other business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar or a
dissimilar nature.
4. Compensation.
------------
Mitchell Hutchins shall not be obligated to pay any compensation to
PaineWebber hereunder nor to reimburse any of PaineWebber's expenses incurred
hereunder.
5. Duties of Mitchell Hutchins.
---------------------------
(a) It is understood that the Fund reserves the right at any time to
withdraw all offerings of Class Y Shares of any or all Series by written notice
to Mitchell Hutchins.
(b) Mitchell Hutchins shall keep PaineWebber fully informed of the Fund's
affairs and shall make available to PaineWebber copies of all information,
financial statements and other papers which PaineWebber may reasonably request
for use in connection with the distribution of Class Y Shares, including,
without limitation, certified copies of any financial statements prepared for
the Fund by its independent public accountant and such reasonable number of
copies of the most current prospectus, statement of additional information, and
annual and interim reports of any Series as PaineWebber may request, and
Mitchell Hutchins shall cooperate fully in the efforts of PaineWebber to sell
and arrange for the sale of the Class Y Shares and in the performance of
PaineWebber under this Contract.
(c) Mitchell Hutchins shall comply with all state and federal laws and
regulations applicable to a distributor of the Class Y Shares.
6. Advertising. Mitchell Hutchins agrees to make available such sales and
-----------
advertising materials relating to the Class Y Shares as Mitchell Hutchins in its
discretion determines appropriate. PaineWebber agrees to submit all sales and
advertising materials developed by it
- 3 -
<PAGE>
relating to the Class Y Shares to Mitchell Hutchins for approval. PaineWebber
agrees not to publish or distribute such materials without first receiving such
approval in writing. Mitchell Hutchins shall assist PaineWebber in obtaining any
regulatory approvals of such materials that may be required of or desired by
PaineWebber.
7. Records. PaineWebber agrees to maintain all records required by
-------
applicable state and federal laws and regulations relating to the offer and sale
of the Class Y Shares. Mitchell Hutchins and its representatives shall have
access to such records during normal business hours for review or copying.
8. Expenses of PaineWebber. PaineWebber shall bear all costs and expenses of
-----------------------
(i) preparing, printing, and distributing any materials not prepared by the Fund
or Mitchell Hutchins and other materials used by PaineWebber in connection with
its offering of Class Y Shares for sale to the public; (ii) any expenses of
advertising incurred by PaineWebber in connection with such offering; (iii) the
expenses of registration or qualification of PaineWebber as a dealer or broker
under federal or state laws and the expenses of continuing such registration or
qualification; and (iv) all compensation paid to PaineWebber's investment
executives or other employees and others for selling Class Y Shares, and all
expenses of PaineWebber, its investment executives and employees and others who
engage in or support the sale of Class Y Shares as may be incurred in connection
with their sales efforts. PaineWebber shall bear such additional costs and
expenses as it and Mitchell Hutchins may agree upon, such agreement to be
evidenced in a writing signed by both parties. Mitchell Hutchins shall advise
the Board of any such agreement as to additional costs and expenses borne by
PaineWebber at their first regular meeting held after such agreement but shall
not be required to obtain prior approval for such agreements from the Board.
9. Indemnification.
---------------
(a) Mitchell Hutchins agrees to indemnify, defend, and hold PaineWebber,
its officers and directors, and any person who controls PaineWebber within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands, or liabilities and any counsel
fees incurred in connection therewith) which PaineWebber, its officers,
directors, or any such controlling person may incur under the 1933 Act, under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement; arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement thereof or necessary to make the
statements in the Registration Statement thereof not misleading; or arising out
of any sales or advertising materials with respect to the Class Y Shares
provided by Mitchell Hutchins to PaineWebber. However, this indemnity agreement
shall not apply to any claims, demands, liabilities, or expenses that arise out
of or are based upon any such untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
furnished in writing by PaineWebber to Mitchell Hutchins or the Fund for use in
the Registration Statement or in any sales or advertising material; and further
provided, that in no event shall anything contained herein be so construed as to
protect PaineWebber against any liability to Mitchell Hutchins or the Fund or to
the shareholders of any Series to which PaineWebber would otherwise be subject
by
- 4 -
<PAGE>
reason of willful misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of its obligations under
this Contract.
(b) PaineWebber agrees to indemnify, defend, and hold Mitchell Hutchins
and its officers and directors, the Fund, its officers and trustees, and any
person who controls Mitchell Hutchins or the Fund within the meaning of Section
15 of the 1933 Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of investigating or
defending against such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which Mitchell Hutchins or its officers or
directors or the Fund, its officers or trustees, or any such controlling person
may incur under the 1933 Act, under common law or otherwise arising out of or
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by PaineWebber to Mitchell Hutchins or the Fund
for use in the Registration Statement; arising out of or based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration Statement or necessary to make such information
not misleading; or arising out of any agreement between PaineWebber and a
correspondent firm or any other retail dealer; or arising out of any sales or
advertising material used by PaineWebber in connection with its duties under
this Contract.
10. Duration and Termination.
------------------------
(a) This Contract shall become effective upon the date written above,
provided that, with respect to any Series, this Contract shall not take effect
unless such action has first been approved by vote of a majority of the Board
and by vote of a majority of those trustees of the Fund who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
operation of this Contract or in any agreements related thereto (all such
trustees collectively being referred to herein as the "Independent Trustees"),
cast in person at a meeting called for the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for one year from the above written date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board with respect to any given Series or by vote of a majority of the
outstanding voting securities of the Class Y Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Contract may be terminated at any time, without the payment of any penalty, by
either party, upon the giving of 30 days' written notice. Such notice shall be
deemed to have been given on the date it is received in writing by the other
party or any officer thereof. This Contract may also be terminated at any time,
without the payment of any penalty, by vote of the Board, by vote of a majority
of the Independent Trustees or by vote of a majority of the outstanding voting
securities of the Class Y Shares of such Series on 30 days' written notice to
Mitchell Hutchins and PaineWebber.
- 5 -
<PAGE>
(d) Termination of this Contract with respect to any given Series shall
in no way affect the continued validity of this Contract or the performance
thereunder with respect to any other Series. This Contract will automatically
terminate in the event of its assignment or in the event that the Distribution
contract is terminated.
11. Amendment of this Agreement. No provision of this Contract may be
---------------------------
amended, changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
12. Use of PaineWebber Name. PaineWebber hereby authorizes Mitchell Hutchins
-----------------------
to use the name "PaineWebber Incorporated" or any name derived therefrom in any
sales or advertising materials prepared and/or used by Mitchell Hutchins in
connection with its duties as distributor of the Class Y Shares, but only for so
long as this Contract or any extension, renewal or amendment hereof remains in
effect, including any similar agreement with any organization which shall have
succeeded to the business of PaineWebber.
13. Governing Law. This Contract shall be construed in accordance with the
-------------
laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the 1940 Act, the latter shall control.
14. Miscellaneous. The captions in this Contract are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person"
and "assignment" shall have the same meaning as such terms have in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first written
above.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: By:
-------------------------- --------------------------
PAINEWEBBER INCORPORATED
Attest: By:
-------------------------- --------------------------
- 6 -
<PAGE>
Exhibit No. 7
CUSTODIAN CONTRACT
Between
PAINEWEBBER INDEX TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
<S> <C>
1. Employment of Custodian and Property to be Held by It.......................................... 1
2. Duties of the Custodian with Respect to Property of the Fund Held by the
Custodian in the United States................................................................. 1
2.1 Holding Securities........................................................................ 1
2.2 Delivery of Securities.................................................................... 2
2.3 Registration of Securities................................................................ 4
2.4 Bank Accounts............................................................................. 4
2.5 Availability of Federal Funds............................................................. 4
2.6 Collection of Income...................................................................... 4
2.7 Payment of Fund Monies.................................................................... 5
2.8 Liability for Payment in Advance of Receipt of Securities Purchased....................... 6
2.9 Appointment of Agents..................................................................... 6
2.10 Deposit of Fund Assets in U. S. Securities Systems........................................ 6
2.11 Fund Assets Held in the Custodian's Direct Paper System................................... 7
2.12 Segregated Account........................................................................ 8
2.13 Ownership Certificates for Tax Purposes................................................... 8
2.14 Proxies................................................................................... 8
2.15 Communications Relating to Portfolio Securities........................................... 8
3. Duties of the Custodian with Respect to Property of the Fund Held Outside of
The United States.............................................................................. 9
3.1 Appointment of Foreign Sub-Custodians..................................................... 9
3.2 Assets to be Held......................................................................... 9
3.3 Foreign Securities Systems................................................................ 9
3.4 Holding Securities........................................................................ 9
3.5 Agreements with Foreign Banking Institutions..............................................10
3.6 Access of Independent Accountants of the Fund.............................................10
3.7 Reports by Custodian......................................................................10
3.8 Transactions in Foreign Custody Account...................................................10
3.9 Liability of Foreign Sub-Custodians.......................................................11
3.10 Liability of Custodian....................................................................11
3.11 Reimbursement for Advances................................................................11
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.12 Monitoring Responsibilities............................................................11
3.13 Branches of U.S. Banks.................................................................12
3.14 Tax Law................................................................................12
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund......................12
5. Proper Instructions.........................................................................13
6. Actions Permitted Without Express Authority.................................................13
7. Evidence of Authority.......................................................................13
8. Duties of Custodian With Respect to the Books of Account and Calculation of
Net Asset Value and Net Income..............................................................14
9. Records.....................................................................................14
10. Opinion of Fund's Independent Accountants...................................................14
11. Reports to Fund by Independent Public Accountants...........................................14
12. Compensation of Custodian...................................................................15
13. Responsibility of Custodian.................................................................15
14. Effective Period, Termination and Amendment.................................................16
15. Successor Custodian.........................................................................16
16. Interpretive and Additional Provisions......................................................17
17. Additional Funds............................................................................17
18. Massachusetts Law to Apply..................................................................17
19. Prior Contracts.............................................................................18
20. Reproduction of Documents...................................................................18
21. Shareholder Communications Election.........................................................18
22. Limitation of Liability.....................................................................18
</TABLE>
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between PaineWebber Index Trust, a business trust organized
and existing under the laws of Delaware, having its principal place of business
at 1285 Avenue of the Americas, New York, New York 10019 hereinafter called the
"Fund", and State Street Bank and Trust Company, a Massachusetts trust company,
having its principal place of' business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, the
PaineWebber S & P 500 Index Fund (such series together with all other series
subsequently established by the Fund and made subject to this Contract in
accordance with paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Declaration of
Trust. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian
all securities and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect to all
securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such sub-
custodian has to the Custodian. The Custodian may employ as sub-custodian for
the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
------------------------------------------------------------------------
Custodian in the United States
------------------------------
2.1 Holding Securities. The Custodian shall hold and physically segregate for
------------------
the account of each Portfolio all non-cash property, to be held by
<PAGE>
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury
(each, a "U.S. Securities System") and (b) commercial paper of an issuer
for which State Street Bank and Trust Company acts as issuing and paying
agent ("Direct Paper") which is deposited and/or maintained in the Direct
Paper System of the Custodian (the "Direct Paper System") pursuant to
Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
----------------------
securities owned by a Portfolio field by the Custodian or in a U.S.
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement
related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in any such
--------
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of' the Portfolio, to
the broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may anise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian;
2
<PAGE>
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, but only against receipt of adequate collateral as agreed
--------
upon from time to time by the Custodian and the Fund on behalf of the
Portfolio, which may be in the form of cash or obligations issued by
the United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the Custodian will
not be held liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the Fund
on behalf of the Portfolio requiring a pledge of assets by the Fund on
behalf of the Portfolio, but only against receipt of amounts borrowed;
--------
12) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may be
described from time to time in the currently effective prospectus and
statement of additional information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in
--------
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person
or persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
--------------------------
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
3
<PAGE>
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
-------------
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a Portfolio
may be deposited by it to its credit as Custodian in the Banking Department
of the Custodian or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however, that every such
--------
bank or trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company and
the funds to be deposited with each such bank or trust company shall on
behalf of each applicable Portfolio be approved by vote of a majority of
the Board of Trustees of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on
-----------------------------
behalf of each applicable Portfolio and the Custodian, the Custodian shall,
upon the receipt of' Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such Portfolio as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
--------------------
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to bearer domestic securities if, on the date
of payment by the issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due each Portfolio on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of
the income to which the Portfolio is properly entitled.
4
<PAGE>
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund
----------------------
on behalf of the applicable Portfolio, which may be continuing instructions
when deemed appropriate by the parties, the Custodian shall pay out monies
of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts or
options on futures contracts for the account of the Portfolio but only
(a) against the delivery of such securities or evidence of title to
such options, futures contracts or options on futures contracts to the
Custodian (or any bank, banking firm or trust company doing business in
the United States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and has been
designated by the Custodian as its agent for this purpose) registered
in the name of the Portfolio or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a U.S.
Securities System, in accordance with the conditions set forth in
Section 2.10 hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth in Section
2.11; (d) in the case of repurchase agreements entered into between the
Fund on behalf of the Portfolio and the Custodian, or another bank, or
a broker-dealer which is a member of NASD, (i) against delivery of the
securities either in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such securities or
(ii) against delivery of the receipt evidencing purchase by the
Portfolio of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase such
securities from the Portfolio or (e) for transfer to a time deposit
account of the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation from a
broker and/or the applicable bank, pursuant to Proper Instructions from
the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as
set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of
the Portfolio: interest, taxes, management, accounting, transfer agent
and legal fees, and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in addition to
--------
Proper Instructions from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the
5
<PAGE>
purpose for which such payment is to be made, declaring such purpose to
be a proper purpose, and naming the person or persons to whom such
payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except
-------------------------------------------------------------------
as specifically stated other-wise in this Contract, in any and every case
where payment for purchase of domestic securities for the account of a
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund on
behalf of such Portfolio to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as if
the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
---------------------
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not relieve the
-------- -------
Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in U. S. Securities Systems. The Custodian may
--------------------------------------------------
deposit and/or maintain securities owned by a Portfolio in a clearing
--------
agency registered with the Securities and Exchange Commission under Section
------
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "U.S. Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and regulations,
if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S. Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the U.S. Securities System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities System
that such securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the Portfolio upon
(i) receipt of advice from the U.S. Securities System that payment for
such securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Portfolio. Copies of all
advices from the U.S. Securities System of transfers of securities for
the account of the Portfolio shall identify the Portfolio, be
maintained for the Portfolio by the Custodian and be provided to the
Fund at its request. Upon request, the Custodian shall furnish the Fund
on behalf of the Portfolio confirmation of each transfer to or from the
account of the Portfolio in the form of a written advice or notice and
shall furnish to the Fund on behalf of the Portfolio copies of
6
<PAGE>
daily transaction sheets reflecting each day's transactions in the U.S.
Securities System for the account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any report
obtained by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the Portfolio
for any loss or damage to the Portfolio resulting from use of the U.S.
Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian with respect to any claim
against the U.S. Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if and
to the extent that the Portfolio has not been made whole for any such
loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may
-------------------------------------------------------
deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will
be effected in the absence of Proper Instructions from the Fund on
behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall not
include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of the
Portfolio upon the making of an entry on the records of the Custodian
to reflect such payment and transfer of securities to the account of
the Portfolio. The Custodian shall transfer securities sold for the
account of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such transfer and receipt of payment for the
account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio,
in the form of a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets reflecting
each day's transaction in the U.S. Securities System for the account of
the Portfolio;
7
<PAGE>
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund may
reasonable request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
------------------
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on behalf
of each such Portfolio, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
--- ----
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Trustees or of
the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
---------------------------------------
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities held
-------
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Portfolio Securities. Subject to the provisions
-----------------------------------------------
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights
in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from issuers
of the securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender
8
<PAGE>
offer, exchange offer or any other similar transaction, the Portfolio
shall notify the Custodian at least three business days prior to the date
on which the Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside
-------------------------------------------------------------------------
of the United States
--------------------
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
-------------------------------------
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of "Proper Instructions", as defined in Section 5 of this Contract,
together with a certified resolution of the Fund's Board of Trustees, the
Custodian and the Fund may agree to amend Schedule A hereto from time to
time to designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the employment
of any one or more such sub-custodians for maintaining custody of the
Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
-----------------
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund, the
foreign securities of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
--------------------------
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in a clearing agency which acts as a securities depository or
in a book-entry system for the central handling of securities located
outside the United States (each a "Foreign Securities System") only
through arrangements implemented by the foreign banking institutions
serving as sub-custodians pursuant to the terms hereof (Foreign Securities
Systems and U.S. Securities Systems are collectively referred to herein as
the "Securities Systems"). Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 3.5
hereof.
3.4 Holding Securities. The Custodian may hold securities and other non-cash
------------------
property for all of its customers, including the Fund, with a foreign sub-
custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
-------- -------
records of the Custodian with respect to securities and other non-cash
property of the Fund which are maintained in such account shall identify
by book-entry those securities and other non-cash property belonging to
the Fund and (ii) the Custodian shall require that securities and other
non-cash property so held by the foreign sub-custodian be held separately
from any assets of the foreign sub-custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
--------------------------------------------
foreign banking institution shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or
its creditors or agent, except a claim of payment for their safe custody
or administration, (b) beneficial ownership for the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for custody or administration, (c) adequate records will
be maintained identifying the assets as belonging to each
9
<PAGE>
applicable Portfolio, (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted under
applicable law the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian, and (e)
assets of the Portfolios held by the foreign sub-custodian will be subject
only to the instructions of the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of the Fund,
---------------------------------------------
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian
insofar as such books and records relate to the performance of such
foreign banking institution under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from time to
--------------------
time, as mutually agreed upon, statements in respect of the securities and
other assets of the Portfolio(s) held by foreign sub-custodians, including
but not limited to an identification of entities having possession of the
Portfolio(s) securities and other assets and advices or notifications of
any transfers of securities to or from each custodial account maintained
by a foreign banking institution for the Custodian on behalf of each
applicable Portfolio indicating, as to securities acquired for a
Portfolio, the identity of the entity having physical possession of such
securities.
3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided
---------------------------------------
in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and
2.7 of this Contract shall apply, mutatis mutandis to the foreign
------- --------
securities of the Fund held outside the United States by foreign sub-
custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the account
of each applicable Portfolio may be effected in accordance with the
customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities
to the purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold any
such nominee harmless from any liability as a holder of record of such
securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
10
<PAGE>
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
----------------------
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.13 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this
paragraph 3.10, in delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any responsibility to the Fund for
any loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or other losses under
circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the Custodian to advance
--------------------------
cash or securities for any purpose for the benefit of a Portfolio
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Portfolio shall be security
therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of
such Portfolio's assets to the extent necessary to obtain reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to the
---------------------------
Fund, during the month of June, information concerning the foreign sub-
custodians employed by the Custodian. Such information shall be similar in
kind and scope to that furnished to the Fund in connection with the
initial approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign sub-
custodian or any material loss of the assets of the Fund or in the case of
any foreign sub-custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such foreign sub-
custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this
----------------------
Contract, the provisions hereof shall not apply where the custody of the
Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a sub-
custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the Fund with
the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
11
<PAGE>
3.14 Tax Law. The Custodian shall have no responsibility or liability for any
-------
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the responsibility
of the Fund to notify the Custodian of the obligations imposed on the Fund
or the Custodian as custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including responsibility
for withholding and other taxes, assessments or other governmental
charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to
use reasonable efforts to assist the Fund with respect to any claim for
exemption or refund under the tax law of jurisdictions for which the Fund
has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
----------------------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.12.
12
<PAGE>
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to the
--------
Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Portfolio except as otherwise
directed by the Board of Trustees of the Fund.
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Declaration of Trust as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation of
---------------------------------------------------------------------------
Net Asset Value and Net Income
------------------------------
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Fund's currently effective prospectus related to such
Portfolio.
9. Records
-------
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the
13
<PAGE>
Investment Company Act of 1940, with particular attention to Section 31 thereof
and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of
the Fund and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss,
14
<PAGE>
liability, claim or expense resulting from or caused by: (i) events or
circumstances beyond the reasonable control of the Custodian or any sub-
custodian or Securities System or any agent or nominee of any of the foregoing,
including, without limitation, nationalization or expropriation, imposition of
currency controls or restrictions, the interruption, suspension or restriction
of trading on or the closure of any securities market. power or other mechanical
or technological failures or interruptions, computer viruses or communications
disruptions, acts of war or terrorism, riots, revolutions, work stoppages,
natural disasters or other similar events or acts; (ii) errors by the Fund or
the Investment Advisor in their instructions to the Custodian provided such
instructions have been in accordance with this Contract; (iii) the insolvency of
or acts or omissions by a Securities System; (iv) any delay or failure of any
broker, agent or intermediary, central bank, or other commercially prevalent
payment or clearing system to deliver to the Custodian's sub-custodian or agent
securities purchased or in the remittance or payment made in connection with
securities sold; (v) any delay or failure of any company, corporation, or other
body in charge of registering or transferring securities in the name of the
Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or any
consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or
any other country, or political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to sub-
custodians generally in this Contract.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing;
15
<PAGE>
provided, however that the Custodian shall not with respect to a Portfolio act
- --------
under Section 2.10 hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of Trustees of the Fund
has approved the initial use of a particular Securities System by such
Portfolio, as required by Rule 17f-4 under the Investment Company Act of 1940,
as amended and that the Custodian shall not with respect to a Portfolio act
under Section 2.11 hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of Trustees has approved
the initial use of the Direct Paper System by such Portfolio; provided further,
-------- -------
however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Declaration of Trust, and further provided, that the Fund on behalf of
one or more of the Portfolios may at any time by action of its Board of Trustees
(i) substitute another bank or trust company for the Custodian by giving notice
as described above to the Custodian, or (ii) immediately terminate this Contract
in the event of the appointment of a conservator or receiver for the Custodian
by the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
-------------------
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties
16
<PAGE>
and the provisions of this Contract relating to the duties and obligations of
the Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
--------
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
17. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to PaineWebber S & P 500 Index Fund with respect to which it desires to
have the Custodian render services as custodian under the terms hereof, it shall
so notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
18. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
20. Reproduction of Documents
-------------------------
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm, micro-
card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
21. Shareholder Communications Election
-----------------------------------
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
17
<PAGE>
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address,
and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
22. Limitation of Liability
-----------------------
The Custodian agrees that the Contract may only be enforced against the
assets of the Fund or the particular Portfolio of the Fund.
IN WITNESS WHEREOF, each of the parties has caused this instrument to he
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 31st day of December, 1997.
ATTEST PAINEWEBBER INDEX TRUST
/s/ Scott Griffith By: /s/ Dianne E. O'Donnell
- --------------------------------- -----------------------------------
Name: Name: Dianne E. O'Donnell
Title: Title: Secretary and Vice President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Thomas M. Lenz By: /s/ Ronald E. Logue
- --------------------------------- -----------------------------------
Thomas M. Lenz Ronald E. Logue
VP & Associate Counsel Executive Vice President
18
<PAGE>
Schedule A
17f-5 Approval
The Board of Directors/Trustees of PAINEWEBBER INDEX TRUST has approved
certain foreign banking institutions and foreign securities depositories within
State Street's Global Custody Network for use as subcustodians for the Fund's
securities, cash and cash equivalents held outside of the United States. Board
approval is as indicated by the Fund's Authorized Officer:
<TABLE>
<CAPTION>
FUND
OFFICER
Initials Country Subcustodian Central Depository
- --------- ------------------ ------------------------------------------ --------------------------------------
<S> <C> <C> <C>
_______ STATE STREET'S ENTIRE GLOBAL CUSTODY NETWORK LISTED BELOW
_______ Argentina Citibank, N.A. Caja de Valores S.A.
_______ Australia Westpac Banking Corporation Austraclear Limited; Reserve Bank
Information and Transfer System (RITS)
_______ Austria Erste Bank der oesterreichischen Oesterreichische Kontrollbank AG
Sparkasen AG (Wertpapiersammelbank Division)
_______ Bahrain The British Bank of the Middle East (as None
delegate of the Hongkong and Shanghai
Banking Corporation Limited)
_______ Bangladesh Standard Chartered Bank None
_______ Belgium Generale Bank Caisse Interprofessionnelle de
et de Depots Virements de Titres S.A.
(CIK);
Banque Nationale de Belgique
_______ Bermuda The Bank of Bermuda Limited None
_______ Botswana Barclays Bank of Botswana Limited None
_______ Brazil Citibank, N.A. Cmera de Liquidao de Sao Paula;
Banco Central do Brasil,
Systema Especial de Liquidao e
Custodia (SELIC)
_______ Bulgaria ING Bank N.V. Central Depository AD
_______ Canada Canada Trustco Mortgage Company The Canadian Depository for
Securities Limited (CDS)
_______ Chile Citibank, N.A. None
_______ People's Republic Banking Corporation Limited, Shanghai and The Hongkong and Shanghai, Shanghai
of China Shenzhen branches Registration Corporation (SSCCRC);
Shenzhen Securities Central Clearing
_______ Colombia Cititrust Colombia S.A. Sociedad None
Fiduciaria
_______ Croatia Privredna Banka Zagreb d.d. Ministry of Finance
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
_______ Cyprus Barclays Bank PLC None
Cyprus Offshore Banking Unit
_______ Czech Republic Ceskoslovensk Obchodni Banka A.S. Stredisko cennch papr (SCP);
Czech National Bank (CNB)
_______ Denmark Den Danske Bank Vrdipapircentralen - The Danish
Securities Center (VP)
_______ Ecuador Citibank, N.A. None
_______ Egypt National Bank of Egypt Misr Company for Clearing,
Settlement, and Central Depository
(MCSD)
_______ Finland Merita Bank Ltd. The Finnish Central Securities
Depository (CSD)
_______ France Banque Paribas Socit Interprofessionnelle pour la
Compensation des Valeurs Mobilires
(SICOVAM);
Banque de France, Saturne System
_______ Germany Dresdner Bank AG The Deutscher Kassenverein AG
_______ Ghana Barclays Bank of Ghana Limited None
_______ Greece National Bank of Greece S.A The Central Securities Depository
(Apothetirion Titlon A.E.);
Bank of Greece
_______ Hong Kong Standard Chartered Bank The Central Clearing and Settlement
System (CCASS);
The Central Money Markets Unit (CMU)
_______ Hungary Citibank Rt., Budapest The Central Depository and Clearing
House (Budapest) Ltd. (KELER Ltd.)
_______ India Deutsche Bank AG The National Securities Depository
Limited
_______ The Hongkong and Shanghai Banking The National Securities Depository
Corporation Limited Limited
_______ Indonesia Standard Chartered Bank None
_______ Ireland Bank of Ireland None;
The Central Bank of Ireland,
The Gilt Settlement Office (GSO)
_______ Israel Bank Hapoalim B.M. The Clearing House of the Tel Aviv
Stock Exchange;
Bank of Israel
_______ Italy Banque Paribas Monte Titoli S.p.A.;
Banca d'Italia
_______ Ivory Coast Socit Gnrale de Banques en Cte d'lvoire None
_______ Japan The Daiwa Bank, Limited Japan Securities Depository Center
(JASDEC);
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Bank of Japan Net System
_______ The Fuji Bank, Limited Japan Securities Depository Center
(JASDEC);
Bank of Japan Net System
_______ The Sumitomo Trust & Banking Co., Ltd Japan Securities Depository Center
(JASDEC);
Bank of Japan Net System
_______ Jordan The British Bank of the Middle East (as None
delegate of the Hongkong and Shanghai
Banking Corporation Limited)
_______ Kenya Barclays Bank of Kenya Limited None
_______ Republic of Korea SEOULBANK Korea Securities Depository (KSD)
_______ Lebanon The British Bank of the Middle East (as Custodian and Clearing Center of
delegate of the Hongkong and Shanghai Financial Instruments for Lebanon
Banking Corporation Ltd. ) (MIDCLEAR) S.A.L.;
The Central Bank of Lebanon
_______ Malaysia Standard Chartered Bank Malaysian Central Depository Sdn.
Malaysia Berhad Bhd. (MCD);
Bank Negara Malaysia,
Scripless Securities Trading and
_______ Mauritius The Hongkong and Shanghai The Central Depository & Settlement
_______ Mexico Citibank Mexico, S.A. S.D. INDEVAL, S.A. de C.V.
(Instituto para el Depsito de Valores)
_______ Morocco Banque Commerciale du Maroc None
_______ The Netherlands MeesPierson N.V. Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF);
_______ New Zealand ANZ Banking Group (New Zealand) Limited New Zealand Central Securities
Depository Limited (NZCSD)
_______ Norway Christiania Bank og Verdipapirsentralen - The Norwegian
_______ Oman The British Bank of the Middle East (as Muscat Securities Market (MSM)
delegate of the Hongkong and Shanghai
Banking Corporation Limited
_______ Pakistan Deutsche Bank AG Central Depository Company of
Pakistan Ltd.
_______ Peru Citibank, N.A. Caja de Valores y Liquidaciones
(CAVALI, S.A.)
_______ Philippines Standard Chartered Bank The Philippines Central Depository
Inc. (PCD);
The Book- Entry- System (BES) of
Bangko
Sentral ng Pilipinas; The Registry of
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Scripless Securities (ROSS) of the
Bureau of Treasury
_______ Poland Citibank Poland S.A. The National Depository of Securities
(Krajowy Depozyt Papierw
Wartociowych);
National Bank of Poland
_______ Portugal Banco Comercial Portugus Central de Valores Mobilirios
(Central)
_______ Romainia ING Bank N.V. - Bucharest National Securities Clearing,
Settlement and Depository Company
_______ Russia Credit Suisse First Boston, Zurich via None
Credit Suisse First Boston Limited, Moscow
_______ Singapore The Development Bank of Singapore Ltd. The Central Depository (Pte) Limited
(CDP)
_______ Slovak Republic Ceskoslovensk Obchodna Banka A.S. Stredisko Cennch Papierov (SCP);
National Bank of Slovakia
_______ Slovenia Banka Creditanstalt d.d. Klirinsko Depotna Bruzba
_______ South Africa Standard Bank of South Africa Limited The Central Depository Limited
_______ Spain Banco Santander, S.A. Servicio de Compensacin y Liquidacin
de Valores, S.A. (SCLV);
Banco de Espaa, Anotaciones en Cuenta
_______ Sri Lanka The Hongkong and Shanghai Banking Central Depository System (Pvt)
Corporation Limited Limited
_______ Swaziland Barclays Bank of Swaziland Limited None
_______ Sweden Skandinaviska Enskilda Banken Vrdepapperscentralen VPC AB - The
Swedish Central Securities Depository
_______ Switzerland Union Bank of Switzerland Schweizerische Effekten - Giro AG
(SEGA); INTERSETTLE
_______ Taiwan - R.O.C. Central Trust of China The Taiwan Securities Central
OR Depository Company, Ltd. (TSCD)
__________________________________
(Client Designated Subcustodian)
_______ Thailand Standard Chartered Bank Thailand Securities Depository
Company Limited (TSD)
_______ Turkey Citibank, N.A. Takas ve Saklama Bankasi A.S.
(TAKASBANK);
Central Bank of Turkey
_______ United Kingdom State Street Bank and Trust Company None;
The Bank of England,
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
The Central Gilts Office (CGO);
The Central Moneymarkets Office (CMO);
_______ Uruguay Citibank, N.A. None
_______ Venezuela Citibank, N.A. None
_______ Zambia Barclays Bank of Zambia Limited Lusaka Central Depository (LCD)
_______ Zimbabwe Barclays Bank of Zimbabwe Limited None
_______ Euroclear (The Euroclear System)/State Street London Limited
_______ Cedel (Cedel Bank, societe anonyme)/State Street London Limited
</TABLE>
CERTIFIED BY:
/s/ Dianne E. O'Donnell
- --------------------------------------- ---------------------
Fund's Authorized Officer Date
23
<PAGE>
Exhibit No. 8
TRANSFER AGENCY AND RELATED SERVICES AGREEMENT
----------------------------------------------
THIS AGREEMENT is made as of August 1, 1997 by and between PFPC INC., a
Delaware corporation ("PFPC"), and PAINEWEBBER INDEX TRUST, a Delaware business
trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and related services agent to the Fund's
Portfolios (as hereinafter defined) and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
---------------------------------------
(a) "1933 Act" means the Securities Act of 1933, as amended.
----------
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
----------
(c) "Authorized Person" means any officer of the Fund and any other
-------------------
person duly authorized by the Fund's Board of Directors or Trustees ("Board") to
give Oral Instructions and Written Instructions on behalf of the Fund and listed
on the Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PFPC. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
<PAGE>
(d) "CEA" means the Commodities Exchange Act, as amended.
-----
(e) "Oral Instructions" mean oral instructions received by PFPC from an
-------------------
Authorized Person.
(f) "Portfolio" means a series or investment portfolio of the Fund
-----------
identified on Annex A hereto, as the same may from time to time be amended, if
the Fund consists of more than one series or investment portfolio; however, if
the Fund does not have separate series or investment portfolios, then this term
shall be deemed to refer to the Fund itself.
(g) "SEC" means the Securities and Exchange Commission.
-----
(h) "Securities Laws" mean the 1933 Act, the 1934 Act, the 1940 Act and the
-----------------
CEA.
(i) "Shares" mean the shares of common stock or beneficial interest of any
--------
series or class of the Fund.
(j) "Written Instructions" mean written instructions signed by an
----------------------
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to serve as transfer
-----------
agent, registrar, dividend disbursing agent and related services agent to the
Fund, and should the Fund have separate Portfolios, those Portfolios which are
listed on Annex A hereto, in accordance with the terms set forth in this
Agreement. PFPC accepts such appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund (or a particular Portfolio, as
---------------------
appropriate) has provided or, where applicable, will provide PFPC with the
following:
2
<PAGE>
(a) Certified or authenticated copies of the resolutions of the Fund's
Board approving the appointment of PFPC to provide services to the
Fund and approving this Agreement;
(b) A copy of each executed broker-dealer agreement with respect to each
Fund; and
(c) Copies (certified or authenticated if requested by PFPC) of any post-
effective amendment to the Fund's registration statement, advisory
agreement, distribution agreement, shareholder servicing agreement and
all amendments or supplements to the foregoing upon request.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply with
-------------------------------------
all applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or any of
its Portfolios.
5. INSTRUCTIONS.
------------
(a) Unless otherwise provided in this Agreement, PFPC shall act only upon
Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and Written
Instructions it receives from an Authorized Person pursuant to this Agreement.
PFPC may assume that any Oral Instruction or Written Instruction received
hereunder is not in any way inconsistent with the provisions of organizational
documents or of any vote, resolution or proceeding of the Fund's Board or of the
Fund's shareholders, unless and until PFPC receives Written Instructions to the
contrary.
(c) The Fund agrees to forward to PFPC Written Instructions confirming
Oral Instructions so that PFPC receives the Written Instructions by the close of
business on the next day after such Oral Instructions are received. The fact
that such confirming Written Instructions
3
<PAGE>
are not received by PFPC shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral Instructions. Where
Oral Instructions or Written Instructions reasonably appear to have been
received from an Authorized Person, PFPC shall incur no liability to the Fund in
acting upon such Oral Instructions or Written Instructions provided that PFPC's
actions comply with the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
-----------------------
(a) Advice of the Fund. If PFPC is in doubt as to any action it should or
------------------
should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question of law
-----------------
pertaining to any action it should or should not take, PFPC may request advice
at its own cost from such counsel of its own choosing (who may be counsel for
the Fund, the Fund's investment adviser or PFPC, at the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between directions,
------------------
advice or Oral Instructions or Written Instructions PFPC receives from the Fund,
and the advice it receives from counsel, PFPC may rely upon and follow the
advice of counsel. In the event PFPC so relies on the advice of counsel, PFPC
remains liable for any action or omission on the part of PFPC which constitutes
willful misfeasance, bad faith, negligence or reckless disregard by PFPC of any
duties, obligations or responsibilities set forth in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action it takes or
------------------
does not take in reliance upon directions, advice or Oral Instructions or
Written Instructions it receives from the Fund or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice or Oral
Instructions or Written Instructions. Nothing in this section shall
4
<PAGE>
be construed so as to impose an obligation upon PFPC (i) to seek such
directions, advice or Oral Instructions or Written Instructions, or (ii) to act
in accordance with such directions, advice or Oral Instructions or Written
Instructions unless, under the terms of other provisions of this Agreement, the
same is a condition of PFPC's properly taking or not taking such action. Nothing
in this subsection shall excuse PFPC when an action or omission on the part of
PFPC constitutes willful misfeasance, bad faith, negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
7. RECORDS; VISITS. PFPC shall prepare and maintain in complete and
---------------
accurate form all books and records necessary for it to serve as transfer agent,
registrar, dividend disbursing agent and related services agent to each
Portfolio, including (a) all those records required to be prepared and
maintained by the Fund under the 1940 Act, by other applicable Securities Laws,
rules and regulations and by state laws and (b) such books and records as are
necessary for PFPC to perform all of the services it agrees to provide in this
Agreement and the appendices attached hereto, including but not limited to the
books and records necessary to effect the conversion of Class B shares, the
calculation of any contingent deferred sales charges and the calculation of
front-end sales charges. The books and records pertaining to the Fund, which
are in the possession or under the control of PFPC, shall be the property of the
Fund. The Fund and Authorized Persons shall have access to such books and
records in the possession or under the control of PFPC at all times during
PFPC's normal business hours. Upon the reasonable request of the Fund, copies
of any such books and records in the possession or under the control of PFPC
shall be provided by PFPC to the Fund or to an Authorized Person. Upon
reasonable notice by the Fund, PFPC shall make available during regular business
hours its facilities and premises employed in connection with its performance of
this Agreement for reasonable visits by the
5
<PAGE>
Fund, any agent or person designated by the Fund or any regulatory agency having
authority over the Fund.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the
---------------
Fund and information relating to the Fund and its shareholders (past, present
and future), its investment adviser and its principal underwriter, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund prior to its release. The Fund agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed to civil
or criminal contempt proceedings or when required to divulge such information or
records to duly constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC shall cooperate with the Fund's
----------------------------
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect
-----------------
with appropriate parties one or more agreements making reasonable provisions for
periodic backup of computer files and data with respect to the Fund and
emergency use of electronic data processing equipment. In the event of
equipment failures, PFPC shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions. PFPC shall have no
liability with respect to the loss of data or service interruptions caused by
equipment failure, provided such loss or interruption is not caused by PFPC's
own willful misfeasance, bad faith, negligence or reckless disregard of its
duties or obligations under this Agreement and provided further that PFPC has
complied with the provisions of this paragraph 10.
6
<PAGE>
11. COMPENSATION. As compensation for services rendered by PFPC during
------------
the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to from time to time in writing by the Fund and PFPC.
12. INDEMNIFICATION.
---------------
(a) The Fund agrees to indemnify and hold harmless PFPC and its affiliates
from all taxes, charges, expenses, assessments, penalties, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state and foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) reasonable
attorneys' fees and disbursements, arising directly or indirectly from (i) any
action or omission to act which PFPC takes (a) at the request or on the
direction of or in reliance on the advice of the Fund or (b) upon Oral
Instructions or Written Instructions or (ii) the acceptance, processing and/or
negotiation of checks or other methods utilized for the purchase of Shares.
Neither PFPC, nor any of its affiliates, shall be indemnified against any
liability (or any expenses incident to such liability) arising out of PFPC's or
its affiliates' own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement. The Fund's
liability to PFPC for PFPC's acceptance, processing and/or negotiation of checks
or other methods utilized for the purchase of Shares shall be limited to the
extent of the Fund's policy(ies) of insurance that provide for coverage of such
liability, and the Fund's insurance coverage shall take precedence.
(b) PFPC agrees to indemnify and hold harmless the Fund from all taxes,
charges, expenses, assessments, penalties, claims and liabilities arising from
PFPC's obligations pursuant to this Agreement (including, without limitation,
liabilities arising under the Securities Laws, and any state and foreign
securities and blue sky laws, and amendments thereto) and expenses,
7
<PAGE>
including (without limitation) reasonable attorneys' fees and disbursements
arising directly or indirectly out of PFPC's or its nominee's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
(c) In order that the indemnification provisions contained in this
Paragraph 12 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
(d) The members of the Board of the Fund, its officers and Shareholders, or
of any Portfolio thereof, shall not be liable for any obligations of the Fund,
or any such Portfolio, under this Agreement, and PFPC agrees that in asserting
any rights or claims under this Agreement, it shall look only to the assets and
property of the Fund or the particular Portfolio in settlement of such rights or
claims and not to such members of the Board, its officers or Shareholders.
PFPC further agrees that it will look only to the assets and property of a
particular Portfolio of the Fund, should the Fund have established separate
series, in asserting any rights or claims under this Agreement with respect to
services rendered with respect to that Portfolio and will not seek to obtain
settlement of such rights or claims from the assets of any other Portfolio of
the Fund.
13. INSURANCE. PFPC shall maintain insurance of the types and in the
---------
amounts deemed by it to be appropriate. To the extent that policies of
insurance may provide for coverage of claims for liability or indemnity by the
parties set forth in this Agreement, the contracts of
8
<PAGE>
insurance shall take precedence, and no provision of this Agreement shall be
construed to relieve an insurer of any obligation to pay claims to the Fund,
PFPC or other insured party which would otherwise be a covered claim in the
absence of any provision of this Agreement.
14. SECURITY.
--------
(a) PFPC represents and warrants that, to the best of its knowledge, the
various procedures and systems which PFPC has implemented with regard to the
safeguarding from loss or damage attributable to fire, theft or any other cause
(including provision for twenty-four hours a day restricted access) of the
Fund's blank checks, certificates, records and other data and PFPC's equipment,
facilities and other property used in the performance of its obligations
hereunder are adequate, and that it will make such changes therein from time to
time as in its judgment are required for the secure performance of its
obligations hereunder. PFPC shall review such systems and procedures on a
periodic basis, and the Fund shall have reasonable access to review these
systems and procedures.
(b) Y2K Compliance. PFPC further represents and warrants that any and all
electronic data processing systems and programs that it uses or retains in
connection with the provision of services hereunder on or before January 1, 1999
will be year 2000 compliant.
15. RESPONSIBILITY OF PFPC.
----------------------
(a) PFPC shall be under no duty to take any action on behalf of the Fund
except as specifically set forth herein or as may be specifically agreed to by
PFPC in writing. PFPC shall be obligated to exercise care and diligence in the
performance of its duties hereunder, to act in good faith and to use its best
efforts in performing services provided for under this Agreement. PFPC shall be
liable for any damages arising out of PFPC's failure to perform its duties under
9
<PAGE>
this Agreement to the extent such damages arise out of PFPC's willful
misfeasance, bad faith, negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC shall not be under any duty or obligation to
inquire into and shall not be liable for (A) the validity or invalidity or
authority or lack thereof of any Oral Instruction or Written Instruction, notice
or other instrument which conforms to the applicable requirements of this
Agreement, and which PFPC reasonably believes to be genuine; or (B) subject to
Section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC nor its affiliates shall be liable to the Fund for any consequential,
special or indirect losses or damages which the Fund may incur or suffer by or
as a consequence of PFPC's or its affiliates' performance of the services
provided hereunder, whether or not the likelihood of such losses or damages was
known by PFPC or its affiliates.
(d) Notwithstanding anything in this Agreement to the contrary, the Fund
shall not be liable to PFPC nor its affiliates for any consequential, special or
indirect losses or damages which PFPC or its affiliates may incur or suffer by
or as a consequence of PFPC's performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by the Fund.
10
<PAGE>
16. DESCRIPTION OF SERVICES.
-----------------------
(a) Services Provided on an Ongoing Basis, If Applicable.
-----------------------------------------------------
(i) Calculate 12b-1 payments to financial intermediaries,
including brokers, and financial intermediary trail
commissions;
(ii) Develop, monitor and maintain, in consultation with the Fund,
all systems necessary to implement and operate the four-tier
distribution system, including Class B conversion feature, as
described in the registration statement and related documents
of the Fund, as they may be amended from time to time;
(iii) Calculate contingent deferred sales charge amounts upon
redemption of Fund shares and deduct such amounts from
redemption proceeds;
(iv) Calculate front-end sales load amounts at time of purchase of
shares;
(v) Determine dates of Class B conversion and effect the same;
(vi) Establish and maintain proper shareholder registrations;
(vii) Review new applications and correspond with shareholders to
complete or correct information;
(viii) Direct payment processing of checks or wires;
(ix) Prepare and certify stockholder lists in conjunction with
proxy solicitations;
(x) Prepare and mail to shareholders confirmation of activity;
(xi) Provide toll-free lines for direct shareholder use, plus
customer liaison staff for on-line inquiry response;
(xii) Send duplicate confirmations to broker-dealers of their
clients' activity, whether executed through the broker-dealer
or directly with PFPC;
(xiii) Provide periodic shareholder lists, outstanding share
calculations and related statistics to the Fund;
(xiv) Provide detailed data for underwriter/broker confirmations;
11
<PAGE>
(xv) Prepare and mail required calendar and taxable year-end tax
and statement information (including forms 1099-DIV and 1099-B
and accompanying statements);
(xvi) Notify on a daily basis the investment adviser, accounting
agent, and custodian of fund activity;
(xvii) Perform, itself or through a delegate, all of the services,
whether or not included within the scope of another paragraph
of this Paragraph 16(a), specified on Annex B hereto; and
(xviii) Perform other participating broker-dealer shareholder
services as may be agreed upon from time to time.
(b) Services Provided by PFPC Under Oral Instructions or Written
------------------------------------------------------------
Instructions.
------------
(i) Accept and post daily Fund and class purchases and redemptions;
(ii) Accept, post and perform shareholder transfers and exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Cancel certificates.
(c) Purchase of Shares. PFPC shall issue and credit an account of an
------------------
investor, in the manner described in the Fund's prospectus, once it receives:
(i) A purchase order;
(ii) Proper information to establish a shareholder account; and
(iii) Confirmation of receipt or crediting of funds for such order
to the Fund's custodian.
(d) Redemption of Shares. PFPC shall redeem Shares only if that function
--------------------
is properly authorized by the Fund's organizational documents or resolutions of
the Fund's Board. Shares shall be redeemed and payment therefor shall be made
in accordance with the Fund's or Portfolio's prospectus.
12
<PAGE>
(i) Broker-Dealer Accounts.
----------------------
When a broker-dealer notifies PFPC of a redemption desired by a
customer, and the Fund's or Portfolio's custodian (the
"Custodian") has provided PFPC with funds, PFPC shall (a)
transfer by Fedwire or other agreed upon electronic means such
redemption payment to the broker-dealer for the credit to, and
for the benefit of, the customer's account or (b) shall prepare
and send a redemption check to the broker-dealer, made payable
to the broker-dealer on behalf of its customer.
(ii) Fund-Only Accounts.
------------------
If Shares (or appropriate instructions) are received in proper
form, at the Fund's request Shares may be redeemed before the
funds are provided to PFPC from the Custodian. If the
recordholder has not directed that redemption proceeds be wired,
when the Custodian provides PFPC with funds, the redemption check
shall be sent to and made payable to the recordholder, unless:
(a) the surrendered certificate is drawn to the order of an
assignee or holder and transfer authorization is signed by
the recordholder; or
(b) transfer authorizations are signed by the recordholder when
Shares are held in book-entry form.
(e) Dividends and Distributions. Upon receipt of a resolution of the
---------------------------
Fund's Board authorizing the declaration and payment of dividends and
distributions, PFPC shall issue dividends and distributions declared by the Fund
in Shares, or, upon shareholder election, pay such dividends and distributions
in cash, if provided for in the appropriate Fund's or Portfolio's prospectus.
Such issuance or payment, as well as payments upon redemption as described
above,
13
<PAGE>
shall be made after deduction and payment of the required amount of funds
to be withheld in accordance with any applicable tax law or other laws, rules or
regulations. PFPC shall mail to the Fund's shareholders and the IRS and other
appropriate taxing authorities such tax forms, or permissible substitute forms,
and other information relating to dividends and distributions paid by the Fund
(including designations of the portions of distributions of net capital gain
that are 20% rate gain distributions and 28% rate gain distributions pursuant to
IRS Notice 97-64) as are required to be filed and mailed by applicable law, rule
or regulation within the time required thereby. PFPC shall prepare, maintain
and file with the IRS and other appropriate taxing authorities reports relating
to all dividends above a stipulated amount paid by the Fund to its shareholders
as required by tax or other law, rule or regulation.
(f) Shareholder Account Services.
----------------------------
(i) PFPC will arrange, in accordance with the appropriate Fund's or
Portfolio's prospectus, for issuance of Shares obtained through:
- The transfer of funds from shareholders' accounts at financial
institutions, provided PFPC receives advance Oral or Written
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks and
applications.
(ii) PFPC will arrange, in accordance with the appropriate Fund's or
Portfolio's prospectus, for a shareholder's:
- Exchange of Shares for shares of another fund with which the
Fund has exchange privileges;
Automatic redemption from an account where that shareholder
participates in a systematic withdrawal plan; and/or
- Redemption of Shares from an account with a checkwriting
privilege.
14
<PAGE>
(g) Communications to Shareholders. Upon timely Written Instructions, PFPC
------------------------------
shall mail all communications by the Fund to its shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax forms (including substitute forms) and accompanying
information containing the information required by paragraph
16(e).
If requested by the Fund, PFPC will receive and tabulate the proxy cards
for the meetings of the Fund's shareholders and supply personnel to serve as
inspectors of election.
(h) Records. PFPC shall maintain those records required by the Securities
-------
Laws and any laws, rules and regulations of governmental authorities having
jurisdiction with respect to the duties to be performed by PFPC hereunder with
respect to shareholder accounts or by transfer agents generally, including
records of the accounts for each shareholder showing the following information:
(i) Name, address and United States Taxpayer Identification or Social
Security number;
(ii) Number and class of Shares held and number and class of Shares
for which certificates, if any, have been issued, including
certificate numbers and denominations;
(iii) Historical information regarding the account of each
shareholder, including dividends and distributions paid, their
character (e.g. ordinary income, net capital gain (including
20% rate gain and 28% rate gain), exempt-interest, foreign tax-
credit and dividends received deduction eligible) for federal
income tax purposes and the date and price for all transactions
on a shareholder's account;
15
<PAGE>
(iv) Any stop or restraining order placed against a shareholder's
account;
(v) Any correspondence relating to the current maintenance of a
shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer agent to
perform any calculations contemplated or required by this
Agreement.
(i) Lost or Stolen Certificates. PFPC shall place a stop notice against
---------------------------
any certificate reported to be lost or stolen and comply with all applicable
federal regulatory requirements for reporting such loss or alleged
misappropriation. The lost or stolen certificate will be canceled and
uncertificated Shares will be issued to a shareholder's account only upon:
(i) The shareholder's pledge of a lost instrument bond or such other
appropriate indemnity bond issued by a surety company approved by
PFPC; and
(ii) Completion of a release and indemnification agreement signed by
the shareholder to protect PFPC and its affiliates.
(j) Shareholder Inspection of Stock Records. Upon a request from any Fund
---------------------------------------
shareholder to inspect stock records, PFPC will notify the Fund, and the Fund
will issue instructions granting or denying each such request. Unless PFPC has
acted contrary to the Fund's instructions, the Fund agrees and does hereby
release PFPC from any liability for refusal of permission for a particular
shareholder to inspect the Fund's shareholder records.
(k) Withdrawal of Shares and Cancellation of Certificates. Upon receipt of
-----------------------------------------------------
Written Instructions, PFPC shall cancel outstanding certificates surrendered by
the Fund to reduce the total amount of outstanding shares by the number of
shares surrendered by the Fund.
16
<PAGE>
17. DURATION AND TERMINATION.
------------------------
(a) This Agreement shall be effective on the date first written above and
shall continue for a period of three (3) years (the "Initial Term"). Upon the
expiration of the Initial Term, this Agreement shall automatically renew for
successive terms of one (1) year ("Renewal Terms") each provided that it may be
terminated by either party during a Renewal Term upon written notice given at
least ninety (90) days prior to termination. During either the Initial Term or
the Renewal Terms, this Agreement may also be terminated on an earlier date by
either party for cause.
(b) With respect to the Fund, cause includes, but is not limited to, (i)
PFPC's material breach of this Agreement causing it to fail to substantially
perform its duties under this Agreement. In order for such material breach to
constitute "cause" under this Paragraph, PFPC must receive written notice from
the Fund specifying the material breach and PFPC shall not have corrected such
breach within a 15-day period; (ii) financial difficulties of PFPC evidenced by
the authorization or commencement of a voluntary or involuntary bankruptcy under
the U.S. Bankruptcy Code or any applicable bankruptcy or similar law, or under
any applicable law of any jurisdiction relating to the liquidation or
reorganization of debt, the appointment of a receiver or to the modification or
alleviation of the rights of creditors; and (iii) issuance of an administrative
or court order against PFPC with regard to the material violation or alleged
material violation of the Securities Laws or other applicable laws related to
its business of performing transfer agency services;
(c ) With respect to PFPC, cause includes, but is not limited to, the
failure of the Fund to pay the compensation set forth in writing pursuant to
Paragraph 11 of this Agreement.
17
<PAGE>
(d) Any notice of termination for cause in conformity with subparagraphs
(a), (b) and (c) of this Paragraph by the Fund shall be effective thirty (30)
days from the date of any such notice. Any notice of termination for cause by
PFPC shall be effective 90 days from the date of such notice.
(e) Upon the termination hereof, the Fund shall pay to PFPC such
compensation as may be due for the period prior to the date of such termination.
In the event that the Fund designates a successor to any of PFPC's obligations
under this Agreement, PFPC shall, at the direction and expense of the Fund,
transfer to such successor all relevant books, records and other data
established or maintained by PFPC hereunder including, a certified list of the
shareholders of the Fund or any Portfolio thereof with name, address, and if
provided, taxpayer identification or Social Security number, and a complete
record of the account of each shareholder. To the extent that PFPC incurs
expenses related to a transfer of responsibilities to a successor, other than
expenses involved in PFPC's providing the Fund's books and records described in
the preceding sentence to the successors, PFPC shall be entitled to be
reimbursed for such extraordinary expenses, including any out-of-pocket expenses
reasonably incurred by PFPC in connection with the transfer.
(f) Any termination effected pursuant to this Paragraph shall not affect
the rights and obligations of the parties under Paragraph 12 hereof.
(g) Notwithstanding the foregoing, this Agreement shall terminate with
respect to the Fund or any Portfolio thereof upon the liquidation, merger, or
other dissolution of the Fund or Portfolio or upon the Fund's ceasing to be a
registered investment company.
18. REGISTRATION AS A TRANSFER AGENT. PFPC represents that it is
--------------------------------
currently registered with the appropriate federal agency for the registration of
transfer agents, or is otherwise
18
<PAGE>
permitted to lawfully conduct its activities without such registration and that
it will remain so registered or able to so conduct such activities for the
duration of this Agreement. PFPC agrees that it will promptly notify the Fund in
the event of any material change in its status as a registered transfer agent.
Should PFPC fail to be registered with the SEC as a transfer agent at any time
during this Agreement, and such failure to register does not permit PFPC to
lawfully conduct its activities, the Fund may, on written notice to PFPC,
terminate this Agreement upon five days written notice to PFPC.
19. NOTICES. All notices and other communications, including Written
-------
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to PFPC, at 400
Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at the address
of the Fund or (c) if to neither of the foregoing, at such other address as
shall have been given by like notice to the sender of any such notice or other
communication by the other party. If notice is sent by confirming telegram,
cable, telex or facsimile sending device during regular business hours, it shall
be deemed to have been given immediately; if sent at a time other than regular
business hours, such notice shall be deemed to have been given at the opening of
the next business day. If notice is sent by first-class mail, it shall be
deemed to have been given three days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on the day it is
delivered. All postage, cable, telegram, telex and facsimile sending device
charges arising from the sending of a notice hereunder shall be paid by the
sender.
20. AMENDMENTS. This Agreement, or any term thereof, may be changed or
----------
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
19
<PAGE>
21. ADDITIONAL PORTFOLIOS. In the event that the Fund establishes one or
---------------------
more investment series in addition to and with respect to which it desires to
have PFPC render services as transfer agent, registrar, dividend disbursing
agent and related services agent under the terms set forth in this Agreement, it
shall so notify PFPC in writing, and PFPC shall agree in writing to provide such
services, and such investment series shall become a Portfolio hereunder, subject
to such additional terms, fees and conditions as are agreed to by the parties.
22. DELEGATION; ASSIGNMENT.
----------------------
(a) PFPC may, at its own expense, assign its rights and delegate its duties
hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Fund
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Fund to comply with all relevant provisions of the Securities
Laws; and (iii) PFPC and such delegate (or assignee) promptly provide such
information as the Fund may request, and respond to such questions as the Fund
may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee). The assignment and
delegation of any of PFPC's duties under this subparagraph (a) shall not relieve
PFPC of any of its responsibilities or liabilities under this Agreement.
(b) PFPC may delegate to PaineWebber Incorporated its obligation to perform
the services described on Annex B hereto. In addition, PFPC may assign its
rights and delegate its other duties hereunder to PaineWebber Incorporated or
Mitchell Hutchins Asset Management Inc. or an affiliated person of either,
provided that (I) PFPC gives the Fund thirty (30) days' prior written notice;
(ii) the delegate (or assignee) agrees with PFPC and the Fund to comply with all
relevant provisions of the Securities Laws; and (iii) PFPC and such delegate (or
assignee)
20
<PAGE>
promptly provide such information as the Fund may request, and respond
to such questions as the Fund may ask, relative to the delegation (or
assignment), including (without limitation) the capabilities of the delegate (or
assignee). In assigning its rights and delegating its duties under this
paragraph, PFPC may impose such conditions or limitations as it determines
appropriate including the condition that PFPC be retained as a sub-transfer
agent.
(c) In the event that PFPC assigns its rights and delegates its duties
under this section, no amendment of the terms of this Agreement shall become
effective without the written consent of PFPC.
23. COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24. FURTHER ACTIONS. Each party agrees to perform such further acts and
---------------
execute such further documents as are necessary to effectuate the purposes
hereof.
25. MISCELLANEOUS.
-------------
(a) Entire Agreement. This Agreement embodies the entire agreement and
----------------
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to services to be performed and fees payable under this Agreement.
(b) Captions. The captions in this Agreement are included for convenience
--------
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
21
<PAGE>
(c) Governing Law. This Agreement shall be deemed to be a contract made
-------------
in Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement shall be held
------------------
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to this
--------------------
Agreement shall constitute the valid and binding execution hereof by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ Joseph Gramlich
-------------------
Title: Senior Vice President
PAINEWEBBER INDEX TRUST
By: /s/ Dianne E. O'Donnell
-----------------------
Title: Secretary and Vice President
22
<PAGE>
ANNEX A
Portfolios
PaineWebber S&P 500 Index Fund
PaineWebber Small Cap Index Fund
23
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
- ------------ ------------
- ------------ ------------
- ------------ ------------
- ------------ ------------
- ------------ ------------
- ------------ ------------
24
<PAGE>
ANNEX B
a. Establish and maintain a dedicated service center with sufficient
facilities, equipment and skilled personnel to address all shareholder
inquiries received by telephone, mail or in-person regarding the Funds and
their accounts
b. Provide timely execution of redemptions, exchanges and non-financial
transactions directed to investment executives and specifically requested
by Fund shareholders
c. Issue checks from proceeds of Fund share redemptions to shareholders as
directed by the shareholders or their agents
d. Process and maintain shareholder account registration information
e. With respect to customer accounts maintained through PaineWebber
Incorporated ("PaineWebber"), review new applications and correspond with
shareholders to complete or correct information
f. Prepare and mail monthly or quarterly consolidated account statements that
reflect PaineWebber Mutual Fund balances and transactions (such
information to be combined with other activity and holdings in investors'
brokerage accounts if this responsibility is delegated to PaineWebber)
g. Establish and maintain a dedicated service center with sufficient
facilities, equipment and skilled personnel to address all branch inquiries
regarding operational issues and performance
h. Capture, process and mail required tax information to shareholders and
report this information to the Internal Revenue Service
i. Provide the capability to margin PaineWebber Mutual Funds held within the
client's brokerage account (if this responsibility is delegated to
PaineWebber)
j. Prepare and provide shareholder registrations for mailing of proxies,
reports and other communications to shareholders
k. Develop, maintain and issue checks from the PaineWebber systematic
withdrawal plan offered within the client's brokerage account (if this
responsibility is delegated to PaineWebber)
l. Maintain duplicate shareholder records and reconcile those records with
those at the transfer agent (if this responsibility is delegated to
PaineWebber)
25
<PAGE>
m. Process and mail duplicate PaineWebber monthly or quarterly statements to
PaineWebber Investment Executives
n. Establish and maintain shareholder distribution options (i.e., election to
have dividends paid in cash, rather than reinvested in Fund shares)
o. Process and mail purchase, redemption and exchange confirmations to Fund
shareholders and PaineWebber Investment Executives
p. Issue dividend checks to shareholders that select cash distributions to
their brokerage account (if this responsibility is delegated to
PaineWebber)
q. Develop and maintain the automatic investment plan offered within the
client's brokerage account (if this responsibility is delegated to
PaineWebber)
r. Provide bank-to-bank wire transfer capabilities related to transactions in
Fund shares
s. Maintain computerized compliance programs for blue sky and non-resident
alien requirements (only with respect to PaineWebber Cashfund, Inc.)
26
<PAGE>
Exhibit No. 9
KIRKPATRICK & LOCKHART LLP
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
TELEPHONE 202-778-9000
WWW.KL.COM
September 29, 1998
PaineWebber Index Trust
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
You have requested our opinion, as counsel to PaineWebber Index Trust
("Trust"), as to certain matters regarding the issuance of certain Shares of the
Trust. As used in this letter, the term "Shares" means the Class A, Class C and
Class Y shares of beneficial interest of the series of the Trust listed below
during the time that Post-Effective Amendment No. 2 to the Trust's Registration
Statement on Form N-1A ("PEA") is effective and has not been superseded by
another post-effective amendment. The series of the Trust is PaineWebber S&P
500 Index Fund.
As such counsel, we have examined certified or other copies, believed by us to
be genuine, of the Trust's Trust Instrument and by-laws and such resolutions and
minutes of meetings of the Trust's Board of Trustees as we have deemed relevant
to our opinion, as set forth herein. Our opinion is limited to the laws and
facts in existence on the date hereof, and it is further limited to the laws
(other than the conflict of law rules) in the State of Delaware that in our
experience are normally applicable to the issuance of shares by investment
companies organized as business trusts in that State and to the Securities Act
of 1933 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the
regulations of the Securities and Exchange Commission ("SEC") thereunder.
Based on the foregoing, we are of the opinion that the issuance of the Shares
has been duly authorized by the Trust and that, when sold in accordance with the
terms contemplated by the PEA, including receipt by the Trust of full payment
for the Shares and compliance with the 1933 Act and the 1940 Act, the Shares
will have been validly issued, fully paid and non-assessable.
We hereby consent to this opinion accompanying the PEA when it is filed with
the SEC and to the reference to our firm in the statement of additional
information that is being filed as part of the PEA.
Very truly yours,
/s/ Kirkpatrick & Lockhart LLP
KIRKPATRICK & LOCKHART LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information and to the incorporation by reference of our report dated July 24,
1998, in this Registration Statement (Form N-1A No. 333-27917) of PaineWebber
S&P 500 Index Fund.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
New York, New York
September 28, 1998
<PAGE>
Exhibit No. 13(a)
PAINEWEBBER INDEX TRUST -- CLASS A SHARES
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS PaineWebber Index Trust ("Trust") is registered under the Investment
Company Act of 1940, as amended ("1940 Act"), as an open-end management
investment company, and has four distinct series of shares of beneficial
interest ("Series"), which correspond to distinct portfolios and have been
designated as PaineWebber Bond Index Fund, PaineWebber EAFE Index Fund,
PaineWebber S&P 500 Index Fund and PaineWebber Small Cap Index Fund; and
WHEREAS the Trust desires to adopt a Plan of Distribution ("Plan") pursuant to
Rule 12b-1 under the 1940 Act with respect to the Class A shares of the above-
referenced Series and of such other Series as may hereafter be designated by the
Trust's board of trustees ("Board") and have Class A shares established; and
WHEREAS the Trust has entered into a Distribution Contract ("Contract") with
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") pursuant to which
Mitchell Hutchins has agreed to serve as Distributor of the Class A shares of
each such Series;
NOW, THEREFORE, the Trust hereby adopts this Plan with respect to the Class A
shares of each Series in accordance with Rule 12b-1 under the 1940 Act.
1. A. Each Series is authorized to pay to Mitchell Hutchins, as compensation
for Mitchell Hutchins' services as Distributor of the Series' Class A shares, a
service fee at the rate of 0.25% on an annualized basis of the average daily net
assets of the Series' Class A shares. Such fee shall be calculated and accrued
daily and paid monthly or at such other intervals as the Board shall determine.
B. Any Series may pay a service fee to Mitchell Hutchins at a lesser rate
than the fee specified in paragraph 1A of this Plan, as agreed upon by the Board
and Mitchell Hutchins and as approved in the manner specified in paragraph 4 of
this Plan.
2. As Distributor of the Class A shares of each Series, Mitchell Hutchins may
spend such amounts as it deems appropriate on any activities or expenses
primarily intended to result in the sale of the Series' Class A shares or the
servicing and maintenance of shareholder accounts, including, but not limited
to, compensation to employees of Mitchell Hutchins; compensation to and
expenses, including overhead and telephone and other communication expenses, of
Mitchell Hutchins, PaineWebber Incorporated ("PaineWebber") and other selected
dealers who engage in or support the distribution of shares or who service
shareholder accounts; the printing of prospectuses, statements of additional
information, and reports for other than existing shareholders; and the
preparation, printing and distribution of sales literature and advertising
materials.
<PAGE>
3. If adopted with respect to the Class A shares of a Series after any public
offering of those shares, this Plan shall not take effect with respect to those
shares unless it has first been approved by a vote of a majority of the voting
securities of the Class A shares of that Series.
4. This Plan shall not take effect with respect to the Class A shares of any
Series unless it first has been approved, together with any related agreements,
by votes of a majority of both (a) the Board and (b) those Trustees of the Trust
who are not "interested persons" of the Trust and have no direct or indirect
financial interest in the operation of this Plan or any agreements related
thereto ("Independent Trustees"), cast in person at a meeting (or meetings)
called for the purpose of voting on such approval; and until the Trustees who
approve the Plan's taking effect with respect to such Series' Class A shares
have reached the conclusion required by Rule 12b-1(e) under the 1940 Act.
5. After approval as set forth in paragraphs 3 and 4, this Plan shall
continue in full force and effect with respect to such Series for so long as
such continuance is specifically approved at least annually in the manner
provided for approval of this Plan in paragraph 4.
6. Mitchell Hutchins shall provide to the Board and the Board shall review,
at least quarterly, a written report of the amounts expended with respect to the
Class A shares of each Series by Mitchell Hutchins under this Plan and the
Contract and the purposes for which such expenditures were made. Mitchell
Hutchins shall submit only information regarding amounts expended for "service
activities," as defined in this paragraph 6, to the Board in support of the
service fee payable hereunder.
"Service activities" shall mean activities covered by the definition of
"service fee" contained in Rule 2830 of the Conduct Rules of the National
Association of Securities Dealers, Inc., including the provision by Mitchell
Hutchins or PaineWebber of personal, continuing services to investors in the
Class A shares of the Series. Overhead and other expenses of Mitchell Hutchins
and PaineWebber related to their "service activities," including telephone and
other communications expenses, may be included in the information regarding
amounts expended for such activities.
7. This Plan may be terminated with respect to the Class A shares of any
Series at any time by vote of the Board, by vote of a majority of the
Independent Trustees, or by vote of a majority of the outstanding voting
securities of the Class A shares of that Series.
8. This Plan may not be amended to increase materially the amount of service
fees provided for in paragraph 1A hereof unless such amendment is approved by a
vote of a majority of the outstanding voting securities of each Series, and no
material amendment to the Plan shall be made unless approved in the manner
provided for approval and annual renewal in paragraph 5 hereof.
9. The amount of the service fees payable by any Series to Mitchell Hutchins
under paragraph 1A hereof and the Contract is not related directly to expenses
incurred by Mitchell Hutchins on behalf of such Series in serving as Distributor
of the Class A shares, and paragraph 2 hereof and the Contract do not obligate
the Series to reimburse Mitchell Hutchins for such
- 2 -
<PAGE>
expenses. The service fees set forth in paragraph 1A hereof will be paid by the
Series to Mitchell Hutchins until either the Plan or the Contract is terminated
or not renewed. If either the Plan or the Contract is terminated or not renewed
with respect to the Class A shares of any Series, any distribution expenses
incurred by Mitchell Hutchins on behalf of the Series in excess of payments of
the service fees specified in paragraph 1A hereof and the Contract which
Mitchell Hutchins has received or accrued through the termination date are the
sole responsibility and liability of Mitchell Hutchins, and are not obligations
of the Series.
10. While this Plan is in effect, the selection and nomination of the
Trustees who are not interested persons of the Trust shall be committed to the
discretion of the Trustees who are not interested persons of the Trust.
11. As used in this Plan, the terms "majority of the outstanding voting
securities" and "interested person" shall have the same meaning as those terms
have in the 1940 Act.
12. The Trust shall preserve copies of this Plan (including any amendments
thereto) and any related agreements and all reports made pursuant to paragraph 6
hereof for a period of not less than six years from the date of this Plan, the
first two years in an easily accessible place.
13. The Trustees of the Trust and the shareholders of each Series shall not
be liable for any obligations of the Trust or any Series under this Plan, and
Mitchell Hutchins or any other person, in asserting any rights or claims under
this Plan, shall look only to the assets and property of the Trust or such
Series in settlement of such right or claim, and not to such Trustees or
shareholders.
IN WITNESS WHEREOF, the Trust has executed this Plan of Distribution on the
day and year set forth below in New York, New York.
Date:__________, 1998
ATTEST: PAINEWEBBER INDEX TRUST
By:
- ----------------------------- --------------------------------
- 3 -
<PAGE>
Exhibit No. 13(b)
PAINEWEBBER INDEX TRUST -- CLASS C SHARES
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, PaineWebber Index Trust ("Trust") is registered under the Investment
Company Act of 1940, as amended ("1940 Act"), as an open-end management
investment company, and has four distinct series of shares of beneficial
interest ("Series"), which correspond to distinct portfolios and have been
designated as PaineWebber Bond Index Fund, PaineWebber EAFE Index Fund,
PaineWebber S&P 500 Index Fund and PaineWebber Small Cap Index Fund; and
WHEREAS, the Trust desires to adopt a Plan of Distribution ("Plan") pursuant
to Rule 12b-1 under the 1940 Act with respect to the Class C shares of the
above-referenced Series and of such other Series as may hereafter be designated
by the Trust's board of trustees ("Board") and have Class C shares established;
and
WHEREAS, the Trust has entered into a Distribution Contract ("Contract") with
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") pursuant to which
Mitchell Hutchins has agreed to serve as Distributor of the Class C shares of
each such Series;
NOW, THEREFORE, the Trust hereby adopts this Plan with respect to the Class C
shares of each Series in accordance with Rule 12b-1 under the 1940 Act.
I. A. The following Series of the Trust are authorized to pay to Mitchell
Hutchins, as compensation for Mitchell Hutchins' services as Distributor of the
Series' Class C shares, distribution fees at the rate (on an annualized basis)
set forth below of the average daily net assets of the Series' Class C shares.
Such fee shall be calculated and accrued daily and paid monthly or at such other
intervals as the Board shall determine:
<TABLE>
<S> <C>
PaineWebber Bond Index Fund 0.50%
PaineWebber EAFE Index Fund 0.75%
PaineWebber S&P 500 Index Fund 0.75%
PaineWebber Small Cap Index Fund 0.75%
</TABLE>
B. Any Series hereafter established is authorized to pay to Mitchell
Hutchins, as compensation for Mitchell Hutchins' services as Distributor of the
Series' Class C Shares, a distribution fee in the amount to be agreed upon in a
written distribution fee addendum to this Plan ("Distribution Fee Addendum")
executed by the Trust on behalf of such Series. All such Distribution Fee
Addenda shall provide that they are subject to all terms and conditions of this
Plan.
<PAGE>
C. Each Series is authorized to pay to Mitchell Hutchins, as compensation
for Mitchell Hutchins' services as Distributor of the Series' Class C shares, a
service fee at the rate of 0.25%, on an annualized basis, of the average daily
net assets of the Series' Class C shares. Such fee shall be calculated and
accrued daily and paid monthly or at such other intervals as the Board shall
determine.
D. Any Series may pay a distribution or service fee to Mitchell Hutchins
at a lesser rate than the fees specified above, as agreed upon by the Board and
Mitchell Hutchins and as approved in the manner specified in Paragraph 4 of this
Plan.
2. As Distributor of the Class C shares of each Series, Mitchell Hutchins may
spend such amounts as it deems appropriate on any activities or expenses
primarily intended to result in the sale of the Class C shares of the Series or
the servicing and maintenance of shareholder accounts, including, but not
limited to, compensation to employees of Mitchell Hutchins; compensation to and
expenses, including overhead and telephone and other communication expenses, of
Mitchell Hutchins, PaineWebber Incorporated ("PaineWebber") and other selected
dealers who engage in or support the distribution of shares or who service
shareholder accounts; the printing of prospectuses, statements of additional
information, and reports for other than existing shareholders; and the
preparation, printing and distribution of sales literature and advertising
materials.
3. If adopted with respect to the Class C shares of a Series after any public
offering of those shares, this Plan shall not take effect with respect to those
shares unless it first has been approved by a vote of a majority of the voting
securities of the Class C shares of that Series.
4. This Plan shall not take effect with respect to the Class C shares of any
Series unless it first has been approved, together with any related agreements,
by votes of a majority of both (a) the Board and (b) those Trustees of the Trust
who are not "interested persons" of the Trust and have no direct or indirect
financial interest in the operation of this Plan or any agreements related
thereto ("Independent Trustees"), cast in person at a meeting (or meetings)
called for the purpose of voting on such approval; and until the Trustees who
approve the Plan's taking effect with respect to such Series' Class C shares
have reached the conclusion required by Rule 12b-1(e) under the 1940 Act.
5. After approval as set forth in paragraphs 3 and 4, this Plan shall take
effect and continue in full force and effect with respect to the Class C shares
of such Series for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in Paragraph 4.
6. Mitchell Hutchins shall provide to the Board and the Board shall review,
at least quarterly, a written report of the amounts expended with respect to the
Class C shares of each Series by Mitchell Hutchins under this Plan and the
Contract and the purposes for which such expenditures were made. Mitchell
Hutchins shall submit only information regarding amounts expended for
"distribution activities," as defined in this Paragraph 6, to the Board in
support of the distribution fee payable hereunder and shall submit only
information regarding amounts
- 2 -
<PAGE>
expended for "service activities," as defined in this Paragraph 6, to the Board
in support of the service fee payable hereunder.
For purposes of this Plan, "distribution activities" shall mean any activities
in connection with Mitchell Hutchins' performance of its obligations under this
Plan or the Contract that are not deemed "service activities." "Service
activities" shall mean activities covered by the definition of "service fee"
contained in Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., including the provision by Mitchell Hutchins or
PaineWebber of personal, continuing services to investors in the Class C shares
of the Series. Overhead and other expenses of Mitchell Hutchins and PaineWebber
related to their "distribution activities" or "service activities," including
telephone and other communications expenses, may be included in the information
regarding amounts expended for such activities.
7. This Plan may be terminated with respect to the Class C shares of any
Series at any time by vote of the Board, by vote of a majority of the
Independent Trustees, or by vote of a majority of the outstanding voting
securities of the Class C shares of that Series.
8. This Plan may not be amended to increase materially the amount of
distribution fees provided for in Paragraph 1A or 1B hereof or the amount of
service fees provided for in Paragraph 1C hereof unless such amendment is
approved in the manner provided for initial approval in paragraphs 3 and 4
hereof, and no material amendment to the Plan shall be made unless approved in
the manner provided for approval and annual renewal in Paragraph 5 hereof.
9. The amount of the distribution and service fees payable by the Series to
Mitchell Hutchins under Paragraphs 1 hereof and the Contract is not related
directly to expenses incurred by Mitchell Hutchins on behalf of such Series in
serving as Distributor of the Class C shares, and Paragraph 2 hereof and the
Contract do not obligate the Series to reimburse Mitchell Hutchins for such
expenses. The distribution and service fees set forth in Paragraph 1 hereof
will be paid by the Series to Mitchell Hutchins until either the Plan or the
Contract is terminated or not renewed. If either the Plan or the Contract is
terminated or not renewed with respect to the Class C shares of any Series, any
distribution expenses incurred by Mitchell Hutchins on behalf of the Class C
shares of the Series in excess of payments of the distribution and service fees
specified in Paragraphs 1 hereof and the Contract which Mitchell Hutchins has
received or accrued through the termination date are the sole responsibility and
liability of Mitchell Hutchins, and are not obligations of the Series.
10. While this Plan is in effect, the selection and nomination of the
Trustees who are not interested persons of the Trust shall be committed to the
discretion of the Trustees who are not interested persons of the Trust.
11. As used in this Plan, the terms "majority of the outstanding voting
securities" and "interested person" shall have the same meaning as those terms
have in the 1940 Act.
12. The Trust shall preserve copies of this Plan (including any amendments
thereto) and any related agreements and all reports made pursuant to Paragraph 6
hereof for a period of not less than six years from the date of this Plan, the
first two years in an easily accessible place.
- 3 -
<PAGE>
13. The Trustees of the Trust and the shareholders of each Series shall not
be liable for any obligations of the Trust or any Series under this Plan, and
Mitchell Hutchins or any other person, in asserting any rights or claims under
this Plan, shall look only to the assets and property of the Trust or such
Series in settlement of such right or claim, and not to such Trustees or
shareholders.
IN WITNESS WHEREOF, the Trust has caused this Plan of Distribution to be
executed on the day and year set forth below in New York, New York.
Date:__________________, 1998
ATTEST: PAINEWEBBER INDEX TRUST
By:
- ---------------------------- ------------------------------
- 4 -
<PAGE>
Exhibit No. 15
PAINEWEBBER INDEX TRUST
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
PaineWebber Index Trust hereby adopts this amended and restated Multiple Class
Plan pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended
("1940 Act") on behalf of its current series, PaineWebber Bond Index Fund, PW
EAFE Index Fund, PW S&P 500 Index Fund and PW Small Cap Index Fund, and any
series that may be established in the future (referred to hereinafter
collectively as the "Funds" and individually as a "Fund").
A. GENERAL DESCRIPTION OF CLASSES THAT ARE OFFERED:
-----------------------------------------------
1. CLASS A SHARES. Class A shares of each Fund are sold to the general
public subject to an initial sales charge. The initial sales charge for each
Fund is waived for certain eligible purchasers and reduced or waived for certain
large volume purchases.
The maximum sales charge is 2.5% of the public offering price for Class A
shares.
Class A shares of each Fund are subject to an annual service fee of 0.25% of
the average daily net assets of the Class A shares of each Fund paid pursuant to
a plan of distribution adopted pursuant to Rule 12b-1 under the 1940 Act.
Class A shares of each Fund are subject to a contingent deferred sales charge
("CDSC") on redemptions of shares (i) purchased without an initial sales charge
due to a sales charge waiver for purchases of $1 million or more and (ii) held
less than one year. The Class A CDSC is equal to 0.50% of the lower of: (i) the
net asset value of the shares at the time of purchase or (ii) the net asset
value of the shares at the time of redemption. Class A shares of each Fund held
one year or longer and Class A shares of each Fund acquired through reinvestment
of dividends or capital gains distributions on shares otherwise subject to a
Class A CDSC are not subject to the CDSC. The CDSC for Class A shares of each
Fund will be waived under certain circumstances.
2. CLASS C SHARES. Class C shares of each Fund are sold to the general
public without imposition of a sales charge.
Class C shares of a Fund that invests primarily in equity securities or a
combination of equity and debt securities (or in other investment companies that
invest primarily in equity securities or a combination of equity and debt
securities) are subject to an annual service fee of 0.25% of average daily net
assets and a distribution fee of 0.75% of average daily net assets of Class C
shares of such Fund, each pursuant to a plan of distribution adopted pursuant to
Rule 12b-1 under the 1940 Act. Class C shares of such a Fund will be subject to
a CDSC on redemptions of Class C shares held less than one year equal to 1% of
the lower of: (i) the net asset value of the shares at the time of purchase or
(ii) the net asset value of the shares at the time of redemption.
Class C shares of a Fund that invests primarily in debt securities (or in
other investment companies that invest primarily in debt securities) are subject
to an annual service fee of 0.25% of
<PAGE>
average daily net assets and a distribution fee of 0.50% of average daily net
assets of Class C shares of such Fund, each pursuant to a plan of distribution
adopted pursuant to Rule 12b-1 under the 1940 Act. Class C shares of such a Fund
will be subject to a CDSC on redemptions of Class C shares held less than one
year equal to 0.75% of the lower of: (i) the net asset value of the shares at
the time of purchase or (ii) the net asset value of the shares at the time of
redemption.
Class C shares of each Fund held one year or longer and Class C shares of each
Fund acquired through reinvestment of dividends or capital gains distributions
are not subject to the CDSC. The CDSC for Class C shares of each Fund will be
waived under certain circumstances.
3. CLASS Y SHARES. Class Y shares are sold without imposition of an initial
sales charge or CDSC and are not subject to any service or distribution fees.
Class Y shares of each Fund are available for purchase only by: (i) employee
benefit and retirement plans, other than individual retirement accounts and
self-employed retirement plans, of Paine Webber Group Inc. and its affiliates;
(ii) certain unit investment trusts sponsored by PaineWebber Incorporated
("PaineWebber"); (iii) participants in certain investment programs that are
currently, or will in the future be, sponsored by PaineWebber or its affiliates
and that charge a separate fee for program services, provided that shares are
purchased through or in connection with such programs; (iv) investors purchasing
$10,000,000 or more at one time in any combination of PaineWebber proprietary
funds in the Flexible Pricing System; (v) an employee benefit plan qualified
under section 401 (including a salary reduction plan qualified under section
401(k)) or section 403(b) of the Internal Revenue Code (each an "employee
benefit plan"), provided that such employee benefit plan has 5,000 or more
eligible employees; (vi) an employee benefit plan with assets of $50,000,000 or
more; and (vii) any investment company advised by PaineWebber or its affiliates.
4. CLASS X SHARES. Class X shares are established currently only for
PaineWebber S&P 500 Index Fund are sold to the general public without imposition
of an initial sales charge or CDSC.
Class X shares of PaineWebber S&P 500 Index Fund are subject to an annual
service fee of 0.05% of the average daily net assets of the Class X shares paid
pursuant to a plan of distribution adopted pursuant to Rule 12b-1 under the 1940
Act.
Class X shares of PaineWebber S&P 500 Index Fund will convert to Class Y
shares of that Fund when Class A shares of PaineWebber S&P 500 Index Fund are
offered to the general public.
B. EXPENSE ALLOCATIONS OF EACH CLASS:
---------------------------------
Certain expenses may be attributable to a particular Class of shares of each
Fund ("Class Expenses"). Class Expenses are charged directly to the net assets
of the particular Class and, thus, are borne on a pro rata basis by the
outstanding shares of that Class.
2
<PAGE>
In addition to the distribution and service fees described above, each Class
may also pay a different amount of the following other expenses:
(1) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses,
and proxies to current shareholders of a specific Class;
(2) Blue Sky fees incurred by a specific Class of shares;
(3) SEC registration fees incurred by a specific Class of shares;
(4) expenses of administrative personnel and services required to
support the shareholders of a specific Class of shares;
(5) Trustees' fees incurred as a result of issues relating to a
specific Class of shares;
(6) litigation expenses or other legal expenses relating to a
specific Class of shares; and
(7) transfer agent fees identified as being attributable to a
specific Class.
C. EXCHANGE PRIVILEGES:
-------------------
Class A and Class C shares of each Fund may be exchanged for shares of the
corresponding Class of other PaineWebber mutual funds or may be acquired through
an exchange of shares of the corresponding Class of those funds. Class Y shares
of the Funds are not exchangeable. Class X shares of PaineWebber S&P 500 Index
Fund are not exchangeable for any other class but will be converted into Class Y
shares of that Fund.
These exchange privileges may be modified or terminated by a Fund, and
exchanges may only be made into funds that are legally registered for sale in
the investor's state of residence.
D. CLASS DESIGNATION:
-----------------
Subject to approval by the Board of Trustees of PaineWebber Index Trust, a
Fund may alter the nomenclature for the designations of one or more of its
classes of shares.
E. ADDITIONAL INFORMATION:
----------------------
This Multiple Class Plan is qualified by and subject to the terms of the then
current prospectus for the applicable Classes; provided, however, that none of
the terms set forth in any such prospectus shall be inconsistent with the terms
of the Classes contained in this Plan. The prospectus for each Fund contains
additional information about the Classes and each Fund's multiple class
structure.
3
<PAGE>
F. DATE OF EFFECTIVENESS:
---------------------
This Multiple Class Plan is effective as of the date hereof, provided that
this Plan shall not become effective with respect to any Fund unless such action
has first been approved by the vote of a majority of the Board and by vote of a
majority of those trustees of the Fund who are not interested persons of
PaineWebber Index Trust.
May 13, 1998
4
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