<PAGE>
As filed with the Securities and Exchange Commission on September 29, 1999
1933 Act Registration No. 333-27917
1940 Act Registration No. 811-8229
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. 4 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5 [ X ]
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 September 30, 1999, 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: Class A, C and Y Shares of Beneficial
Interest.
<PAGE>
PaineWebber
S&P 500 Index Fund
------------------------------------------
PROSPECTUS
SEPTEMBER 30, 1999
------------------------------------------
This prospectus offers Class A, Class C and Class Y shares of PaineWebber S&P
500 Index Fund. Each class has different sales charges and ongoing expenses. You
can choose the class that is best for you based on how much you plan to invest
and how long you plan to hold your fund shares. Class Y shares are available
only to certain types of investors.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund's shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
<PAGE>
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==========================
PaineWebber S&P 500 Index Fund
Contents
THE FUND
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------------------------------
What every investor 3 S&P 500 Index Fund
should know about
the fund 6 More About Risks and Investment Strategies
YOUR INVESTMENT
--------------------------------------------------------------------------------------------------------
Information for 7 Managing Your Fund Account
managing your fund -- Flexible Pricing
account -- Buying Shares
-- Selling Shares
-- Exchanging Shares
-- Pricing and Valuation
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------------------------------
Additional important 12 Management
information about
the fund 13 Dividends and Taxes
14 Financial Highlights
--------------------------------------------------------------------------------------------------------
Where to learn more Back Cover
about PaineWebber
mutual funds
</TABLE>
---------------------------------
The fund is not a complete or
balanced investment program.
---------------------------------
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Prospectus Page 2
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==========================
PaineWebber S&P 500 Index Fund
PaineWebber S&P 500 Index Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE
To replicate the total return of the S&P 500 Index, before fees and expenses.
PRINCIPAL INVESTMENT STRATEGIES
The fund invests primarily in common stocks issued by companies in the Standard
& Poor's 500 Composite Stock Price Index. The fund ordinarily invests in at
least 450 stocks that are represented in the Index in proportion to their
weighting in the Index. The fund also invests, to a lesser extent, in related
derivatives, such as options and futures contracts, that simulate investment in
the 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'). Most of these
500 stocks trade on the New York Stock Exchange. These stocks represent
approximately 75% of the market value of all U.S common stocks but do not
necessarily represent the largest companies. S&P selects the component stocks
included in the Index with the aim of achieving a distribution that is
representative of the various industry components of the U.S. market for common
stocks. S&P also considers aggregate market value and trading activity in the
selection process. Each stock in the Index is weighted by its total market value
relative to the total market value of all securities in the Index.
The fund's investment adviser, Mitchell Hutchins Asset Management Inc., uses a
'passive' investment approach in attempting to replicate the investment
performance of the S&P 500 Index rather than actively buying and selling stocks,
some of which might not be included in the S&P 500 Index, in an effort to 'beat'
the market. Mitchell Hutchins may use options and futures and other derivatives
in strategies intended to simulate full investment in the S&P 500 Index stocks
while retaining a cash balance for fund management purposes. Mitchell Hutchins
also may use these instruments to reduce the risk of adverse price movements
while investing cash received when investors buy fund shares, to facilitate
trading and to reduce transaction costs.
The fund is not sponsored, endorsed, sold or promoted by S&P, and S&P makes no
representation regarding the advisability of investing in the fund. S&P 500'r'
is a trademark of the McGraw-Hill Companies, Inc. and has been licensed for use
by Mitchell Hutchins.
PRINCIPAL RISKS
An investment in the fund is not guaranteed; you may lose money by investing in
the fund.
Common stocks, which are the fund's main type of investment, generally fluctuate
in value more than other investments. The fund expects a close correlation
between its performance and that of the S&P 500 Index in both rising and falling
markets. The fund's performance, however, will generally will not be identical
to that of the Index because of the fees and expenses borne by the fund and
investor purchases and sales of fund shares, which can occur daily.
More information about these and other risks of an investment in the fund is
provided below in 'More About Risks and Investment Strategies.' In particular,
see the following headings:
Equity Risk
Index Tracking Risk
Derivatives Risk
Foreign Securities Risk
Information on the fund's investment strategies and recent holdings can be found
in its current annual/semi-annual reports (see back cover for information on
ordering such reports).
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Prospectus Page 3
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PaineWebber S&P 500 Index Fund
PERFORMANCE
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RISK/RETURN BAR CHART AND TABLE
The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.
The bar chart shows how the fund's performance has varied from year to year. The
chart shows Class Y shares because they have the longest performance history of
any class of fund shares. Unlike the other classes of shares, Class Y shares
have no sales charges.
The table that follows the chart shows the average annual returns over several
time periods for the fund's Class Y shares. The fund's other classes of shares
have not been outstanding for a full calendar year. The table compares fund
returns to returns on the S&P 500 Index, a broad-based market index that is
unmanaged and that, therefore, does not include any expenses.
The fund's past performance does not necessarily indicate how the fund will
perform in the future.
TOTAL RETURN ON CLASS Y SHARES (1998 IS THE FUND'S FIRST FULL CALENDAR YEAR OF
OPERATIONS.)
[PERFORMANCE GRAPH]
YEAR PERCENTAGES
- ---- -----------
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998 27.93%
Total return January 1, 1999 to June 30, 1999 -- 12.12%
Best quarter during years shown: 4th quarter 1998 -- 20.87%
Worst quarter during years shown: 3rd quarter 1998 -- (10.00)%
AVERAGE ANNUAL TOTAL RETURNS*
as of December 31, 1998
<TABLE>
<CAPTION>
CLASS Y S&P 500
CLASS (12/31/97) INDEX
(INCEPTION DATE) ---------- -----
<S> <C> <C>
One Year.................................................. 27.93% 28.60%
Life of Class............................................. 27.93% 28.60%
</TABLE>
- ------------
* Average annual total returns are not shown for Class A and Class C shares
because those shares were not in existence for a full calendar year.
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Prospectus Page 4
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PaineWebber S&P 500 Index Fund
EXPENSES AND FEE TABLES
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FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investments)
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS Y
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 2.5% None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC) (as a
% of offering price).................................... None 1% None
Exchange Fee................................................ None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS Y
------- ------- -------
<S> <C> <C> <C>
Management Fees............................................. 0.20% 0.20% 0.20%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 0.00
Other Expenses.............................................. 1.07 1.04 1.09
---- ---- ----
Total Annual Fund Operating Expenses........................ 1.52% 2.24% 1.29%
---- ---- ----
---- ---- ----
Expense Reimbursements*..................................... 0.92 0.89 0.94
---- ---- ----
Net Expenses*............................................... 0.60% 1.35% 0.35%
---- ---- ----
---- ---- ----
</TABLE>
- ----------
* The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent that
the fund's expenses through the end of the current fiscal year otherwise would
exceed the 'Net Expenses' rates for each class shown above. The fund has agreed
to repay Mitchell Hutchins for those reimbursed expenses if it can do so over
the following three years without causing the fund's expenses in any of those
three years to exceed those 'Net Expenses' rates.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same, except for the
one year period when the fund's expenses are lower due to its reimbursement
agreement with Mitchell Hutchins. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A................................................. $310 $630 $ 973 $1,941
Class C (assuming sale of all shares at end of
period)............................................... 237 615 1,119 2,505
Class C (assuming no sale of shares).................... 137 615 1,119 2,505
Class Y................................................. 36 316 617 1,474
</TABLE>
=================
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Prospectus Page 5
<PAGE>
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==========================
PaineWebber S&P 500 Index Fund
MORE ABOUT RISKS
AND INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
The main risks of investing in the fund are described below. Other risks of
investing in the fund, along with further detail about some of the risks
described below, are discussed in the fund's Statement of Additional Information
('SAI'). Information on how you can obtain the SAI is on the back cover of this
prospectus.
Equity Risk. The prices of common stocks and other equity securities generally
fluctuate more than those of other investments. They reflect changes in the
issuing company's financial condition and changes in the overall market. Common
stocks generally represent the riskiest investment in a company. The fund may
lose a substantial part, or even all, of its investment in a company's stock.
Index Tracking Risk. The fund expects a close correlation between its
performance and that of the S&P 500 Index in both rising and falling markets.
While the fund attempts to replicate, before deduction of fees and operating
expenses, the investment results of the 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. In addition, the fund must pay fees and expenses
that are not borne by the Index.
Derivatives Risk. The value of 'derivatives' -- so-called because their value
'derives' from the value of an underlying asset, reference rate or index --
may rise or fall more rapidly than other investments. For some derivatives, it
is possible for the fund to lose more than the amount it invested in the
derivative. Derivatives include options and futures contracts that may be used
to simulate full investment in the S&P 500 Index.
Foreign Securities Risk. The S&P 500 Index includes some U.S. dollar-denominated
foreign securities. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices.
ADDITIONAL RISKS
Year 2000 Risk. The fund could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the fund, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from service providers that they are taking similar steps.
Similarly, the companies in which the fund invests and trading systems used by
the fund could be adversely affected by this issue. The ability of a company or
trading system to respond successfully to the 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 on the fund.
=================
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Prospectus Page 6
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PaineWebber S&P 500 Index Fund
MANAGING YOUR FUND ACCOUNT
- --------------------------------------------------------------------------------
FLEXIBLE PRICING
The fund offers three classes of shares -- Class A, Class C and Class Y. Each
class has different sales charges and ongoing expenses. You can choose the class
that is best for you, based on how much you plan to invest in the fund and how
long you plan to hold your fund investment. Class Y shares are only available to
certain types of investors.
The fund has adopted a plan under rule 12b-1 for its Class A and Class C shares
that allows it to pay service and (for Class C shares) distribution fees for the
sale of its shares and services provided to shareholders. Because the 12b-1
distribution fees for Class C shares are paid out of the fund's assets on an
ongoing basis, over time they will increase the cost of your investment and may
cost you more than if you paid a front-end sale charge.
CLASS A SHARES
Class A shares have a front-end sales charge that is included in the offering
price of the Class A shares. This sales charge is not invested in the fund.
Class A shares pay an annual 12b-1 service fee of 0.25% of average net assets,
but they pay no 12b-1 distribution fees. The ongoing expenses for Class A shares
are lower than for Class C shares.
The Class A sales charges for the fund are described in the following table.
CLASS A SALES CHARGES
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF: DISCOUNT TO SELECTED DEALERS AS
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED PERCENTAGE OF OFFERING PRICE
- -------------------- -------------- ------------------- -------------------------------
<S> <C> <C> <C>
Less than $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 dividends are not subject
to this 0.50% charge. Withdrawals in the first year after purchase of up to
12% of the value of the fund account under the funds' Systematic Withdrawal
Plan are not subject to this charge.
(2) Mitchell Hutchins pays 0.50% to PaineWebber.
Sales Charge Reductions and Waivers. You may qualify for a lower sales charge if
you already own Class A shares of a PaineWebber mutual fund. You can combine the
value of Class A shares that you own in other PaineWebber funds and the purchase
amount of the Class A shares of the PaineWebber fund that you are buying.
You may also qualify for a lower sales charge if you combine your purchases with
those of:
your spouse, parents or children under age 21;
your Individual Retirement Accounts (IRAs);
certain employee benefit plans, including 401(k) plans;
a company that you control;
a trust that you created;
Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts created
by you or by a group of investors for your children; or
accounts with the same adviser.
=================
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Prospectus Page 7
<PAGE>
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PaineWebber S&P 500 Index Fund
You may qualify for a complete waiver of the sales charge if you:
Are an employee of PaineWebber or its affiliates or the spouse, parent or
child under age 21 of a PaineWebber employee;
Buy these shares through a PaineWebber Financial Advisor who was formerly
employed as an investment executive with a competing brokerage firm that was
registered as a broker-dealer with the SEC, and
-- you were the Financial Advisor's client at the competing brokerage firm;
-- within 90 days of buying shares in the fund, you sell shares of one or
more mutual funds that were principally underwritten by the competing
brokerage firm or its affiliates, and you either paid a sales charge to
buy those shares, pay a contingent deferred sales charge when selling
them or held those shares until the contingent deferred sales charge was
waived; and
-- you purchase an amount that does not exceed the total amount of money you
received from the sale of the other mutual fund;
Acquire these shares through the reinvestment of dividends of a PaineWebber
unit investment trust;
Are a 401(k) or 403(b) qualified employee benefit plan with 50 or more
eligible employees in the plan or at least $1 million in assets;
Are a participant in the PaineWebber Members Only'sm' Program. For investments
made pursuant to this waiver, Mitchell Hutchins may make payments out of its
own resources to PaineWebber and to participating membership organizations in
a total amount not to exceed 1% of the amount invested; or
Acquire these shares through a PaineWebber InsightOne Program brokerage
account.
Note: See the fund's SAI for some other sales charge waivers. If you think you
qualify for any sales charge reductions or waivers, you will need to provide
documentation to PaineWebber or the fund. For more information, you should
contact your PaineWebber Financial Advisor or correspondent firm or call
1-800-647-1568. If you want information on the fund's Systematic Withdrawal
Plan, see the SAI or contact your PaineWebber Financial Advisor or correspondent
firm.
CLASS C SHARES
Class C shares have a level load sales charge in the form of ongoing 12b-1
distribution fees. When you purchase Class C shares, we will invest 100% of your
purchase in fund shares.
Class C shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
Over time these fees will increase the cost of your investment and may cost you
more than if you paid a front-end sales charge. Class C shares do not convert to
another class of shares. This means that you will pay the 12b-1 fees for as long
as you own your shares.
Class C shares also have a contingent deferred sales charge. You may have to pay
the deferred sales charge if you sell your shares within one year of the date
you purchased them. We calculate the deferred sales charge on sales of Class C
shares by multiplying 1.00% by the lesser of the net asset value of the Class C
shares at the time of purchase or the net asset value at the time of sale. We
will not impose the deferred sales charge on Class C shares representing
reinvestment of dividends or on withdrawals in the first year after purchase, of
up to 12% of the value of your Class C shares under the Systematic Withdrawal
Plan.
You may be eligible to sell your shares without paying a contingent deferred
sales charge if:
You are a qualified retirement plan with 100 or more employees or $1 million
in assets; or
You are eligible to invest in certain offshore investment pools offered by
PaineWebber, your shares are sold before March 31, 2000, and the proceeds are
used to purchase interests in one or more of these pools.
Note: If you want information on the fund's Systematic Withdrawal Plan, see the
SAI or contact your PaineWebber Financial Advisor or correspondent firm.
CLASS Y SHARES
Class Y shares have no sales charge. Only specific types of investors can
purchase Class Y shares. You may be eligible to purchase Class Y shares if you:
Buy shares through PaineWebber's PACE Multi-Advisor Program;
=================
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Prospectus Page 8
<PAGE>
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==========================
PaineWebber S&P 500 Index Fund
Buy $10 million or more of PaineWebber fund shares at any one time;
Are a qualified retirement plan with 5,000 or more eligible employees or $50
million in assets; or
Are an investment company advised by PaineWebber or an affiliate of
PaineWebber.
Class Y shares do not pay ongoing distribution or service fees or sales charges.
The ongoing expenses for Class Y shares are the lowest for all the classes.
BUYING SHARES
If you are a PaineWebber client, or a client of a PaineWebber correspondent
firm, you can purchase fund shares through your Financial Advisor. Otherwise,
you can invest in the funds through the fund's transfer agent, PFPC Inc. You can
obtain an application by calling 1-800-647-1568. You must complete and sign the
application and mail it, along with a check, to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
If you wish to invest in other PaineWebber Funds, you can do so by:
Contacting your Financial Advisor (if you have an account at PaineWebber or
at a PaineWebber correspondent firm);
Mailing an application with a check; or
Opening an account by exchanging shares from another PaineWebber fund.
You do not have to complete an application when you make additional investments
in the same fund.
The fund and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of shares.
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 amounts for:
Employees of PaineWebber or its affiliates; or
Participants in certain pension plans, retirement accounts, unaffiliated
investment programs or the funds' automatic investment plans.
Frequent Trading The interests of the fund's long-term shareholders and its
ability to manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market fluctuations --
also known as 'market timing.' When large dollar amounts are involved, the fund
may have difficulty implementing long-term investment strategies, because it
cannot predict how much cash it will have to invest. Market timing also may
force the fund to sell portfolio securities at disadvantageous times to raise
the cash needed to buy a market timer's fund shares. These factors may hurt the
fund's performance and its shareholders. When Mitchell Hutchins believes
frequent trading would have a disruptive effect on the fund's ability to manage
its investments, Mitchell Hutchins and the fund may reject purchase orders and
exchanges into the fund by any person, group or account that Mitchell Hutchins
believes to be a market timer. The fund may notify the market timer that a
purchase order or an exchange has been rejected after the day the order is
placed.
SELLING SHARES
You can sell your fund shares at any time. If you own more than one class of
shares, you should specify which class you want to sell. If you do not, the fund
will assume that you want to sell shares in the following order: Class A, then
Class C and last, Class Y.
If you want to sell shares that you purchased recently, the fund may delay
payment until it verifies that it has received good payment. If you purchased
shares by check, this can take up to 15 days.
If you have an account with PaineWebber or a PaineWebber correspondent firm, you
can sell shares by contacting your Financial Advisor.
If you do not have an account at PaineWebber or a correspondent firm, and you
bought your shares through the transfer agent, you can sell your shares by
writing to the fund's transfer agent. Your letter must include:
Your name and address;
The fund's name;
The fund account number;
The dollar amount or number of shares you want to sell; and
=================
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Prospectus Page 9
<PAGE>
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PaineWebber S&P 500 Index Fund
A guarantee of each registered owner's signature. A signature guarantee may be
obtained from a financial institution, broker, dealer or clearing agency that
is a participant in one of the medallion programs recognized by the Securities
Transfer Agents Association. These are: Securities Transfer Agents Medallion
Program (STAMP), Stock Exchanges Medallion Program (SEMP) and the New York
Stock Exchange Medallion Signature Program (MSP). The fund will not accept
signature guarantees that are not a part of these programs.
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
If you sell Class A shares and then repurchase Class A shares of the fund within
365 days of the sale, you can reinstate your account without paying a sales
charge.
It costs the fund money to maintain shareholder accounts. Therefore, the fund
reserves the right to repurchase all shares in any account that has a net asset
value of less than $500. If the fund elects to do this with your account, it
will notify you that you can increase the amount invested to $500 or more within
60 days. The fund will not repurchase shares in accounts that fall below $500
solely because of a decrease in the fund's net asset value.
EXCHANGING SHARES
You may exchange Class A or Class C shares of the fund for shares of the same
class of most other PaineWebber funds. You may not exchange Class Y shares.
You will not pay either a front-end sales charge or a deferred sales charge when
you exchange shares. However, you may have to pay a deferred sales charge if you
later sell the shares you acquired in the exchange. A fund will use the date
that you purchased the shares in the first fund to determine whether you must
pay a deferred sales charge when you sell the shares in the acquired fund.
Other PaineWebber funds may have different minimum investment amounts. You may
not be able to exchange your shares if your exchange is not as large as the
minimum investment amount in that other fund.
You may exchange shares of one fund for shares of another fund only after the
first purchase has settled and the first fund has received your payment.
PaineWebber Clients. If you bought your shares through PaineWebber or a
correspondent firm, you may exchange your shares by placing an order with your
PaineWebber Financial Advisor.
Other Investors. If you are not a PaineWebber client, you may exchange your
shares by writing to the fund's transfer agent. You must include:
Your name and address;
The name of the fund whose shares you are selling and the name of the fund
whose shares you want to buy;
Your account number;
How much you are exchanging (by dollar amount or by number of shares to be
sold); and
A guarantee of your signature. (See 'Buying Shares' for information on
obtaining a signature guarantee.)
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
A fund may modify or terminate the exchange privilege at any time.
PRICING AND VALUATION
The price at which you may buy, sell or exchange fund shares is based on net
asset value per share. The fund calculates net asset value on days that the New
York Stock Exchange is open. The fund calculates net asset value separately for
each class as of the close of regular trading on the NYSE (generally, 4:00 p.m.,
Eastern time). The NYSE normally is not open, and the fund does not price its
shares, on national holidays and on Good Friday. If trading on the NYSE is
halted for the day before 4:00 p.m., Eastern time, the fund's net asset value
per share will be calculated as of the time trading was halted.
Your price for buying, selling or exchanging shares will be based on the net
asset value that is next calculated after the fund accepts your order. If you
place your order through PaineWebber, your PaineWebber Financial Advisor is
responsible for
=================
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Prospectus Page 10
<PAGE>
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==========================
PaineWebber S&P 500 Index Fund
making sure that your order is promptly sent to the fund.
You should keep in mind that a front-end sales charge may be applied to your
purchase if you buy Class A shares. A deferred sales charge may be applied when
you sell Class C shares.
The fund calculates its net asset value based on the current market value for
its portfolio securities. The fund normally obtains market values for its
securities from independent pricing services that use reported last sales
prices, current market quotations or valuations from computerized 'matrix'
systems that derive values based on comparable securities. If a market value is
not available from an independent pricing source for a particular security, that
security is valued at a fair value determined by or under the direction of the
fund's board. The fund normally uses the amortized cost method to value bonds
that will mature in 60 days or less.
=================
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Prospectus Page 11
<PAGE>
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PaineWebber S&P 500 Index Fund
MANAGEMENT
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INVESTMENT ADVISER
Mitchell Hutchins Asset Management Inc. is the fund's investment adviser and
administrator. Mitchell Hutchins is located at 51 West 52nd Street, New York,
New York, 10019, and is a 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, 1999, Mitchell
Hutchins was adviser or sub-adviser of 33 investment companies with 75 separate
portfolios and aggregate assets of approximately $47.8 billion.
PORTFOLIO MANAGER
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.
ADVISORY FEES
The fund paid advisory fees to Mitchell Hutchins at the effective rate of 0% of
its average daily net assets because Mitchell Hutchins waived all of its
advisory fees. The contractual rate for the fund's advisory fees to Mitchell
Hutchins is 0.20% of the fund's average daily net assets.
OTHER INFORMATION
The fund has received an exemptive order from the SEC that permits the board to
appoint and replace sub-advisers and to amend sub-advisory contracts without
obtaining shareholder approval. Shareholders must approve this policy before the
board may implement it. As of the date of this prospectus, the fund has not
asked shareholders to do so.
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Prospectus Page 12
<PAGE>
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==========================
PaineWebber S&P 500 Index Fund
DIVIDENDS AND TAXES
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DIVIDENDS
The fund normally declares and pays dividends and distributes any gains
annually.
Classes with higher expenses are expected to have lower dividends. For example,
Class C shares are expected to have the lowest dividends of any class of the
fund's shares, while Class Y shares are expected to have the highest.
You will receive dividends in additional shares of the same class unless you
elect to receive them in cash. Contact your Financial Advisor at PaineWebber or
one of its correspondent firms if you prefer to receive dividends in cash.
TAXES
The dividends that you receive from the fund generally are subject to federal
income tax regardless of whether you receive them in additional fund shares or
in cash. If you hold fund shares through a tax-exempt account or plan, such as
an IRA or 401(k) plan, dividends on your shares generally will not be subject to
tax.
When you sell fund shares, you generally will be subject to federal income tax
on any gain you realize. If you exchange the fund's shares for shares of another
PaineWebber mutual fund, the transaction will be treated as a sale of the first
fund's shares, and any gain will be subject to federal income tax.
The fund expects that its dividends will include capital gain distributions. The
distribution of capital gains may be taxed at a lower rate than ordinary income,
depending on whether the fund held the assets that generated the gains for more
than 12 months. The fund will tell you how you should treat its dividends for
tax purposes.
=================
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Prospectus Page 13
<PAGE>
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PaineWebber S&P 500 Index Fund
FINANCIAL HIGHLIGHTS
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The following financial highlights tables are intended to help you understand
the fund's financial performance for the life of each class. Certain information
reflects financial results for a single fund share. In the tables, 'total
investment return' represents the rate that an investor would have earned (or
lost) on an investment in the fund (assuming reinvestment of all dividends).
This information in the financial highlights has been audited by Ernst & Young
LLP, independent auditors, whose reports, along with the fund's financial
statements, are included in the fund's Annual Report to Shareholders. The Annual
Report may be obtained without charge by calling 1-800-647-1568.
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Prospectus Page 14
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==========================
PaineWebber S&P 500 Index Fund
FINANCIAL HIGHLIGHTS
(Continued)
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FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest
outstanding throughout each period is presented below:
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS Y
----------- ----------- -----------------------------
FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
OCTOBER 2, OCTOBER 7, DECEMBER 31,
1998'D' 1998'D' FOR THE 1997'D'
THROUGH THROUGH YEAR ENDED THROUGH
MAY 31, MAY 31, MAY 31, MAY 31,
1999 1999 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 12.83 $ 12.80 $14.12 $ 12.50
------- ------- ------ -------
Net investment income.................................... 0.08* 0.02* 0.16* 0.06
Net realized and unrealized gains (losses) from
investments and futures................................ 4.03* 4.02* 2.68* 1.56
------- ------- ------ -------
Net increase (decrease) from investment operations....... 4.11 4.04 2.84 1.62
------- ------- ------ -------
Dividends from net investment income..................... (0.12) (0.10) (0.12) --
Distributions from net realized gains from investment
transactions........................................... (0.10) (0.10) (0.10) --
------- ------- ------ -------
Total dividends and distributions to shareholders........ (0.22) (0.20) (0.22) --
------- ------- ------ -------
Net asset value, end of period........................... $ 16.72 $ 16.64 $16.74 $ 14.12
------- ------- ------ -------
------- ------- ------ -------
Total investment return(1)............................... 32.23% 31.77% 20.30% 12.96%
------- ------- ------ -------
------- ------- ------ -------
Ratios/Supplemental Data:
Net assets, end of period (000's)........................ $18,920 $23,813 $6,480 $12,892
Expenses to average net assets net of waivers and
reimbursements from adviser............................ 0.60%** 1.35%** 0.35% 0.35%**
Expenses to average net assets before waivers and
reimbursements from adviser............................ 1.52%** 2.24%** 1.29% 2.22%**
Net investment income to average net assets net of
waivers and reimbursements from adviser................ 0.87%** 0.17%** 1.12% 1.41%**
Net investment income (loss) to average net assets before
waivers and reimbursements from adviser................ (0.06)%** (0.73)%** 0.18% (0.46)%**
Portfolio turnover rate.................................. 62% 62% 62% 1%
</TABLE>
- ------------------------
* Calculated using average daily shares outstanding for the period
** Annualized
'D' Commencement of issuance of shares
(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 each period reported. The figures do not
include sales charges or program fees; results would be lower if sales
charges or program fees were included. Total investment returns for periods
of less than one year have not been annualized.
=================
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Prospectus Page 15
<PAGE>
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==========================
PaineWebber S&P 500 Index Fund
TICKER SYMBOL: S&P 500 Index Fund Class: A:
C:
Y: None
If you want more information about the fund, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the fund's investments is available in the fund's
annual and semi-annual reports to shareholders. In the fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the fund's performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.
You may discuss your questions about the fund by contacting your PaineWebber
Financial Advisor. You may obtain free copies of annual and semi-annual reports
and the SAI by contacting the fund directly at 1-800-647-1568.
You may review and copy information about the fund, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You can get text-only copies of reports and other information about
the fund and about the operations of the SEC's Public Reference Room:
For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
Free, from the SEC's Internet website at: http://www.sec.gov
PaineWebber Index Trust
- -- PaineWebber S&P 500 Index Fund
Investment Company Act File No. 811-08229
'c'1999 PaineWebber Incorporated
=================
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<PAGE>
PaineWebber S&P 500 Index Fund
51 West 52nd Street
New York, New York 10019-6114
STATEMENT OF ADDITIONAL INFORMATION
PaineWebber S&P 500 Index Fund is a diversified series of PaineWebber
Index Trust ("Trust"), a professionally managed open-end management investment
company.
The fund's investment adviser, administrator and distributor is
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned
asset management subsidiary of PaineWebber Incorporated ("PaineWebber"). As the
fund's distributor, Mitchell Hutchins has appointed PaineWebber to serve as the
exclusive dealer for the sale of fund shares.
Portions of the fund's Annual Report to Shareholders are incorporated
by reference into this Statement of Additional Information ("SAI"). The Annual
Report accompanies this SAI. You may obtain an additional copy of the fund's
Annual Report by calling toll-free 1-800-647-1568.
This SAI is not a prospectus and should be read only in conjunction
with the fund's current Prospectus dated September 30, 1999. A copy of the
Prospectus may be obtained by calling any PaineWebber Financial Advisor or
correspondent firm. This SAI is dated September 30, 1999.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Fund and Its Investment Policies............................................ 2
The Fund's Investments, Related Risks and Limitations........................... 2
Strategies Using Derivative Instruments......................................... 7
Organization; Trustees, Officers and Principal Holders of Securities............ 13
Investment Advisory, Administration and Distribution Agreements................. 20
Portfolio Transactions.......................................................... 24
Reduced Sales Charges, Additional Exchange and Redemption Information and Other
Services.................................................................... 26
Valuation of Shares............................................................. 31
Performance Information......................................................... 31
Taxes........................................................................... 34
Other Information............................................................... 35
Financial Statements............................................................ 37
</TABLE>
<PAGE>
THE FUND AND ITS INVESTMENT POLICIES
The fund's investment objective is to replicate the total return of the
Standard & Poor's 500 Composite Stock Index ("S&P 500 Index"), before fees and
expenses. 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 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. 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.
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.
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.
The fund may invest up to 15% of its net assets in illiquid securities. It may
purchase securities on a when-issued basis and may purchase or sell securities
for delayed delivery. The fund may lend its portfolio securities to qualified
broker-dealers or institutional investors in an amount up to 33 1/3% of its
assets. The fund may borrow money for temporary or emergency purposes in an
amount up to 33 1/3% of its total assets, including reverse repurchase
agreements. The fund also may invest in securities of other investment.
THE FUND'S INVESTMENTS, RELATED RISKS AND LIMITATIONS
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 SAI, there are no policy limitations on the fund's
ability to use the investments or techniques discussed in these documents.
EQUITY SECURITIES. Equity securities (referred to as "stocks" in the
Prospectus) include common stocks, most preferred stocks and securities that are
convertible into them, including common stock purchase warrants and rights,
equity interests in trusts, partnerships, joint ventures or similar enterprises
and depository receipts. Common stocks, the most familiar type, represent an
equity (ownership) interest in a corporation.
Preferred stock has certain fixed income features, like a bond, but
actually it is equity that is senior to a company's common stock. Convertible
securities may include debentures, notes and preferred equity securities, that
may be converted into or exchanged for a prescribed amount of common stock of
the same or a different issuer within a particular period of time at a specified
price or formula. Depository receipts typically are issued by banks or trust
companies and evidence ownership of underlying equity securities.
While past performance does not guarantee future results, equity
securities historically have provided the greatest long-term growth potential in
a company. However, their prices generally fluctuate more than other securities
and reflect changes in a company's financial condition and in overall market and
economic conditions.
2
<PAGE>
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 equity investment.
MONEY MARKET INSTRUMENTS. The fund may invest in money market
instruments for temporary purposes or for cash management purposes. These
instruments are short-term debt obligations and similar securities and include:
(1) securities issued or guaranteed as to interest and principal by the U.S.
government or one of its agencies or instrumentalities; (2) debt obligations of
U.S. banks, savings associations, insurance companies and mortgage bankers, (3)
commercial paper and other short-term obligations of corporations, partnerships,
trusts and similar entities; (4) repurchase agreements; and (5) investment
company securities. Money market instruments include longer-term bonds that have
variable interest rates or other special features that give them the financial
characteristics of short-term debt. In addition, the fund may hold cash and may
invest in participation interests in the money market securities mentioned above
without limitation.
INVESTING IN FOREIGN SECURITIES. To the extent the fund holds U.S.
dollar-denominated securities of foreign issuers, the securities may not be
registered with the Securities and Exchange Commission ("SEC"), and the issuers
thereof may not be subject to its reporting requirements. Accordingly, there may
be less publicly available information concerning foreign issuers of securities
held by the 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.
Investing in foreign securities involves more risks than investing in
the United States. The value of foreign securities is subject to social,
economic and political developments in the countries where the companies operate
and to changes in foreign currency values, as well as risks resulting from the
differences between the regulations to which U.S. and foreign issuers are
subject. These risks may include expropriation, confiscatory taxation,
withholding taxes on interest and/or dividends, limitations on the use of or
transfer of fund assets and political or social instability or diplomatic
developments. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. In those European countries that have begun using
the Euro as a common currency unit, individual national economies may be
adversely affected by the inability of national governments to use monetary
policy to address their own economic or political concerns.
The fund may invest in foreign securities only if the securities are
traded in the U.S. directly or through American Depository Receipts ("ADRs").
ADRs are receipts typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities. They generally are in registered form,
are denominated in U.S. dollars and are designed for use in the U.S. securities
markets. For purposes of the fund's investment policies, ADRs are deemed to have
the same classification as the underlying securities they represent. Thus, an
ADR representing ownership of common stock will be treated as common stock.
ADRs are publicly traded on exchanges or over-the-counter in the United
States and are issued through "sponsored" or "unsponsored" arrangements. In a
sponsored ADR arrangement, the foreign issuer assumes the obligation to pay some
or all of the depository's transaction fees, whereas under an unsponsored
arrangement, the foreign issuer assumes no obligations and the depository's
transaction fees are paid directly by the ADR holders. In addition, less
information is available in the United States about an unsponsored ADR than
about a sponsored ADR.
Investment income on certain foreign securities in which the 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 from a bank or securities
dealer (or its affiliate) and simultaneously commits to resell them to the
counterparty at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased obligations. The fund maintains custody of the underlying obligations
prior to their repurchase, either through its regular custodian or through a
special "tri-party" custodian or
3
<PAGE>
sub-custodian that maintains separate accounts for both the fund and its
counterparty. Thus, the obligation of the counterparty to pay the repurchase
price on the date agreed to or upon demand is, in effect, secured by such
obligations. Repurchase agreements carry certain risks not associated with
direct investments in securities, including a possible decline in the market
value of the underlying obligations. If their value becomes less than the
repurchase price, plus any agreed-upon additional amount, the counterparty must
provide additional collateral so that at all times the collateral is at least
equal to the repurchase price plus any agreed-upon additional amount. The
difference between the total amount to be received upon repurchase of the
obligations and the price that was paid by the fund upon acquisition is accrued
as interest and included in its net investment income. Repurchase agreements
involving obligations other than U.S. government securities (such as commercial
paper and corporate bonds) may be subject to special risks and may not have the
benefit of certain protections in the event of the counterparty's insolvency. If
the seller or guarantor becomes insolvent, the fund may suffer delays, costs and
possible losses in connection with the disposition of collateral. The fund
intends to enter into repurchase agreements only with counterparties in
transactions believed by Mitchell Hutchins to present minimum credit risks.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve
the sale of securities held by the fund subject to the fund's agreement to
repurchase the securities at an agreed-upon date or upon demand and at a price
reflecting a market rate of interest. Reverse repurchase agreements are subject
to the fund's limitation on borrowings and may be entered into only with banks
and securities dealers or their affiliates. While a reverse repurchase agreement
is outstanding, the fund will maintain, in a segregated account with its
custodian, cash or liquid securities, marked to market daily, in an amount at
least equal to its obligations under the reverse repurchase agreement.
Reverse repurchase agreements involve the risk that the buyer of the
securities sold by the fund might be unable to deliver them when the fund seeks
to repurchase. In the event that the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
trustee or receiver may receive an extension of time to determine whether to
enforce the fund's obligation to repurchase the securities, and the fund's use
of the proceeds of the reverse repurchase agreement may effectively be
restricted pending such decision.
ILLIQUID SECURITIES. The term "illiquid securities" for purposes of the
Prospectus and SAI 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 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 fund's board. The assets used
as cover for over-the-counter options written by the fund will be considered
illiquid unless the over-the-counter options are sold to qualified dealers who
agree that the fund may repurchase any over-the-counter options they write at a
maximum price to be calculated by a formula set forth in the option agreements.
The cover for an over-the-counter option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option. To the extent the
fund invests in illiquid securities, it may not be able to readily liquidate
such investments and may have to sell other investments if necessary to raise
cash to meet its obligations. The lack of a liquid secondary market for illiquid
securities may make it more difficult for the fund to assign a value to those
securities for purposes of valuing its portfolio and calculating its net asset
value.
Restricted securities are not registered under the Securities Act of
1933 ("Securities Act") and may be sold only in privately negotiated or other
exempted transactions or after a Securities Act registration statement has
become effective. Where registration is required, 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. A large
institutional market has developed for many U.S. and foreign securities that are
not registered under the Securities Act. Institutional investors generally will
not seek to sell these instruments to the general public, but instead will often
depend either on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
4
<PAGE>
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
Institutional markets for restricted securities also have developed as
a result of Rule 144A under the Securities Act, which establishes a "safe
harbor" from the registration requirements of that Act for resales of certain
securities to qualified institutional buyers. Such markets include automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc. An insufficient number of
qualified institutional buyers interested in purchasing Rule 144A-eligible
restricted securities held by 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 bids 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 its
portfolio securities to broker-dealers or institutional investors that Mitchell
Hutchins deems qualified. Lending securities enables the fund to earn additional
income, but could result in a loss or delay in recovering these securities. The
borrower of the fund's portfolio securities must maintain acceptable collateral
with the fund's custodian in an amount, marked to market daily, at least equal
to the market value of the securities loaned, plus accrued interest and
dividends. Acceptable collateral is limited to cash, U.S. government securities
and irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. 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. PaineWebber also
has been approved as a borrower under the fund's securities lending program.
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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The fund may purchase a
security on a when-issued basis or may purchase or sell securities for delayed
delivery, i.e., for issuance or delivery to or by the fund later than the normal
settlement date for such securities at a stated price and yield. The fund
generally would not pay for such securities or start earning interest on them
until they are received. However, when the fund undertakes a when-issued or
delayed delivery obligation, it immediately assumes the risks of ownership,
including the risks of price
5
<PAGE>
fluctuation. Failure of the issuer to deliver a security purchased by the fund
on a when-issued or delayed delivery basis may result in the fund's incurring or
missing an opportunity to make an alternative investment. Depending on market
conditions, the fund's when-issued and delayed delivery purchase commitments
could cause its net asset value per share to be more volatile, because such
securities may increase the amount by which the fund's total assets, including
the value of when-issued and delayed delivery securities held by the fund,
exceeds its net assets.
A security purchased on a when-issued or delayed delivery basis is
recorded as an asset on the commitment date and is subject to changes in market
value, generally based upon changes in the level of interest rates. Thus,
fluctuation in the value of the security from the time of the commitment date
will affect 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 "The Fund's Investments,
Related Risks and Limitations--Segregated Accounts." The fund 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.
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.
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, as amended ("Investment Company
Act") and then not in excess of 33 1/3% of the fund's total assets
(including the amount of the senior securities issued but reduced by any
liabilities not constituting senior
6
<PAGE>
securities) at the time of the issuance or borrowing, except that the fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes.
(4) make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
restriction, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan.
(5) engage in the business of underwriting securities of other
issuers, except to the extent that the fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities.
(6) purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner.
(7) purchase or sell physical commodities unless acquired as a
result of owning securities or other instruments, but the fund may
purchase, sell or enter into financial options and futures, forward and
spot currency contracts, swap transactions and other financial contracts or
derivative instruments.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the board without shareholder
approval.
The fund will not:
(1) invest more than 15% of its net assets in illiquid securities.
(2) purchase portfolio securities while borrowings in excess of 5%
of its total assets are outstanding.
(3) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the fund
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments.
(4) engage in short sales of securities or maintain a short
position, except that the fund may (a) sell short "against the box" and (b)
maintain short positions in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments.
(5) purchase securities of other investment companies, except to
the extent permitted by the Investment Company 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. The fund may use a
variety of financial instruments ("Derivative Instruments"), including certain
options, futures contracts (sometimes referred to as "futures") and options on
futures contracts. 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
7
<PAGE>
use of these instruments will place at risk a much smaller portion of its
assets. The particular Derivative Instruments that may be used by the fund are
described below.
The fund might not use any Derivative Instruments or derivative
strategies, and there can be no assurance that using any strategy will succeed.
If the fund is incorrect in its judgment on market values, interest rates or
other economic factors in using a Derivative Instrument or strategy, the fund
may have lower net income and a net loss on the investment.
OPTIONS ON SECURITIES. A call option is a short-term contract pursuant
to which the purchaser of the option, in return for a premium, has the right to
buy the security underlying the option at a specified price at any time during
the term of the option or at specified times or at the expiration of the option,
depending on the type of option involved. The writer of the call option, who
receives the premium, has the obligation, upon exercise of the option during the
option term, to deliver the underlying security against payment of the exercise
price. A put option is a similar contract that gives its purchaser, in return
for a premium, the right to sell the underlying security at a specified price
during the option term or at specified times or at the expiration of the option,
depending on the type of option involved. The writer of the put option, who
receives the premium, has the obligation, upon exercise of the option during the
option term, to buy the underlying security at the exercise price.
OPTIONS ON SECURITIES INDICES. A securities index assigns relative
values to the securities included in the index and fluctuates with changes in
the market values of those securities. A securities index option operates in the
same way as a more traditional securities option, except that exercise of a
securities index option is effected with cash payment and does not involve
delivery of securities. Thus, upon exercise of a securities index option, the
purchaser will realize, and the writer will pay, an amount based on the
difference between the exercise price and the closing price of the securities
index.
SECURITIES INDEX FUTURES CONTRACTS. A securities index futures contract
is a bilateral agreement pursuant to which one party agrees to accept, and the
other party agrees to make, delivery of an amount of cash equal to a specified
dollar amount times the difference between the securities index value at the
close of trading of the contract and the price at which the futures contract is
originally struck. No physical delivery of the securities comprising the index
is made. Generally, contracts are closed out prior to the expiration date of the
contract.
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 USING DERIVATIVE INSTRUMENTS. The
fund may use Derivative Instruments to simulate full investment in the S&P 500
Index while retaining a cash balance for 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 cash
management purposes, the fund may attempt to reduce the risk of adverse price
movements ("hedge") in the securities of the S&P 500 Index while investing cash
received from investor purchases of fund shares or selling securities to meet
shareholder redemptions. The fund may also use Derivative Instruments to reduce
transaction costs and to facilitate trading.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative Instrument
intended partially or fully to offset potential declines in the value of one or
more investments held in 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
8
<PAGE>
and thus limit its loss below the exercise price to the premium paid plus
transaction costs. In the alternative, because the value of the put option can
be expected to increase as the value of the underlying security declines, 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 stock
market sectors.
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 may discover additional opportunities in
connection with Derivative Instruments and with hedging, income, return and gain
strategies. These new opportunities may become available as regulatory
authorities broaden the range of permitted transactions and as new Derivative
Instruments and techniques are developed. 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 SAI will be
supplemented to the extent that new products or techniques involve materially
different risks than those described below or in the Prospectus.
SPECIAL RISKS OF STRATEGIES USING DERIVATIVE INSTRUMENTS. The use of
Derivative Instruments involves special considerations and risks, as described
below. Risks pertaining to particular Derivative Instruments are described in
the sections that follow.
(1) There might be imperfect correlation between price movements of a
Derivative Instrument and price movements of the investments that are being
hedged. For example, if the value of a Derivative Instrument used in a
short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the 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.
9
<PAGE>
(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
counterparty to enter into a transaction closing out the position. Therefore,
there is no assurance that any hedging position can be closed out at a time
and price that is favorable to 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,
currencies or other options or futures contracts or (2) cash or liquid
securities with a value sufficient at all times to cover its potential
obligations to the extent not covered as provided in (1) above. The fund will
comply with SEC guidelines regarding cover for such transactions and will, if
the guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open, unless
they are replaced with similar assets. As a result, committing a large portion
of the fund's assets to cover positions or to segregated accounts could impede
portfolio management or the fund's ability to meet redemption requests or other
current obligations.
OPTIONS. The fund may purchase put and call options, and write (sell)
covered put or call options on securities in which it invests and indices of
those securities. The purchase of call options may serve as a long hedge, and
the purchase of put options may serve as a short hedge. The fund may also use
options to attempt to enhance return or realize gains by increasing or reducing
its exposure to the securities in the S&P 500 Index without purchasing or
selling the underlying securities. Writing covered put or call options can
enable the fund to enhance income by reason of the premiums paid by the
purchasers of such options. Writing covered call options serves as a limited
short hedge, because declines in the value of the hedged investment would be
offset to the extent of the premium received for writing the option. However, if
the security appreciates to a price higher than the exercise price of the call
option, it can be expected that the option will be exercised and the fund will
be obligated to sell the security at less than its market value. Writing covered
put options serves as a limited long hedge, because increases in the value of
the hedged investment would be offset to the extent of the premium received for
writing the option. However, if the security depreciates to a price lower than
the exercise price of the put option, it can be expected that the put option
will be exercised and the fund will be obligated to purchase the security at
more than its market value. The securities or other assets used as cover for
over-the-counter options written by the fund would be considered illiquid to the
extent described under "The Fund's Investments, Related Risks and
Limitations--Illiquid Securities."
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options normally have expiration dates
of up to nine months. Generally, over-the-counter options on bonds are
European-style options. This means that the option can only be exercised
immediately prior to its expiration. This is in contract to American-style
options that may be exercised at any time. There are also other types of options
that may be exercised on certain specified dates before expiration. Options that
expire unexercised have no value.
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
10
<PAGE>
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
over-the-counter options. Currently, many options on equity securities (stocks)
are exchange-traded. Exchange markets for options on bonds exist but are
relatively new, and these instruments are primarily traded on the
over-the-counter market. Exchange-traded options in the United States are issued
by a clearing organization affiliated with the exchange on which the option is
listed which, in effect, guarantees completion of every exchange-traded option
transaction. In contrast, over-the-counter 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
over-the-counter option, it relies on the counterparty to make or take delivery
of the underlying investment upon exercise of the option. Failure by the
counterparty to do so would result in the loss of any premium paid by the fund
as well as the loss of any expected benefit of the transaction.
The 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 over-the-counter options only by negotiating directly with the
counterparty, or by a transaction in the secondary market if any such market
exists. Although the fund will enter into over-the-counter 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 over-the-counter 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 over-the-counter 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 fund's use of options is
governed by the following guidelines, which can be changed by its 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.
(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, securities indices and 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 purchase put and call options, and write
covered put and call options, on futures in which it is allowed to invest. The
purchase of futures or call options thereon can serve as a long hedge, and the
sale of futures or the purchase of put options thereon can serve as a short
hedge. Writing covered call options on futures contracts can serve as a limited
short hedge, and writing covered put options on futures contracts can serve as a
limited long hedge, using a strategy similar to that used for writing covered
options on securities or indices. In addition, the fund may purchase or sell
futures contracts or purchase options thereon to increase or reduce its exposure
to an asset class without purchasing or selling the underlying securities,
either as a hedge or to enhance return or realize gains.
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
11
<PAGE>
transaction was effected, "initial margin" consisting of cash, obligations of
the United States or obligations fully guaranteed as to principal and interest
by the United States, in an amount generally equal to 10% or less of the
contract value. Margin must also be deposited when writing a call option on a
futures contract, in accordance with applicable exchange rules. Unlike margin in
securities transactions, initial margin on futures contracts does not represent
a borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to 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 each 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.
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 fund's use
of futures and related options is governed by the following guidelines, which
can be changed by its board without shareholder vote:
(1) 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.
12
<PAGE>
(2) The aggregate premiums paid on all options (including options on
securities, securities indices and 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.
ORGANIZATION; TRUSTEES, OFFICERS AND PRINCIPAL HOLDERS OF SECURITIES
The Trust was formed on May 27, 1997 as a business trust under the laws
of Delaware. The Trust has one operating series and is governed by a board of
trustees which is authorized to establish additional series and to issue an
unlimited number of shares of beneficial interest of each existing or future
series, par value $0.001 per share.
The trustees and executive officers of the Trust, their ages, business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Margo N. Alexander*'D'; 52 Trustee and President Mrs. Alexander is chairman (since March
1999), chief executive officer and a director
of Mitchell Hutchins (since January 1995),
and an executive vice president and a
director of PaineWebber (since March 1984).
Mrs. Alexander is president and a director or
trustee of 32 investment companies for which
Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment
adviser.
Richard Q. Armstrong; 64 Trustee Mr. Armstrong is chairman and principal of
R.Q.A. Enterprises R.Q.A. Enterprises (management consulting
One Old Church Road firm) (since April 1991 and principal
Unit #6 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,
PaineWebber or one of their affiliates serves
as investment adviser.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.**'D'; 73 Trustee and Chairman of Mr. Bewkes is a director of Paine Webber
the Board of Trustees Group Inc. ("PW Group") (holding company of
PaineWebber and Mitchell Hutchins). Prior to
December 1995, he was a consultant to PW
Group. Prior to 1988, he was chairman of the
board, president and chief executive officer
of American Bakeries Company. Mr. Bewkes is a
director of Interstate Bakeries Corporation.
Mr. Bewkes is a director or trustee of 35
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Richard R. Burt; 52 Trustee Mr. Burt is chairman of IEP Advisors, Inc.
1275 Pennsylvania Ave., N.W. (international investments and consulting
Washington, DC 20004 firm) (since March 1994) and a partner of
McKinsey & Company (management consulting
firm) (since 1991). He is also a director of
Archer-Daniels-Midland Co. (agricultural
commodities), Hollinger International Co.
(publishing), Homestake Mining Corp. (gold
mining), Powerhouse Technologies Inc.
(provides technology to gaming and wagering
industry) and Weirton Steel Corp. (makes and
finishes steel products). 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, PaineWebber or one of their
affiliates serves as investment adviser.
Mary C. Farrell**'D'; 49 Trustee Ms. Farrell is a managing director, 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 Economic 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 23
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Meyer Feldberg; 57 Trustee Mr. Feldberg is Dean and Professor of
Columbia University Management of the Graduate School of
101 Uris Hall Business, Columbia University. Prior to 1989,
New York, NY 10027 he was president of the Illinois Institute of
Technology. Dean Feldberg is also a director
of Primedia, Inc. (publishing), Federated
Department Stores, Inc. (operator of
department stores) and Revlon, Inc.
(cosmetics). Dean Feldberg is a director or
trustee of 34 investment companies for which
Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment
adviser.
George W. Gowen; 70 Trustee Mr. Gowen is a partner in the law firm of
666 Third Avenue Dunnington, Bartholow & Miller. Prior to May
New York, NY 10017 1994, he was a partner in the law firm of
Fryer, Ross & Gowen. Mr. Gowen is a director
or trustee of 34 investment companies for
which Mitchell Hutchins, PaineWebber or one
of their affiliates serves as investment
adviser.
Frederic V. Malek; 62 Trustee Mr. Malek is chairman of Thayer Capital
1455 Pennsylvania Ave., N.W. Partners (merchant bank). From January 1992
Suite 350 to November 1992, he was campaign manager of
Washington, DC 20004 Bush-Quayle `92. From 1990 to 1992, he was
vice chairman and, from 1989 to 1990, he was
president of Northwest Airlines Inc. and NWA
Inc. (holding company of Northwest Airlines
Inc.). Prior to 1989, he was employed by the
Marriott Corporation (hotels, restaurants,
airline catering and contract feeding), where
he most recently was an executive vice
president and president of Marriott Hotels
and Resorts. Mr. Malek is also a director of
Aegis Communications, Inc. (tele-services),
American Management Systems, Inc. (management
consulting and computer related services),
Automatic Data Processing, Inc. (computing
services), CB Richard Ellis, Inc. (real
estate services), FPL Group, Inc. (electric
services), Global Vacation Group (packaged
vacations), HCR/Manor Care, Inc. (health
care) and Northwest Airlines Inc. Mr. Malek
is a director or trustee of 31 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Carl W. Schafer; 63 Trustee Mr. Schafer is president of the Atlantic
66 Witherspoon Street, #1100 Foundation (charitable foundation supporting
Princeton, NJ 08542 mainly oceanographic exploration and
research). He is a director of Base Ten
Systems, Inc. (software), 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 Corporation and
Nutraceutix, Inc. (biotechnology company).
Prior to January 1993, he was chairman of the
Investment Advisory Committee of the Howard
Hughes Medical Institute. Mr. Schafer is a
director or trustee of 31 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.
Brian M. Storms*'D'; 45 Trustee Mr. Storms is president and chief operating
officer of Mitchell Hutchins (since March
1999). Prior to March 1999, he was president
of Prudential Investments (1996-1999). Prior
to joining Prudential, he was a managing
director at Fidelity Investments. Mr. Storms
is a director or trustee of 31 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.
T. Kirkham Barneby*; 53 Vice President Mr. Barneby is a managing director and chief
investment officer -- 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 seven
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
John J. Lee**; 31 Vice President and Mr. Lee is a vice president and a manager of
Assistant Treasurer the mutual fund finance department of
Mitchell Hutchins. Prior to September 1997,
he was an audit manager in the financial
services practice of Ernst & Young LLP. Mr.
Lee is a vice president and assistant
treasurer of 32 investment companies for
which Mitchell Hutchins, PaineWebber or one
of their affiliates serves as an investment
adviser.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Kevin J. Mahoney**; 34 Vice President and Mr. Mahoney is a first vice president and
Assistant Treasurer senior manager of the mutual fund finance
department of Mitchell Hutchins. From August
1996 through March 1999, he was the manager
of the mutual fund internal control group of
Salomon Smith Barney. Prior to August 1996,
he was an associate and assistant treasurer
for BlackRock Financial Management L.P.
Mr. Mahoney is a vice president and assistant
treasurer of 32 investment companies for
which Mitchell Hutchins, PaineWebber or one
of their affiliates serves as investment
adviser.
Ann E. Moran**; 42 Vice President and Ms. Moran is a vice president and a manager
Assistant Treasurer of the mutual fund finance department of
Mitchell Hutchins. Ms. Moran is a vice
president and assistant treasurer of 32
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Dianne E. O'Donnell**; 47 Vice President and Ms. O'Donnell is a senior vice president and
Secretary deputy general counsel of Mitchell Hutchins.
Ms. O'Donnell is a vice president and
secretary of 31 investment companies and a
vice president and assistant secretary of one
investment company for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Emil Polito*; 38 Vice President Mr. Polito is a senior vice president and
director of operations and control for
Mitchell Hutchins. Mr. Polito is a vice
president of 32 investment companies for
which Mitchell Hutchins, PaineWebber or one
of their affiliates serves as investment
adviser.
Victoria E. Schonfeld**; 48 Vice President Ms. Schonfeld is a managing director and
general counsel of Mitchell Hutchins (since
May 1994) and a senior vice president of
PaineWebber (since July 1995). Ms. Schonfeld
is a vice president of 31 investment
companies and a vice president and secretary
of one investment company for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Paul H. Schubert**; 36 Vice President and Mr. Schubert is a senior vice president and
Treasurer director of the mutual fund finance
department of Mitchell Hutchins. Mr. Schubert
is a vice president and treasurer of 32
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
Barney A. Taglialatela**; 38 Vice President and Mr. Taglialatela is a vice president and a
Assistant Treasurer manager of the mutual fund finance department
of Mitchell Hutchins. Prior to February 1995,
he was a manager of the mutual fund finance
division of Kidder Peabody Asset Management,
Inc. Mr. Taglialatela is a vice president and
assistant treasurer of 32 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.
Keith A. Weller**; 38 Vice President and Mr. Weller is a first vice president and
Assistant Secretary 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, PaineWebber or one of their
affiliates serves as investment adviser.
</TABLE>
- ---------------
* The business address of each listed person is 51 West 52nd Street, New York,
New York 10019-6114.
** The business address of each listed person is 1285 Avenue of the Americas,
New York, New York 10019.
'D' Mrs. Alexander, Mr. Bewkes, Ms. Farrell and Mr. Storms are "interested
persons" of the fund as defined in the Investment Company Act by virtue of
their positions with Mitchell Hutchins, PaineWebber, and/or PW Group.
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
separate meeting of a board committee. 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 in the aggregate less than 1% the 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.
18
<PAGE>
The table below includes certain information related to the
compensation of the current trustees who held office with the Trust during the
fiscal year ended May 31, 1999 and the compensation of those trustees from all
PaineWebber funds during the 1998 calendar year.
COMPENSATION TABLE'D'
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FROM THE TRUST AND THE
NAME OF PERSON, POSITION THE TRUST* FUND COMPLEX**
------------------------ ----------------- ----------------------
<S> <C> <C>
Richard Q. Armstrong,
Trustee............................... $1,810 $101,372
Richard R. Burt,
Trustee............................... 1,780 $101,372
Meyer Feldberg,
Trustee............................... 2,470 $116,222
George W. Gowen,
Trustee............................... 1,660 $108,272
Frederic V. Malek,
Trustee............................... 1,810 $101,372
Carl W. Schafer,
Trustee............................... 1,810 $101,372
</TABLE>
- ------------
Only independent trustees are compensated by the PaineWebber funds and
identified above; trustees who are "interested persons," as defined by the
Investment Company Act, do not receive compensation from the funds.
* Represents fees paid to each trustee indicated for the fiscal year ended
May 31, 1999.
** Represents total compensation paid during the calendar year ended
December 31, 1998, to each trustee by 31 investment companies (33 in the
case of Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber
or one of their affiliates served as investment adviser. No fund within the
PaineWebber fund complex has a bonus, pension, profit sharing or retirement
plan.
PRINCIPAL HOLDERS OF SECURITIES. As of August 31, 1999, the records of the
Trust indicate that no shareholder owned 5% or more of a class of shares of the
fund:
19
<PAGE>
INVESTMENT ADVISORY, ADMINISTRATION
AND DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY AND ADMINISTRATION 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 fiscal year ended May 31, 1999 and the period December 31,
1997 (commencement of operations) to May 31, 1998, Mitchell Hutchins earned (or
accrued) advisory fees in the amounts of $49,416 and $8,340, respectively (all
of which was waived).
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 Investment Company 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.
SECURITIES LENDING. During the year ended May 31, 1999, the fund did
not lend its portfolio securities and thus did not pay (or accrue) any fees to
PaineWebber for its services as securities lending agent.
20
<PAGE>
NET ASSETS. The following table shows the approximate net assets as of
August 31, 1999, 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)............ $ 7,939.9
Global ..................................... 4,537.1
Equity/Balanced.............................. 7,677.7
Fixed Income (excluding Money Market)........ 4,799.3
Taxable Fixed Income.................... 3,290.8
Tax-Free Fixed Income................... 1,508.5
Money Market Funds........................... 35,356.5
</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 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 separate 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 separate plans 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 Investment Company 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.
Mitchell Hutchins uses the service fees under the Plans for Class A and
C shares primarily to pay PaineWebber for shareholder servicing, currently at
the annual rate of 0.25% of the aggregate investment amounts maintained in the
fund by PaineWebber clients. PaineWebber then compensates its Financial Advisors
for shareholder servicing that they perform and offsets its own expenses in
servicing and maintaining shareholder accounts.
Mitchell Hutchins uses the distribution fees under the Class C Plan to:
Offset the commissions it pays to PaineWebber for selling each fund's
Class C shares.
Offset the fund's marketing costs attributable to such class, 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.
21
<PAGE>
PaineWebber compensates Financial Advisors when Class C shares are
bought by investors, as well as on an ongoing basis. Mitchell Hutchins receives
no special compensation from any of the funds or investors at the time 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 specify that the fund must pay service and distribution fees to
Mitchell Hutchins for its activities, not as reimbursement for specific expenses
incurred. Therefore, even if Mitchell Hutchins' expenses exceed the service or
distribution fees it receives, the 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 a Plan will be Mitchell Hutchins' sole responsibility and not that of the
fund. Annually, the board reviews the Plan and Mitchell Hutchins' corresponding
expenses for each class separately from the Plan and expenses of the other
class.
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 another class of the fund's shares.
For the fiscal year ended May 31, 1999, the fund paid (or accrued) to
Mitchell Hutchins service fees of $19,281 under the Class A Plan and service and
distribution fees of $73,122 under the Class C Plan.
22
<PAGE>
Mitchell Hutchins estimates that it and its parent corporation,
PaineWebber, incurred the following shareholder service-related and
distribution-related expenses with respect to the fund during the fiscal year
ended May 31, 1999:
<TABLE>
<CAPTION>
S&P 500 INDEX FUND
------------------
<S> <C>
CLASS A
Marketing and advertising............... $33,699
Amortization of commissions..................... 0
Printing of prospectuses and statements of
additional information...................................... 441
Branch network costs allocated and interest expense......... 19,810
Service fees paid to PaineWebber Financial Advisors......... 7,333
CLASS C
Marketing and advertising................................... $34,239
Amortization of commissions................................. 21,231
Printing of prospectuses and statements of
additional information...................................... 448
Branch network costs allocated and interest expense......... 13,890
Service fees paid to PaineWebber Financial Advisors......... 7,077
</TABLE>
In approving the fund's overall Flexible Pricing'sm' 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 Financial Advisors 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 Financial Advisors 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 Financial Advisors 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
23
<PAGE>
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 Financial
Advisors 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.
Under the Distribution Contract between the fund and Mitchell Hutchins
for the Class A shares for the periods set forth below, Mitchell Hutchins earned
the following approximate amounts of sales charges and retained the following
approximate amounts, net of concessions to PaineWebber as exclusive dealer.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL PERIOD ENDED
MAY 31, 1999 MAY 31, 1998*
------------ --------------
<S> <C> <C>
Earned......................................... $75,471 $ 0
Retained....................................... 47,086 0
</TABLE>
- ------------------
* The period December 31, 1997 (commencement of operations) to May 31, 1998.
Mitchell Hutchins earned and retained the following contingent deferred
sales charges paid upon certain redemptions of fund shares for the fiscal year
ended May 31, 1999:
<TABLE>
<S> <C>
Class A.............................. $ 0
Class C.............................. 3,213
</TABLE>
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 over-the-counter market and will engage primarily in
transactions directly with the dealers who make markets in such securities,
unless a better price or execution could be obtained by using a broker. For the
fiscal year ended May 31, 1999 and the period December 31, 1997 (commencement of
operations) to May 31, 1998, the fund paid $17,687 and $4,199 in brokerage
commissions, respectively.
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 Investment Company Act to
ensure that all brokerage commissions paid to PaineWebber are
24
<PAGE>
reasonable and fair. Specific provisions in the Advisory Contract authorize
PaineWebber to effect portfolio transactions for the fund on a national
securities exchange of which it is a member 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 fiscal year ended May 31, 1999 and the period December 31, 1997
(commencement of operations) to May 31, 1998, the fund paid no brokerage
commissions to PaineWebber or any other affiliate of Mitchell Hutchins.
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.
In selecting brokers, Mitchell Hutchins will consider the full range
and quality of a broker's services. 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 through brokers who provide Mitchell
Hutchins with brokerage or research services. The fund may pay 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.
Research services obtained from brokers may include written reports,
pricing and appraisal services, analysis of issues raised in proxy statements,
educational seminar, subscriptions, portfolio attribution and monitoring
services, and computer hardware, software and access charges which are directly
related to investment research. Research services may be received in the form of
written reports, online services, telephone contacts and personal meetings with
security analysts, economists, corporate and industry spokespersons and
government representatives.
For the fiscal year ended May 31, 1999, Mitchell Hutchins directed
$90,464 in portfolio transactions to brokers chosen because they provided
research services, for which the fund paid $125 in commissions.
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 were attributed to the services
provided by the executing dealer. Mitchell Hutchins may engage in agency
transactions in over-the-counter equity and debt securities in return for
research and execution services. These transactions are entered into only
pursuant to procedures that are designed to ensure that the transaction
(including commissions) is at least as favorable as it would have been if
effected directly with a market-maker that did not provide research or execution
services.
Research services and information received from brokers or dealers are
supplemental to Mitchell Hutchins' own research efforts and, when utilized, are
subject to internal analysis before being incorporated into their own investment
processes. 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.
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 accounts. In
those cases, simultaneous transactions are inevitable. Purchases or sales are
then averaged as to price and allocated between the fund and the other
account(s) as to amount according to a formula deemed equitable to the fund and
the other 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 simultaneous transactions and the ability to participate in volume
transactions will benefit the fund.
25
<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
Investment Company Act. Among other things, these procedures require that the
spread or commission paid in connection with such a purchase be reasonable and
fair, 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 fiscal year ended May 31,
1999 and the period December 31, 1997 (commencement of operations) to May 31,
1998, the fund's portfolio turnover rate was 62% and 1%, respectively.
REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND REDEMPTION
INFORMATION AND OTHER SERVICES
WAIVERS OF SALES CHARGES/CONTINGENT DEFERRED SALES CHARGES -- CLASS A
SHARES. The following additional sales charge waivers are available for Class A
shares if you:
Purchase shares through a variable annuity offered only to qualified
plans. For investments made pursuant to this waiver, Mitchell Hutchins
may make payments out of its own resources to PaineWebber and to the
variable annuity's sponsor, adviser or distributor in a total amount not
to exceed l% of the amount invested;
Acquire shares through an investment program that is not sponsored by
PaineWebber or its affiliates and that charges participants a fee for
program services, provided that the program sponsor has entered into a
written agreement with PaineWebber permitting the sale of shares at net
asset value to that program. For investments made pursuant to this
waiver, Mitchell Hutchins may make a payment to PaineWebber out of its
own resources in an amount not to exceed 1% of the amount invested. For
subsequent investments or exchanges made to implement a rebalancing
feature of such an investment program, the minimum subsequent investment
requirement is also waived;
Acquire shares in connection with a reorganization pursuant to which the
fund acquires substantially all of the assets and liabilities of another
fund in exchange solely for shares of the acquiring fund; or
Acquire shares in connection with the disposition of proceeds from the
sale of shares of Managed High Yield Plus Fund Inc. that were acquired
during the fund's initial public offering of shares and that meet
certain other conditions described in its prospectus
In addition, reduced sales charges on Class A shares are available through
the combined purchase plan or through rights of accumulation described below.
Class A share purchases of $1 million or more are not subject to an initial
sales charge; however, if a shareholder sells these shares within one year after
purchase, a contingent deferred sales charge of 1% of the offering price or the
net asset value of the shares at the time of sale by the shareholder, whichever
is less, is imposed. This contingent deferred sales charged is waived if you are
eligible to invest in certain offshore investment pools offered by PaineWebber,
your shares are sold before March 31, 2000 and the proceeds are used to purchase
interests in one or more of these pools.
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
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<PAGE>
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 total of (1) the dollar amount then being purchased plus
(2) an amount equal to the then-current net asset value of the purchaser's
combined holdings of Class A fund shares and Class A shares of any other
PaineWebber mutual fund. The purchaser must provide sufficient information to
permit confirmation of his or her holdings, and the acceptance of the purchase
order is subject to such confirmation. The right of accumulation may be amended
or terminated at any time.
REINSTATEMENT PRIVILEGE -- CLASS A SHARES. Shareholders who have redeemed
Class A shares of the fund may reinstate their account without a sales charge by
notifying the transfer agent of such desire and forwarding a check for the
amount to be purchased within 365 days after the date of redemption. The
reinstatement will be made at the net asset value per share next computed after
the notice of reinstatement and check are received. The amount of a purchase
under this reinstatement privilege cannot exceed the amount of the redemption
proceeds. Gain on a redemption is taxable regardless of whether the
reinstatement privilege is exercised, although a loss arising out of a
redemption might not be deductible under certain circumstances. See "Taxes"
below.
PURCHASES OF CLASS Y SHARES THROUGH THE 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 at the effective maximum annual rate of 1.5% of assets. Employees
of PaineWebber and its affiliates are entitled to a waiver of this fee. Please
contact your PaineWebber Financial Advisor or PaineWebber's
27
<PAGE>
correspondent firms for more information concerning mutual funds that are
available through the PACE Multi Advisor Program.
PURCHASES OF CLASS A SHARES THROUGH THE INSIGHTONE PROGRAM. An investor who
participates in the PaineWebber InsightOne Program is eligible to purchase Class
A shares without a sales load. [THE PAINEWEBBER INSIGHTONE PROGRAM PROVIDES A
BROKERAGE ACCOUNT TO INVESTORS FOR AN ASSET-BASED SALES CHARGE AT THE ANNUAL
RATE OF UP TO 1.50% OF ASSETS IN THE ACCOUNT. ACCOUNTHOLDERS MAY PURCHASE OR
SELL CERTAIN INVESTMENT PRODUCTS WITHOUT PAYING ANY COMMISSIONS OR OTHER
MARKUPS/MARKDOWNS APART FROM THE ACCOUNT SALES CHARGE.]
NON-RESIDENT ALIEN WAIVER OF CONTINGENT DEFERRED SALES CHARGE FOR CLASS A
AND C SHARES. Until March 31, 2000, investors who are non-resident aliens will
be able to sell their fund shares without incurring a contingent deferred sales
charge, if they use the sales proceeds to immediately purchase shares of certain
offshore investment pools available through PaineWebber. The fund will waive the
contingent deferred sales charge that would otherwise apply to a sale of Class A
or Class C shares of the fund. Fund shareholders who want to take advantage of
this waiver should review the offering documents of the offshore investment
pools for further information, including investment minimums, and fees and
expenses. Shares of the offshore investment pools are available only in those
jurisdictions where the sale is authorized and are not available to any U.S.
person, including, but not limited to, any citizen or resident of the United
States, and U.S. partnership or U.S. trust, and are not available to residents
of certain other countries. For more information on how to take advantage of the
deferred sales charge waiver, investors should contact their PaineWebber
Financial Advisors.
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. Class Y shares are
not eligible for exchange. Shareholders will receive at least 60 days' notice of
any termination or material modification of the exchange offer, except no notice
need be given if, under extraordinary circumstances, either redemptions are
suspended under the circumstances described below or 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. Any such
redemption in kind will be made with readily marketable securities, to the
extent available. If payment is made in securities, a shareholder may incur
brokerage expenses in converting these securities into cash.
The fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange is closed or trading on
the New York Stock Exchange is restricted as determined by the SEC, (2) when an
emergency exists, as defined by the SEC, that makes it not reasonably
practicable for 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.
SERVICE ORGANIZATIONS. The fund may authorize service organizations, and
their agents, to accept on its behalf purchase and redemption orders that are in
"good form." The fund will be deemed to have received these purchase and
redemption orders when a service organization or its agent accepts them. Like
all customer orders, these orders will be priced based on the fund's net asset
value next computed after receipt of the order by the service organizations or
their agents. Service organizations may include retirement plan service
providers who aggregate purchase and redemption instructions received from
numerous retirement plans or plan participants.
AUTOMATIC INVESTMENT PLAN. 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
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<PAGE>
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. The systematic withdrawal plan allows investors
to set up monthly, quarterly (March, June, September and December), semi-annual
(June and December) or annual (December) withdrawals from their PaineWebber
Mutual Fund accounts. Minimum balances and withdrawals vary according to the
class of shares:
Class A and Class C shares. Minimum value of fund shares is $5,000;
minimum withdrawals of $100.
Withdrawals under the systematic withdrawal plan will not be subject to a
contingent deferred sales charge if the investor withdraws no 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 this plan.
An investor's participation in the systematic withdrawal plan will
terminate automatically if the "Initial Account Balance" (a term that means the
value of the fund account at the time the investor elects to participate in the
systematic withdrawal plan) less aggregate redemptions made other than pursuant
to the systematic withdrawal plan is less than $5,000 for Class A and Class C
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. 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 are received by PFPC. Shareholders may request the forms needed to
establish a systematic withdrawal plan from their PaineWebber Financial
Advisors, correspondent firms or PFPC at 1-800-647-1568.
INDIVIDUAL RETIREMENT ACCOUNTS. Self-directed IRAs are available through
PaineWebber in which purchases of PaineWebber mutual funds and other investments
may be made. Investors considering establishing an IRA should review applicable
tax laws and should consult their tax advisers.
TRANSFER OF ACCOUNTS. If investors holding shares of the fund in a
PaineWebber brokerage account transfer their brokerage accounts to another firm,
the fund shares will be moved to an account with PFPC. However, if the other
firm has entered into a selected dealer agreement with Mitchell Hutchins
relating to the fund, the shareholder may be able to hold fund shares in an
account with the other firm.
PAINEWEBBER RMA RESOURCE ACCUMULATION PLAN'sm'
PAINEWEBBER RESOURCE MANAGEMENT ACCOUNT'r' (RMA)'r'
Shares of PaineWebber mutual funds, 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
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<PAGE>
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.
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 year-end summary statements that provide information on
account activity for use in tax planning and tax return preparation;
automatic "sweep" of uninvested cash into the RMA accountholder's choice
of one of the six RMA money market funds -- RMA Money Market Portfolio,
RMA U.S. Government Portfolio, RMA Tax-Free Fund, RMA California
Municipal Money Fund, RMA New Jersey Municipal Money Fund and RMA New
York Municipal Money Fund. An investment in a money market fund is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although a money market fund seeks to
preserve the value of your investment at $1.00 per share, it is possible
to lose money by investing in a money market fund.
check writing, with no per-check usage charge, no minimum amount on
checks and no maximum number of checks that can be written. RMA
accountholders can code their checks to classify expenditures. All
canceled checks are returned each month;
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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;
unlimited electronic funds transfers and bill payment service for an
additional fee;
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 the net equity securities balance in the
event of the liquidation of PaineWebber. This protection does not apply
to shares of the PW Funds that are held directly at PFPC and not through
PaineWebber; and
automatic direct deposit of checks into your RMA account and automatic
withdrawals from the account.
The annual account fee for an RMA account is $85, which includes the 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 normally as of the close of regular trading (usually 4:00 p.m.,
Eastern time) on the New York Stock Exchange on each Business Day, which is
defined as each Monday through Friday when the New York Stock Exchange is open.
Prices will be calculated earlier when the NYSE closes early because trading has
been halted for the day. Currently the New York Stock Exchange is closed on the
observance of the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Securities that are listed on exchanges normally are valued at the last
sale price on the day the securities are valued or, lacking any sales on such
day, at the last available bid price. In cases where securities are traded on
more than one exchange, the securities are generally valued on the exchange
considered by Mitchell Hutchins as the primary market. Securities traded in the
over-the-counter market and listed on the Nasdaq Stock Market ("Nasdaq")
normally are valued at the last available sale price on Nasdaq prior to
valuation; other over-the-counter securities are valued at the last bid price
available prior to valuation. Where market quotations are readily available,
portfolio securities are valued based upon market quotations, provided those
quotations adequately reflect, in the judgment of Mitchell Hutchins, the fair
value of the security. Where those market quotations are not readily available,
securities are valued based upon appraisals received from a pricing service
using a computerized matrix system or based upon appraisals derived from
information concerning the security or similar securities received from
recognized dealers in those securities. All other securities and other assets
are valued at fair value as determined in good faith by or under the direction
of the board. The amortized cost method of valuation generally is used to value
debt obligations with 60 days or less remaining until maturity, unless the board
determines that this does not represent fair value.
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:
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<TABLE>
<S> <C> <C>
P(1 + T)'pp'n = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares of a specified class
T = average annual total return of shares of that class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of that period.
</TABLE>
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
period. In calculating the ending redeemable value, for Class A shares, the
maximum 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
outstanding shares for the life of each class.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS Y
CLASS ------- ------- -------
(INCEPTION DATE) (10/2/98) (10/7/98) (12/31/98)
- ---------------- --------- --------- ----------
<S> <C> <C> <C>
Year ended May 31, 1999*
Standardized Return.......... N/A N/A 20.30%
Non-Standardized Return...... N/A N/A 20.30%
Inception* to May 31, 1999:
Standardized Return.......... 28.84% 30.77% 35.89%
Non-Standardized Return...... 32.15% 31.77% 35.89%
</TABLE>
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 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
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<PAGE>
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.*
[CHART TO BE INSERTED]
* Source: Stocks, Bonds, Bills and Inflation 1998 Yearbook'TM' Ibbotson
Assoc., Chi., (annual updates work by Roger G. Ibbotson & Rex A. Sinquefield).
The chart is shown for illustrative purposes only and does not represent
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, although subject to greater risks and higher volatility, stocks
have outperformed all other investments by a wide margin, offering a solid hedge
against inflation. From 1925 to 1998, stocks beat all other traditional asset
classes. A $10,000 investment in the S&P 500 grew to $23,495,420, significantly
more than any other investment.
33
<PAGE>
TAXES
BACKUP WITHHOLDING. The fund is required to withhold 31% of all taxable
dividends, capital gain distributions and redemption proceeds payable to
individuals and certain other non-corporate shareholders who do not provide the
fund or PaineWebber with a correct taxpayer identification number. Withholding
at that rate also is required from dividends and capital gain distributions
payable to those shareholders who otherwise are subject to backup withholding.
SALE OR EXCHANGE OF FUND SHARES. A shareholder's sale (redemption) of
shares may result in a taxable gain or loss, depending on whether the
shareholder receives more or less than his or her adjusted basis for the shares
(which normally includes any initial sales charge paid on Class A shares). An
exchange of the fund's shares for shares of another PaineWebber mutual fund
generally will have similar tax consequences. In addition, if the fund's shares
are bought within 30 days before or after selling other shares of the fund
(regardless of class) at a loss, all or a portion of that loss will not be
deductible and will increase the basis of the newly purchased shares.
SPECIAL RULE FOR CLASS A SHAREHOLDERS. A special tax rule applies when a
shareholder sells or exchanges Class A shares within 90 days of purchase and
subsequently acquires Class A shares of the same or another PaineWebber mutual
fund without paying a sales charge due to the 365-day reinstatement privilege or
the exchange privilege. In these cases, any gain on the sale or exchange of the
original Class A shares would be increased, or any loss would be decreased, by
the amount of the sales charge paid when those shares were bought, and that
amount would increase the basis of the PaineWebber mutual fund shares
subsequently acquired.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. 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 the sum of its investment company taxable income (consisting
generally of net investment income and net short-term capital gain) 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 or futures) derived with respect to its business of investing in
securities ("Income Requirement"); (2) at the close of each quarter of the
fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities that are limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the fund's total assets;
and (3) at the close of each quarter of the fund's taxable year, not more than
25% of the value of its total assets may be invested in securities (other than
U.S. government securities or the securities of other RICs) of any one issuer.
If the fund failed to qualify for treatment as a RIC for any taxable year, (a)
it would be taxed as an ordinary corporation on its taxable income for that year
(even if that income was distributed to its shareholders) and (b) the
shareholders would treat all those distributions, including distributions of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) as dividends (that is, ordinary income) to the extent of the
fund's earnings and profits. In addition, the fund could be required to
recognize unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying for RIC treatment.
OTHER INFORMATION. Dividends and other distributions 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.
34
<PAGE>
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.
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.
The foregoing is only a general summary of some of the important federal
income tax considerations generally affecting the fund and its shareholders. No
attempt is made to present a complete explanation of the federal tax treatment
of the fund's activities, and this discussion is not intended as a substitute
for careful tax planning. Accordingly, potential investors are urged to consult
their own tax advisers for more detailed information and for information
regarding any state, local or foreign taxes applicable to the fund and to
dividends and distributions therefrom.
OTHER INFORMATION
DELAWARE BUSINESS TRUST. The Trust is an entity of the type commonly known
as a Delaware business trust. 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.
CLASSES OF SHARES. A share of a class of the fund represents an identical
interest in its investment portfolio and has the same rights, privileges and
preferences. However, each class may differ with respect to sales charges, if
any, distribution and/or service fees, if any, other expenses allocable
exclusively to each class, voting rights on matters exclusively affecting that
class, and its exchange privilege, if any. The different sales charges and other
expenses applicable to the different classes of shares of the 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, as a result, the holders of more than 50% of all the
shares of the fund (so long as it is the sole series of the Trust) may elect all
of the trustees of the Trust. The
35
<PAGE>
shares of the fund will be voted together, except that only the shareholders of
a particular class of the fund may vote on matters affecting only that class,
such as the terms of a Rule 12b-1 Plan as it relates to the class.
The fund does not hold annual meetings. Shareholders of record of no less
than two-thirds of the outstanding shares of the Trust may remove a trustee
through a declaration in writing or by vote cast in person or by proxy at a
meeting called for that purpose. A meeting will be called to vote on the removal
of the trustee at the written request of holders of 10% of the outstanding
shares of the Trust.
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.
CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND 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.
ADDITIONAL INFORMATION CONCERNING THE S&P 500 INDEX. The fund is not
sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or
warranty, express or implied, to the shareholders of the fund or any member of
the public regarding the advisability of investing in securities generally or in
the fund particularly or the ability of the S&P 500 Index to track general stock
market performance. S&P's only relationship to Mitchell Hutchins or the fund is
the licensing of certain trademarks and trade names of S&P and the S&P 500
Index, which is determined, composed, and calculated by S&P without regard to
Mitchell Hutchins or the fund. S&P has no obligation to take the needs of
Mitchell Hutchins or the shareholders of the fund into consideration in
determining, composing or calculating the S&P 500 Index. S&P is not responsible
for and has not participated in the timing of the issuance or sale of the fund's
shares or the determination or calculation of the equation by which shares of
the fund are priced or converted into cash. S&P has no obligation or liability
in connection with the administration of the fund or the marketing or sale of
the fund's shares.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN, AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND OR ITS SHAREHOLDERS OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
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.
36
<PAGE>
FINANCIAL STATEMENTS
The fund's Annual Report to Shareholders for the period ended May 31, 1999
is a separate document supplied with this SAI, and the financial statements,
accompanying notes and report of independent auditors appearing therein are
incorporated herein by this reference.
37
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN THE
PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION. THE FUND AND ITS
DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT. THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION ARE NOT
AN OFFER TO SELL SHARES OF THE FUND IN ANY JURISDICTION WHERE THE FUND OR ITS
DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE SHARES.
------------
PAINEWEBBER
S&P 500 INDEX FUND
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 30, 1999
PAINEWEBBER
'c'1999 PaineWebber Incorporated
38
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(1) Amended and Restated Trust Instrument (filed herewith)
(2) Amended and Restated By-Laws (filed herewith)
(3) Instruments defining the rights of holders of Registrant's
shares of beneficial interest(1)
(4) Investment Advisory and Administration Contract(2)
(5) (a) Distribution Contract (Class A Shares) (filed herewith)
(b) Distribution Contract (Class C Shares) (filed herewith)
(c) Distribution Contract (Class Y Shares) (filed herewith)
(d) Exclusive Dealer Agreement (Class A Shares) (filed herewith)
(e) Exclusive Dealer Agreement (Class C Shares) (filed herewith)
(f) Exclusive Dealer Agreement (Class Y Shares) (filed herewith)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement(2)
(8) Transfer Agency Agreement(2)
(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) Rule 12b-1 Plan of Distribution with respect to Class A Shares
(filed herewith)
(b) Rule 12b-1 Plan of Distribution with respect to Class C Shares
(filed herewith)
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3(2)
- ---------------------
(1) 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.
(2) Incorporated by reference from Post-Effective Amendment No. 2 to the
registration statement, SEC File No. 333-27917, filed September 30,
1998.
(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").
C-2
<PAGE>
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 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 LIR MONEY 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
C-3
<PAGE>
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.
<TABLE>
<CAPTION>
Positions and Offices With Positions and Offices With Underwriter or
Name Registrant Exclusive Dealer
- ---- ---------- -----------------------------------------
<S> <C> <C>
Margo N. Alexander Trustee and President Chairman, Chief Executive Officer and a
Director of Mitchell Hutchins and Executive
Vice President and Director of PaineWebber
Mary C. Farrell Trustee Managing Director, Senior Investment
Strategist and member of the Investment
Policy Committee of PaineWebber
Brian M. Storms Trustee President and Chief Operating Officer of
Mitchell Hutchins
T. Kirkham Barneby Vice President Managing Director and Chief Investment
Officer - Quantitative Investments of
Mitchell Hutchins
John J. Lee Vice President and Assistant Vice President and a Manager of the Mutual
Treasurer Fund Finance Department of Mitchell Hutchins
Kevin J. Mahoney Vice President and Assistant First Vice President and a Senior Manager
Treasurer of the Mutual Fund Finance Department of
Mitchell Hutchins
Ann E. Moran Vice President and Assistant Vice President and a Manager of the Mutual
Treasurer 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 for Mitchell Hutchins
Victoria E. Schonfeld Vice President Managing Director and General Counsel of
Mitchell Hutchins and a Senior Vice
President of PaineWebber
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 Mutual
Treasurer Fund Finance Department of Mitchell Hutchins
Keith A. Weller Vice President and Assistant First Vice President and Associate General
Secretary Counsel of Mitchell Hutchins
</TABLE>
C-4
<PAGE>
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.
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 29th day of September, 1999.
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 29, 1999
- ------------------------------------ (Chief Executive Officer)
Margo N. Alexander *
/s/ E. Garrett Bewkes, Jr. Trustee and Chairman September 29, 1999
- ------------------------------------ of the Board of Trustees
E. Garrett Bewkes, Jr. *
/s/ Richard Q. Armstrong Trustee September 29, 1999
- ------------------------------------
Richard Q. Armstrong *
/s/ Richard R. Burt Trustee September 29, 1999
- ------------------------------------
Richard R. Burt *
/s/ Mary C. Farrell Trustee September 29, 1999
- ------------------------------------
Mary C. Farrell *
/s/ Meyer Feldberg Trustee September 29, 1999
- ------------------------------------
Meyer Feldberg *
/s/ George W. Gowen Trustee September 29, 1999
- ------------------------------------
George W. Gowen *
/s/ Frederic V. Malek Trustee September 29, 1999
- ------------------------------------
Frederic V. Malek *
/s/ Carl W. Schafer Trustee September 29, 1999
- ------------------------------------
Carl W. Schafer *
/s/ Brian M. Storms Trustee September 29, 1999
- ------------------------------------
Brian M. Storms **
/s/ Paul H. Schubert Vice President and Treasurer (Chief September 29, 1999
- ------------------------------------ Financial and Accounting Officer)
Paul H. Schubert
</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.
** Signature affixed by Elinor W. Gammon pursuant to power of attorney
dated May 14, 1999 and incorporated by reference from Post-Effective
Amendment No. 61 to the registration statement of PaineWebber Managed
Investments Trust, SEC File 2-91362, filed June 1, 1999.
<PAGE>
PAINEWEBBER INDEX TRUST
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
<S> <C>
(1) Amended and Restated Trust Instrument (filed herewith)
(2) Amended and Restated By-Laws (filed herewith)
(3) Instruments defining the rights of holders of Registrant's
shares of beneficial interest(1)
(4) Investment Advisory and Administration Contract(2)
(5) (a) Distribution Contract (Class A Shares) (filed herewith)
(b) Distribution Contract (Class C Shares) (filed herewith)
(c) Distribution Contract (Class Y Shares) (filed herewith)
(d) Exclusive Dealer Agreement (Class A Shares) (filed herewith)
(e) Exclusive Dealer Agreement (Class C Shares) (filed herewith)
(f) Exclusive Dealer Agreement (Class Y Shares) (filed herewith)
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement(2)
(8) Transfer Agency Agreement(2)
(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) Rule 12b-1 Plan of Distribution with respect to Class A Shares
(filed herewith)
(b) Rule 12b-1 Plan of Distribution with respect to Class C Shares
(filed herewith)
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan Pursuant to Rule 18f-3(2)
</TABLE>
- ------------------
(1) 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.
(2) Incorporated by reference from Post-Effective Amendment No. 2 to the
registration statement, SEC File No. 333-27917, filed September 30,
1998.
(3) Incorporated by reference from Pre-Effective Amendment No. 1 to the
registration statement, SEC File No. 333-27917, filed October 17, 1997.
STATEMENT OF DIFFERENCES
------------------------
The trademark symbol shall be expressed as............................. 'TM'
The copyright symbol shall be expressed as............................. 'c'
The registered trademark symbol shall be expressed as.................. 'r'
The service mark symbol shall be expressed as.......................... 'sm'
The dagger symbol shall be expressed as................................ 'D'
Characters normally expressed as superscript shall be preceded by...... 'pp'
<PAGE>
Exhibit No. 1
PAINEWEBBER INDEX TRUST
AMENDED AND RESTATED TRUST INSTRUMENT
May 13, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS.......................................................................................................1
ARTICLE II
TRUSTEES 2
Section 1. Management of the Trust.......................................................................2
Section 2. Initial Trustees; Number and Election of Trustees.............................................2
Section 3. Term of Office................................................................................2
Section 4. Vacancies; Appointment of Trustees............................................................3
Section 5. Temporary Vacancy or Absence..................................................................3
Section 6. Chairman......................................................................................3
Section 7. Action by the Trustees........................................................................3
Section 8. Ownership of Trust Property...................................................................4
Section 9. Effect of Trustees Not Serving................................................................4
Section 10. Trustees, etc. as Shareholders...............................................................4
ARTICLE III
POWERS OF THE TRUSTEES............................................................................................4
Section 1. Powers........................................................................................4
Section 2. Certain Transactions..........................................................................7
ARTICLE IV
SERIES; CLASSES; SHARES...........................................................................................8
Section 1. Establishment of Series or Class..............................................................8
Section 2. Shares........................................................................................8
Section 3. Investment in the Trust.......................................................................9
Section 4. Assets and Liabilities of Series..............................................................9
Section 5. Ownership and Transfer of Shares.............................................................10
Section 6. Status of Shares; Limitation of Shareholder Liability........................................10
ARTICLE V
DISTRIBUTIONS AND REDEMPTIONS....................................................................................10
Section 1. Distributions................................................................................10
Section 2. Redemptions..................................................................................11
Section 3. Determination of Net Asset Value.............................................................11
Section 4. Suspension of Right of Redemption............................................................11
Section 5. Redemptions Necessary for Qualification as Regulated Investment Company......................12
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI
SHAREHOLDERS' VOTING POWERS AND MEETINGS.........................................................................12
Section 1. Voting Power.................................................................................12
Section 2. Meetings of Shareholders.....................................................................13
Section 3. Quorum; Required Vote........................................................................13
ARTICLE VII
CONTRACTS WITH SERVICE PROVIDERS.................................................................................13
Section 1. Investment Adviser...........................................................................13
Section 2. Principal Underwriter........................................................................14
Section 3. Transfer Agency, Shareholder Services, and Administration Agreements.........................14
Section 4. Custodian....................................................................................14
Section 5. Parties to Contracts with Service Providers..................................................14
Section 6. Requirements of the 1940 Act.................................................................14
ARTICLE VIII
EXPENSES OF THE TRUST AND SERIES.................................................................................15
ARTICLE IX
LIMITATION OF LIABILITY AND INDEMNIFICATION......................................................................16
Section 1. Limitation of Liability......................................................................16
Section 2. Indemnification..............................................................................16
Section 3. Indemnification of Shareholder...............................................................18
ARTICLE X
MISCELLANEOUS....................................................................................................18
Section 1. Trust Not a Partnership......................................................................18
Section 2. Trustee Action; Expert Advice; No Bond or Surety.............................................18
Section 3. Record Dates.................................................................................18
Section 4. Termination of the Trust.....................................................................19
Section 5. Reorganization...............................................................................20
Section 6. Trust Instrument.............................................................................20
Section 7. Applicable Law...............................................................................20
Section 8. Amendments...................................................................................21
Section 9. Fiscal Year..................................................................................21
Section 10. Severability................................................................................21
</TABLE>
ii
<PAGE>
PAINEWEBBER INDEX TRUST
TRUST INSTRUMENT
This AMENDED AND RESTATED TRUST INSTRUMENT is adopted on May 13, 1999,
with respect to the business trust established by the Trustees on May 27, 1997,
to establish a business trust for the investment and reinvestment of funds
contributed to the Trust by investors. The Trustees declare that all money and
property contributed to the Trust shall be held and managed in trust pursuant to
this Trust Instrument. The name of the Trust created by this Trust Instrument is
PaineWebber Index Trust.
ARTICLE I
DEFINITIONS
Unless otherwise provided or required by the context:
(a) "By-laws" means the By-laws of the Trust adopted by the Trustees,
as amended from time to time;
(b) "Class" means a class of Shares in a Series established pursuant to
Article IV;
(c) "Commission," "Interested Person," and "Principal Underwriter" have
the meanings provided in the 1940 Act;
(d) "Covered Person" means a person so defined in Article IX, Section
2;
(e) "Delaware Act" means Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time;
(f) "Majority Shareholder Vote" means "the vote of a majority of the
outstanding voting securities" as defined in the 1940 Act;
(g) "Net Asset Value" means the net asset value of each Series of the
Trust, determined as provided in Article V, Section 3;
(h) "Registered Investment Company" means a company registered as a
management investment company under the 1940 Act.
(i) "Outstanding Shares" means Shares shown on the books of the Trust
or its transfer agent as then issued and outstanding, but does not include
Shares which have been repurchased or redeemed by the Trust;
(j) "Series" means a series of Shares established pursuant to Article
IV;
(k) "Shareholder" means a record owner of Outstanding Shares;
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(l) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest of each Series or Class is divided
from time to time (including whole Shares and fractions of Shares);
(m) "Trust" means PaineWebber Index Trust established hereby, and
reference to the Trust, when applicable to one or more Series, refers to that
Series;
(n) "Trustees" means the persons who have signed this Trust Instrument,
so long as they shall continue in office in accordance with the terms hereof,
and all other persons who may from time to time be duly qualified and serving as
Trustees in accordance with Article II, in all cases in their capacities as
Trustees hereunder;
(o) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the Trust or any Series
or the Trustees on behalf of the Trust or any Series; and
(p) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
ARTICLE II
TRUSTEES
Section 1. Management of the Trust. The business and affairs of the
Trust shall be managed by or under the direction of the Trustees, and they shall
have all powers necessary or desirable to carry out that responsibility. No
Shareholder shall have any right to conduct any Trust business solely by reason
of being a Shareholder. The Trustees may execute all instruments and take all
action they deem necessary or desirable to promote the interests of the Trust.
Any determination made by the Trustees in good faith as to what is in the
interests of the Trust shall be conclusive.
Section 2. Initial Trustees; Number and Election of Trustees. The
initial Trustees shall be the persons initially signing this Trust Instrument.
The number of Trustees (other than the initial Trustees) shall be fixed from
time to time by a majority of the Trustees; provided, that there shall be at
least two (2) Trustees. The Shareholders shall elect the Trustees (other than
the initial Trustees) on such dates as the Trustees may fix from time to time.
Section 3. Term of Office. Each Trustee shall hold office for life or
until his or her successor is elected or the Trust terminates; except that (a)
any Trustee may resign by delivering to the other Trustees or to any Trust
officer a written resignation effective upon such delivery or a later date
specified therein; (b) any Trustee may be removed with or without cause at any
time by a written instrument signed by at least two-thirds of the other
Trustees, specifying the effective date of removal; (c) any Trustee who requests
to be retired, or who has become physically or mentally incapacitated or is
otherwise unable to serve, may be retired by a written instrument signed by a
majority of the other Trustees, specifying the effective date of retirement;
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<PAGE>
and (d) any Trustee may be removed at any meeting of the Shareholders by a vote
of at least two-thirds of the Outstanding Shares.
Section 4. Vacancies; Appointment of Trustees. Whenever a vacancy shall
exist in the Board of Trustees, regardless of the reason for such vacancy, the
remaining Trustees shall appoint any person as they determine in their sole
discretion to fill that vacancy, consistent with the limitations under the 1940
Act. Such appointment shall be made by a written instrument signed by a majority
of the Trustees or by a resolution of the Trustees, duly adopted and recorded in
the records of the Trust, specifying the effective date of the appointment. The
Trustees may appoint a new Trustee as provided above in anticipation of a
vacancy expected to occur because of the retirement, resignation, or removal of
a Trustee, or an increase in number of Trustees, provided that such appointment
shall become effective only at or after the expected vacancy occurs. As soon as
any such Trustee has accepted his or her appointment in writing, the trust
estate shall vest in the new Trustee, together with the continuing Trustees,
without any further act or conveyance, and he or she shall be deemed a Trustee
hereunder.
Section 5. Temporary Vacancy or Absence. Whenever a vacancy in the
Board of Trustees shall occur, until such vacancy is filled, or while any
Trustee is absent from his or her domicile (unless that Trustee has made
arrangements to be informed about, and to participate in, the affairs of the
Trust during such absence), or is physically or mentally incapacitated, the
remaining Trustees shall have all the powers hereunder and their certificate as
to such vacancy, absence, or incapacity shall be conclusive. Any Trustee may, by
power of attorney, delegate his or her powers as Trustee for a period not
exceeding six (6) months at any one time to any other Trustee or Trustees to the
extent permitted by the 1940 Act.
Section 6. Chairman. The Trustees shall appoint one of their number to
be Chairman of the Board of Trustees. The Chairman shall preside at all meetings
of the Trustees, shall be responsible for the execution of policies established
by the Trustees and the administration of the Trust, and may be the chief
executive, financial and/or accounting officer of the Trust.
Section 7. Action by the Trustees. The Trustees shall act by majority
vote at a meeting duly called (including a meeting by telephonic or other
electronic means, unless the 1940 Act requires that a particular action be taken
only at a meeting of Trustees in person) at which a quorum is present or by
written consent of a majority of Trustees (or such greater number as may be
required by applicable law) without a meeting. A majority of the Trustees shall
constitute a quorum at any meeting. Meetings of the Trustees may be called
orally or in writing by the Chairman of the Board of Trustees or by any two
other Trustees. Notice of the time, date and place of all Trustees meetings
shall be given to each Trustee by telephone, facsimile or other electronic
mechanism sent to his or her home or business address at least twenty-four hours
in advance of the meeting or by written notice mailed to his or her home or
business address at least seventy-two hours in advance of the meeting. Notice
need not be given to any Trustee who attends the meeting without objecting to
the lack of notice or who signs a waiver of notice either before or after the
meeting. Subject to the requirements of the 1940 Act, the Trustees by majority
vote may delegate to any Trustee or Trustees authority to approve
3
<PAGE>
particular matters or take particular actions on behalf of the Trust. Any
written consent or waiver may be provided and delivered to the Trust by
facsimile or other similar electronic mechanism.
Section 8. Ownership of Trust Property. The Trust Property of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. All of the Trust Property and legal title thereto
shall at all times be considered as vested in the Trustees on behalf of the
Trust, except that the Trustees may cause legal title to any Trust Property to
be held by or in the name of the Trust, or in the name of any person as nominee.
No Shareholder shall be deemed to have a severable ownership in any individual
asset of the Trust or of any Series or any right of partition or possession
thereof, but each Shareholder shall have, as provided in Article IV, a
proportionate undivided beneficial interest in the Trust or Series represented
by Shares.
Section 9. Effect of Trustees Not Serving. The death, resignation,
retirement, removal, incapacity, or inability or refusal to serve of the
Trustees, or any one of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Trust Instrument.
Section 10. Trustees, etc. as Shareholders. Subject to any restrictions
in the By-laws, any Trustee, officer, agent or independent contractor of the
Trust may acquire, own and dispose of Shares to the same extent as any other
Shareholder; the Trustees may issue and sell Shares to and buy Shares from any
such person or any firm or company in which such person is interested, subject
only to any general limitations herein.
ARTICLE III
POWERS OF THE TRUSTEES
Section 1. Powers. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if they were the sole owners of the Trust Property and business in
their own right, but with such powers of delegation as may be permitted in this
Trust Instrument. The Trustees in all instances shall act as principals, free of
the control of the Shareholders. The Trustees shall have full power and
authority to take or refrain from taking any action and to execute any contracts
and instruments that they may consider necessary or desirable in the management
of the Trust. The Trustees shall not in any way be bound or limited by current
or future laws or customs applicable to trust investments, but shall have full
power and authority to make any investments which they, in their sole
discretion, deem proper to accomplish the purposes of the Trust. The Trustees
may exercise all of their powers without recourse to any court or other
authority. Subject to any applicable limitation herein or in the By-laws,
operating documents or resolutions of the Trust, the Trustees shall have power
and authority, without limitation:
(a) To operate as and carry on the business of a Registered Investment
Company and to exercise all the powers necessary and proper to conduct such a
business
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<PAGE>
(b) To subscribe for, invest in, reinvest in, purchase, or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute, or
otherwise deal in or dispose of any form of property, including cash (U.S.
currency), foreign currencies and related instruments, and securities (including
common and preferred stocks, warrants, bonds, debentures, time notes, and all
other evidences of indebtedness, negotiable or non-negotiable instruments,
obligations, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, reverse repurchase agreements, convertible securities,
forward contracts, options, and futures contracts) issued, guaranteed, or
sponsored by any state, territory, or possession of the United States or the
District of Columbia or their political subdivisions, agencies, or
instrumentalities, or by the U.S. government, any foreign government, or any
agency, instrumentality, or political subdivision thereof, or by any
international instrumentality, or by any bank, savings institution, corporation,
or other business entity organized under the laws of the United States
(including a Registered Investment Company or any series thereof, subject to the
provisions of the 1940 Act) or under foreign laws, without regard to whether any
such securities mature before or after the possible termination of the Trust; to
exercise any and all rights, powers, and privileges of ownership or interest in
respect of any and all such investments of every kind and description; and to
hold cash or other property uninvested, without in any event being bound or
limited by any current or future law or custom concerning investments by
trustees;
(c) To adopt By-laws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent such right is not reserved to the Shareholders;
(d) To elect and remove such officers and appoint and terminate such
agents as they deem appropriate;
(e) To employ as custodian of any assets of the Trust, subject to any
provisions herein or in the By-laws, one or more banks, trust companies or
companies that are members of a national securities exchange, or other entities
permitted by the Commission to serve as such;
(f) To retain one or more transfer agents and Shareholder servicing
agents, or both;
(g) To provide for the distribution of Shares either through a
Principal Underwriter as provided herein or by the Trust itself, or both, or
pursuant to a distribution plan of any kind;
(h) To set record dates in the manner provided for herein or in the
By-laws;
(i) To delegate such authority as they consider desirable to any
officers of the Trust and to any agent, independent contractor, manager,
investment adviser, custodian or underwriter;
(j) To sell, exchange or otherwise dispose of any or all of the assets
of the Trust, subject to Article X, Section 4;
(k) To vote or give assent, or exercise any rights of ownership, with
respect to other securities or property; and to execute and deliver powers of
attorney delegating such power to other persons;
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<PAGE>
(l) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities or other property;
(m) To hold any security or other property (i) in a form not indicating
any trust, whether in bearer, book entry, unregistered or other negotiable form,
or (ii) either in the Trust's or Trustees' own name or in the name of a
custodian or a nominee or nominees, subject to safeguards according to the usual
practice of business trusts or investment companies;
(n) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes, and with
separate Shares representing beneficial interests in such Series, and to
establish separate Classes, all in accordance with the provisions of Article IV;
(o) To incur and pay all expenses that in the Trustees' opinion are
necessary or incidental to carry out any of the purposes of this Trust
Instrument; to pay reasonable compensation to themselves as Trustees from the
Trust Property or the assets belonging to any appropriate Series or Class; to
pay themselves such compensation for special services, including legal and
brokerage services, and such reimbursement for expenses reasonably incurred by
themselves on behalf of the Trust or any Series or Class, as they in good faith
may deem reasonable; and to fix the compensation of all officers and employees
of the Trust;
(p) To the full extent permitted by Section 3804 of the Delaware Act,
to allocate assets, liabilities and expenses of the Trust to a particular Series
and liabilities and expenses to a particular Class or to apportion the same
between or among two or more Series or Classes, provided that any liabilities or
expenses incurred by a particular Series or Class shall be payable solely out of
the assets belonging to that Series or Class as provided for in Article IV,
Section 4;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern whose securities are held
by the Trust; to consent to any contract, lease, mortgage, purchase, or sale of
property by such corporation or concern; and to pay calls or subscriptions with
respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided for;
(t) To borrow money or otherwise obtain credit and to secure the same
by mortgaging, pledging, or otherwise subjecting as security any assets of the
Trust, including the lending of portfolio securities, and to endorse, guarantee,
or undertake the performance of any obligation, contract, or engagement of any
other person, firm, association, or corporation;
(u) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any Shareholders
whose investment is less than such minimum;
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(v) To purchase, and pay for, out of Trust Property or the assets
belonging to any appropriate Series, insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, and/or independent
contractors of the Trust (including the investment adviser of any Series)
against all claims arising by reason of holding any such position or by reason
of any action taken or omitted by any such person in such capacity, whether or
not the Trust would have the power to indemnify such person against such claim
(w) To establish committees for such purposes, with such membership,
and with such responsibilities as the Trustees may consider proper, including a
committee consisting of fewer than all of the Trustees then in office, which may
act for and bind the Trustees and the Trust with respect to the institution,
prosecution, dismissal, settlement, review or investigation of any legal action,
suit or proceeding, pending or threatened;
(x) To interpret the investment policies, practices, or limitations of
any Series;
(y) To establish a registered office and have a registered agent in the
State of Delaware;
(z) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold,
resell, reissue, dispose of and otherwise deal in Shares; to establish terms and
conditions regarding the issuance, sale, repurchase, redemption, cancellation,
retirement, acquisition, holding, resale, reissuance, disposition of or dealing
in Shares; and, subject to Articles IV and V, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the Trust or of the particular Series with respect to which such
Shares are issued; and
(aa) To carry on any other business in connection with or incidental to
any of the foregoing powers, to do everything necessary or desirable to
accomplish any purpose or to further any of the foregoing powers, and to take
every other action incidental to the foregoing business or purposes, objects or
powers.
(bb) To select such name for the Trust, or any Series or Class, as the
Trustees deem proper in their discretion, without Shareholder approval, in which
event the Trust may hold its property and conduct its activities under such
other name
The clauses above shall be construed as objects and powers, and the
enumeration of specific powers shall not limit in any way the general powers of
the Trustees. Any action by one or more of the Trustees in their capacity as
such hereunder shall be deemed an action on behalf of the Trust or the
applicable Series, and not an action in an individual capacity. No one dealing
with the Trustees shall be under any obligation to make any inquiry concerning
the authority of the Trustees, or to see to the application of any payments made
or property transferred to the Trustees or upon their order. In construing this
Trust Instrument, the presumption shall be in favor of a grant of power to the
Trustees.
Section 2. Certain Transactions. Except as prohibited by applicable
law, the Trustees may, on behalf of the Trust, buy any securities from or sell
any securities to, or lend any assets of the Trust to, any Trustee or officer of
the Trust or any firm of which any such Trustee or officer
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is a member acting as principal, or have any such dealings with any investment
adviser, administrator, distributor or transfer agent for the Trust or with any
Interested Person of such person. The Trust may employ any such person or entity
in which such person is an Interested Person, as broker, legal counsel,
registrar, investment adviser, administrator, distributor, transfer agent,
dividend disbursing agent, custodian or in any other capacity upon customary
terms.
ARTICLE IV
SERIES; CLASSES; SHARES
Section 1. Establishment of Series or Class. The Trust shall consist of
one or more Series. The Trustees hereby establish the Series listed in Schedule
A attached hereto and made a part hereof. Each additional Series shall be
established by the adoption of a resolution by the Trustees. The Trustees may
designate the relative rights and preferences of the Shares of each Series. The
Trustees may divide the Shares of any Series into Classes and hereby establish
the Classes listed in Schedule A. In such case each Class of a Series shall
represent a proportional beneficial interest in the assets of that Series and
have identical voting, dividend, liquidation and other rights and the same terms
and conditions, except that expenses allocated to a Class may be borne solely by
such Class as determined by the Trustees and a Series or Class may have
exclusive voting rights with respect to matters affecting only that Series or
Class. The Trust shall maintain separate and distinct records for each Series
and hold and account for the assets thereof separately from the other assets of
the Trust or of any other Series. A Series may issue any number of Shares and
need not issue Shares. Each Share of a Series shall represent an equal
beneficial interest in the net assets of such Series. Each holder of Shares of a
Series shall be entitled to receive his or her pro rata share of all
distributions made with respect to such Series, provided that, if Classes of a
Series are outstanding, each holder of Shares of a Class shall be entitled to
receive his or her pro rata share of all distributions made with respect to such
Class of the Series. Upon redemption of his or her Shares, such Shareholder
shall be paid solely out of the assets and property of such Series.
Section 2. Shares. The beneficial interest in the Trust shall be
divided into Shares of one or more separate and distinct Series or Classes
established by the Trustees. The number of Shares of the Trust and of each
Series and Class is unlimited and each Share shall have a par value of $0.001
per Share. All Shares issued hereunder shall be fully paid and nonassessable.
Shareholders shall have no preemptive or other right to subscribe to any
additional Shares or other securities issued by the Trust. The Trustees shall
have full power and authority, in their sole discretion and without obtaining
Shareholder approval: to issue original or additional Shares and fractional
Shares at such times and on such terms and conditions as they deem appropriate;
to establish and to change in any manner Shares of any Series or Classes with
such preferences, terms of conversion, voting powers, rights and privileges as
the Trustees may determine (but the Trustees may not change Outstanding Shares
in a manner materially adverse to the Shareholders of such Shares); to divide or
combine the Shares of any Series or Classes into a greater or lesser number; to
classify or reclassify any unissued Shares of any Series or Classes into one or
more Series or Classes of Shares; to abolish any one or more Series or Classes
of Shares; to issue Shares to acquire other assets (including assets subject to,
and in connection
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with, the assumption of liabilities) and businesses; and to take such other
action with respect to the Shares as the Trustees may deem desirable.
Section 3. Investment in the Trust. The Trustees shall accept
investments in any Series from such persons and on such terms as they may from
time to time authorize. At the Trustees' discretion, such investments, subject
to applicable law, may be in the form of cash or securities in which that Series
is authorized to invest, valued as provided in Article V, Section 3. Investments
in a Series shall be credited to each Shareholder's account in the form of full
and fractional Shares at the Net Asset Value per Share next determined after the
investment is received or accepted in good form as may be determined by the
Trustees; provided, however, that the Trustees may, in their sole discretion,
(a) impose a sales charge upon investments in any Series or Class, or (b)
determine the Net Asset Value per Share of the initial capital contribution. The
Trustees shall have the right to refuse to accept investments in any Series at
any time without any cause or reason therefor whatsoever.
Section 4. Assets and Liabilities of Series. All consideration received
by the Trust for the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof (including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may
be), shall be held and accounted for separately from the other assets of the
Trust and every other Series and are referred to as "assets belonging to" that
Series. The assets belonging to a Series shall belong only to that Series for
all purposes, and to no other Series, subject only to the rights of creditors of
that Series. Any assets, income, earnings, profits, and proceeds thereof, funds,
or payments which are not readily identifiable as belonging to any particular
Series shall be allocated by the Trustees between and among one or more Series
as the Trustees deem fair and equitable. Each such allocation shall be
conclusive and binding upon the Shareholders of all Series for all purposes, and
such assets, earnings, income, profits or funds, or payments and proceeds
thereof shall be referred to as assets belonging to that Series. The assets
belonging to a Series shall be so recorded upon the books of the Trust, and
shall be held by the Trustees in trust for the benefit of the Shareholders of
that Series. The assets belonging to a Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series, except that liabilities and expenses allocated
solely to a particular Class shall be borne by that Class. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series or Class shall be
allocated and charged by the Trustees between or among any one or more of the
Series or Classes in such manner as the Trustees deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes.
Without limiting the foregoing, but subject to the right of the
Trustees to allocate general liabilities, expenses, costs, charges or reserves
as herein provided, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Series shall
be enforceable against the assets of such Series only, and not against the
assets of the Trust generally or of any other Series. Notice of this contractual
limitation on liabilities among Series may, in the Trustees' discretion, be set
forth in the certificate of trust of the Trust (whether
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originally or by amendment) as filed or to be filed in the Office of the
Secretary of State of the State of Delaware pursuant to the Delaware Act, and
upon giving of such notice in the certificate of trust, the statutory provisions
of Section 3804 of the Delaware Act relating to limitations on liabilities among
Series (and the statutory effect under Section 3804 of setting forth such notice
in the certificate of trust) shall become applicable to the Trust and each
Series. Any person extending credit to, contracting with or having any claim
against any Series may look only to the assets of that Series to satisfy or
enforce any debt, with respect to that Series. No Shareholder or former
Shareholder of any Series shall have a claim on or any right to any assets
allocated or belonging to any other Series.
Section 5. Ownership and Transfer of Shares. The Trust shall maintain a
register containing the names and addresses of the Shareholders of each Series
and Class thereof, the number of Shares of each Series and Class held by such
Shareholders, and a record of all Share transfers. The register shall be
conclusive as to the identity of Shareholders of record and the number of Shares
held by them from time to time. The Trustees shall not be required to, but may
authorize the issuance of certificates representing Shares and adopt rules
governing their use. The Trustees may make rules governing the transfer of
Shares, whether or not represented by certificates.
Section 6. Status of Shares; Limitation of Shareholder Liability.
Shares shall be deemed to be personal property giving Shareholders only the
rights provided in this Trust Instrument. Every Shareholder, by virtue of having
acquired a Share, shall be held expressly to have assented to and agreed to be
bound by the terms of this Trust Instrument and to have become a party hereto.
No Shareholder shall be personally liable for the debts, liabilities,
obligations and expenses incurred by, contracted for, or otherwise existing with
respect to, the Trust or any Series. Neither the Trust nor the Trustees shall
have any power to bind any Shareholder personally or to demand payment from any
Shareholder for anything, other than as agreed by the Shareholder. Shareholders
shall have the same limitation of personal liability as is extended to
shareholders of a private corporation for profit incorporated in the State of
Delaware. Every written obligation of the Trust or any Series may contain a
statement to the effect that such obligation may only be enforced against the
assets of the Trust or such Series; however, the omission of such statement
shall not operate to bind or create personal liability for any Shareholder or
Trustee.
ARTICLE V
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees may declare and pay dividends
and other distributions, including dividends on Shares of a particular Series
and other distributions from the assets belonging to that Series. The amount and
payment of dividends or distributions and their form, whether they are in cash,
Shares or other Trust Property, shall be determined by the Trustees. Dividends
and other distributions may be paid pursuant to a standing resolution adopted
once or more often as the Trustees determine. All dividends and other
distributions on Shares of a particular Series shall be distributed pro rata to
the Shareholders of that Series in
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proportion to the number of Shares of that Series they held on the record date
established for such payment, except that such dividends and distributions shall
appropriately reflect expenses allocated to a particular Class of such Series.
The Trustees may adopt and offer to Shareholders such dividend reinvestment
plans, cash dividend payout plans or similar plans as the Trustees deem
appropriate.
Section 2. Redemptions. Each Shareholder of a Series shall have the
right at such times as may be permitted by the Trustees to require the Series to
redeem all or any part of his or her Shares at a redemption price per Share
equal to the Net Asset Value per Share at such time as the Trustees shall have
prescribed by resolution less such charges as are determined by the Trustees and
described in the Trust's Registration Statement for that Series under the
Securities Act of 1933 or any prospectus or statement of additional information
contained therein, as supplemented. In the absence of such resolution, the
redemption price per Share shall be the Net Asset Value next determined after
receipt by the Series of a request for redemption in proper form less such
charges as are determined by the Trustees and described in the Trust's
Registration Statement for that Series under the Securities Act of 1933 or any
prospectus or statement of additional information contained therein, as
supplemented.
The Trustees may specify conditions, prices, and places of redemption,
and may specify binding requirements for the proper form or forms of requests
for redemption. Payment of the redemption price may be wholly or partly in
securities or other assets at the value of such securities or assets used in
such determination of Net Asset Value, or may be in cash. Upon redemption,
Shares may be reissued from time to time. The Trustees may require Shareholders
to redeem Shares for any reason under terms set by the Trustees, including the
failure of a Shareholder to supply a personal identification number if required
to do so, or to have the minimum investment required, or to pay when due for the
purchase of Shares issued to him or her. To the extent permitted by law, the
Trustees may retain the proceeds of any redemption of Shares required by them
for payment of amounts due and owing by a Shareholder to the Trust or any Series
or Class. Notwithstanding the foregoing, the Trustees may postpone payment of
the redemption price and may suspend the right of the Shareholders to require
any Series or Class to redeem Shares during any period of time when and to the
extent permissible under the 1940 Act.
Section 3. Determination of Net Asset Value. The Trustees shall cause
the Net Asset Value of Shares of each Series or Class to be determined from time
to time in a manner consistent with applicable laws and regulations. The
Trustees may delegate the power and duty to determine Net Asset Value per Share
to one or more Trustees or officers of the Trust or to an investment manager,
administrator or investment adviser, custodian, depository or other agent
appointed for such purpose. The Net Asset Value of Shares shall be determined
separately for each Series or Class at such times as may be prescribed by the
Trustees or, in the absence of action by the Trustees, as of the close of
regular trading on the New York Stock Exchange on each day for all or part of
which such Exchange is open for unrestricted trading.
Section 4. Suspension of Right of Redemption. If, as referred to in
Section 2 of this Article, the Trustees postpone payment of the redemption price
and suspend the right of Shareholders to redeem their Shares, such suspension
shall take effect at the time the Trustees
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shall specify, but not later than the close of business on the business day next
following the declaration of suspension. Thereafter Shareholders shall have no
right of redemption or payment until the Trustees declare the end of the
suspension. If the right of redemption is suspended, a Shareholder may either
withdraw his request for redemption or receive payment based on the Net Asset
Value per Share next determined after the suspension terminates.
Section 5. Redemptions Necessary for Qualification as Regulated
Investment Company. If the Trustees shall determine that direct or indirect
ownership of Shares of any Series has or may become concentrated in any person
to an extent which would disqualify any Series as a regulated investment company
under the Internal Revenue Code, then the Trustees shall have the power (but not
the obligation) by lot or other means they deem equitable to (a) call for
redemption by any such person of a number, or principal amount, of Shares
sufficient to maintain or bring the direct or indirect ownership of Shares into
conformity with the requirements for such qualification and (b) refuse to
transfer or issue Shares to any person whose acquisition of Shares in question
would, in the Trustees' judgment, result in such disqualification. Any such
redemption shall be effected at the redemption price and in the manner provided
in this Article. Shareholders shall upon demand disclose to the Trustees in
writing such information concerning direct and indirect ownership of Shares as
the Trustees deem necessary to comply with the requirements of any taxing
authority.
ARTICLE VI
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Power. The Shareholders shall have power to vote only
with respect to (a) the election of Trustees as provided in Section 2 of this
Article; (b) the removal of Trustees as provided in Article II, Section 3(d);
(c) any investment advisory or management contract as provided in Article VII,
Section 1; (d) any termination of the Trust as provided in Article X, Section 4;
(e) the amendment of this Trust Instrument to the extent and as provided in
Article X, Section 8; and (f) such additional matters relating to the Trust as
may be required or authorized by law, this Trust Instrument, or the By-laws or
any registration of the Trust with the Commission or any State, or as the
Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted by individual Series, except (a) when required by the 1940 Act, Shares
shall be voted in the aggregate and not by individual Series, and (b) when the
Trustees have determined that the matter affects only the interests of one or
more Classes, then the Shareholders of only such Class or Classes shall be
entitled to vote thereon. Each whole Share shall be entitled to one vote as to
any matter on which it is entitled to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. There shall be no cumulative voting
in the election of Trustees. Shares may be voted in person or by proxy or in any
manner provided for in the By-laws. The By-laws may provide that proxies may be
given by any electronic or telecommunications device or in any other manner, but
if a proposal by anyone other than the officers or Trustees is submitted to a
vote of the Shareholders of any Series or Class, or if there is a proxy contest
or proxy solicitation or proposal in opposition to any proposal by the officers
or Trustees, Shares may be voted only in person or by written proxy. Until
Shares of a Series or Class thereof are issued, as to that Series or Class, the
Trustees may
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exercise all rights of Shareholders and may take any action required or
permitted to be taken by Shareholders by law, this Trust Instrument or the
By-laws.
Section 2. Meetings of Shareholders. The first Shareholders' meeting of
the Trust (but not the first shareholders' meeting of a Series that is not also
the first shareholders' meeting of the Trust) shall be held to elect Trustees at
such time and place as the Trustees designate. Annual meetings shall not be
required. Special meetings of the Shareholders of any Series or Class may be
called by the Trustees and shall be called by the Trustees upon the written
request of Shareholders owning at least ten percent of the Outstanding Shares of
such Series or Class, or at least ten percent of the Outstanding Shares of the
Trust entitled to vote. Special meetings of Shareholders shall be held, notice
of such meetings shall be delivered and waiver of notice shall occur according
to the provisions of the Trust's By-laws. Any action that may be taken at a
meeting of Shareholders may be taken without a meeting according to the
procedures set forth in the By-laws.
Section 3. Quorum; Required Vote. One-third of the Outstanding Shares
of each Series or Class, or one-third of the Outstanding Shares of the Trust,
entitled to vote in person or by proxy shall be a quorum for the transaction of
business at a Shareholders' meeting with respect to such Series or Class, or
with respect to the entire Trust, respectively. Any lesser number shall be
sufficient for adjournments. Any adjourned session of a Shareholders' meeting
may be held within a reasonable time without further notice. Except when a
Majority Shareholder Vote or other larger vote is required by law, this Trust
Instrument or the By-laws, a majority of the Outstanding Shares voted, in person
or by proxy, shall decide any matters to be voted upon with respect to the
entire Trust and a plurality of such Outstanding Shares voted shall elect a
Trustee; provided, that if this Trust Instrument or applicable law permits or
requires that Shares be voted on any matter by an individual Series or Class,
then a majority of the Outstanding Shares voted, in person or by proxy, of that
Series or Class (or, if required by law, regulation, Commission order, or
no-action letter, a Majority Shareholder Vote or other larger vote of that
Series or Class) voted, in person or by proxy, on the matter shall decide that
matter insofar as that Series or Class is concerned. Shareholders may act as to
the Trust or any Series or Class by the written consent of a majority (or such
greater amount as may be required by applicable law) of the Outstanding Shares
of the Trust or of such Series or Class, as the case may be.
ARTICLE VII
CONTRACTS WITH SERVICE PROVIDERS
Section 1. Investment Adviser. The Trustees may enter into one or more
investment advisory contracts on behalf of the Trust or any Series, providing
for investment advisory services, statistical and research facilities and
services, and other facilities and services to be furnished to the Trust or
Series on terms and conditions acceptable to the Trustees. Any such contract may
provide for the investment adviser to effect purchases, sales or exchanges of
portfolio securities or other Trust Property on behalf of the Trustees or may
authorize any officer or agent of the Trust to effect such purchases, sales or
exchanges pursuant to recommendations
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of the investment adviser. The Trustees may authorize the investment adviser to
employ one or more sub-advisers or servicing agents.
Section 2. Principal Underwriter. The Trustees may enter into contracts
on behalf of the Trust or any Series or Class, providing for the distribution
and sale of Shares by the other party, either directly or as sales agent, on
terms and conditions acceptable to the Trustees. The Trustees may adopt a plan
or plans of distribution with respect to Shares of any Series or Class and enter
into any related agreements, whereby the Series or Class finances directly or
indirectly any activity that is primarily intended to result in sales of its
Shares, subject to the requirements of Section 12 of the 1940 Act, Rule 12b-1
thereunder, and other applicable rules and regulations.
Section 3. Transfer Agency, Shareholder Services, and Administration
Agreements. The Trustees, on behalf of the Trust or any Series or Class, may
enter into transfer agency agreements, Shareholder service agreements, and
administration and management agreements with any party or parties on terms and
conditions acceptable to the Trustees.
Section 4. Custodian. The Trustees shall at all times place and
maintain the securities and similar investments of the Trust and of each Series
with a custodian meeting the requirements of Section 17(f) of the 1940 Act and
the rules thereunder or as otherwise permitted by the Commission or its staff.
The Trustees, on behalf of the Trust or any Series, may enter into an agreement
with a custodian on terms and conditions acceptable to the Trustees, providing
for the custodian, among other things, (a) to hold the securities owned by the
Trust or any Series and deliver the same upon written order or oral order
confirmed in writing, (b) to receive and receipt for any moneys due to the Trust
or any Series and deposit the same in its own banking department or elsewhere,
(c) to disburse such funds upon orders or vouchers, and (d) to employ one or
more sub-custodians.
Section 5. Parties to Contracts with Service Providers. The Trustees
may enter into any contract referred to in this Article with any entity,
although one or more of the Trustees or officers of the Trust may be an officer,
director, trustee, partner, shareholder, or member of such entity, and no such
contract shall be invalidated or rendered void or voidable because of such
relationship. No person having such a relationship shall be disqualified from
voting on or executing a contract in his or her capacity as Trustee and/or
Shareholder, or be liable merely by reason of such relationship for any loss or
expense to the Trust with respect to such a contract or accountable for any
profit realized directly or indirectly therefrom; provided, that the contract
was reasonable and fair and not inconsistent with this Trust Instrument or the
By-laws.
Section 6. Requirements of the 1940 Act. Any contract referred to in
Sections 1 and 2 of this Article shall be consistent with and subject to the
applicable requirements of Section 15 of the 1940 Act and the rules and orders
thereunder with respect to its continuance in effect, its termination, and the
method of authorization and approval of such contract or renewal. No amendment
to a contract referred to in Section 1 of this Article shall be effective unless
assented to in a manner consistent with the requirements of Section 15 of the
1940 Act, and the rules and orders thereunder, if applicable.
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ARTICLE VIII
EXPENSES OF THE TRUST AND SERIES
Subject to Article IV, Section 4, the Trust or a particular Series
shall pay, or shall reimburse the Trustees from the Trust estate or the assets
belonging to the particular Series, for their expenses and disbursements,
including, but not limited to, interest charges, taxes, brokerage fees and
commissions; expenses of issue, repurchase and redemption of Shares; insurance
premiums; applicable fees, interest charges and expenses of third parties,
including the Trust's investment advisers, managers, administrators,
distributors, custodians, transfer agents and fund accountants; fees of pricing,
interest, dividend, credit and other reporting services; costs of membership in
trade associations; telecommunications expenses; funds transmission expenses;
auditing, legal and compliance expenses; costs of forming the Trust and its
Series and maintaining its existence; costs of preparing and printing the
prospectuses of the Trust and each Series, statements of additional information
and reports for Shareholders and delivering them to Shareholders; expenses of
meetings of Shareholders and proxy solicitations therefor (unless otherwise
agreed to by another party); costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trustees;
compensation of the Trust's officers and employees and costs of other personnel
performing services for the Trust or any Series; costs of Trustee meetings;
Commission registration fees and related expenses; state or foreign securities
laws registration fees and related expenses; and for such non-recurring items as
may arise, including litigation to which the Trust or a Series (or a Trustee or
officer of the Trust acting as such) is a party, and for all losses and
liabilities by them incurred in administering the Trust. The Trustees shall have
a lien on the assets belonging to the appropriate Series, or in the case of an
expense allocable to more than one Series, on the assets of each such Series,
prior to any rights or interests of the Shareholders thereto, for the
reimbursement to them of such expenses, disbursements, losses and liabilities.
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ARTICLE IX
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Liability. All persons contracting with or
having any claim against the Trust or a particular Series shall look only to the
assets of the Trust or such Series for payment under such contract or claim; and
neither the Trustees nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable therefor. Any
written instrument or obligation on behalf of the Trust or any Series may
contain a statement to the foregoing effect, but the absence of such statement
shall not operate to make any Trustee or officer of the Trust liable thereunder.
Provided they have exercised reasonable care and have acted under the reasonable
belief that their actions are in the best interest of the Trust, the Trustees
and officers of the Trust shall not be responsible or liable for any act or
omission or for neglect or wrongdoing of them or any officer, agent, employee,
investment adviser or independent contractor of the Trust, but nothing contained
in this Trust Instrument or in the Delaware Act shall protect any Trustee or
officer of the Trust against liability to the Trust or to Shareholders to which
he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
Section 2. Indemnification. (a) Subject to the exceptions and
limitations contained in subsections (b) and (c) below:
(i) every person who is, or has been, a Trustee or an officer,
employee, investment manager and administrator, director, officer or
employee of an investment manager and administrator, investment adviser
or agent of the Trust ("Covered Person") shall be indemnified by the
Trust or the appropriate Series to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts
paid or incurred by him or her in the settlement thereof; and
(ii) as used herein, the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal or other, including appeals), actual or threatened,
and the words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person
who is, or has been: an investment manager and administrator; director, officer
or employee of an investment manager and administrator; an investment adviser or
an agent of the Trust and:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, negligence or
reckless disregard of the duties
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involved in the conduct of his or her office, or (B) not to have acted
in good faith in the reasonable belief that his or her action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful
misfeasance, bad faith, negligence or reckless disregard of the duties
involved in the conduct of his or her office; (A) by the court or other
body approving the settlement; (B) by the vote of at least a majority
of those Trustees who are neither Interested Persons of the Trust nor
are parties to the proceeding based upon a review of readily available
facts (as opposed to a full trial-type inquiry); or (C) by written
opinion of independent legal counsel based upon a review of readily
available facts (as opposed to a full trial-type inquiry).
(c) No indemnification shall be provided hereunder to a Covered Person
who is, or has been, a Trustee or an officer or employee of the Trust, and
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust 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 (B) not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office; (A) by the court
or other body approving the settlement; (B) by the vote of at least a
majority of those Trustees who are neither Interested Persons of the
Trust nor are parties to the proceeding based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or (C) by
written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry).
(d) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, and shall inure to the benefit of the heirs, executors
and administrators of a Covered Person.
(e) To the maximum extent permitted by applicable law, expenses in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in subsection (a) of this
Section may be paid by the Trust or applicable Series from time to time prior to
final disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by him or her to the Trust or
applicable Series if it is ultimately determined that he or she is not entitled
to indemnification under this Section; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are neither Interested
Persons of the Trust
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nor parties to the proceeding, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
(as opposed to a full trial-type inquiry) that there is reason to believe that
such Covered Person will not be disqualified from indemnification under this
Section.
(f) Any repeal or modification of this Article IX by the Shareholders
of the Trust, or adoption or modification of any other provision of the Trust
Instrument or By-laws inconsistent with this Article, shall be prospective only,
to the extent that such repeal or modification would, if applied
retrospectively, adversely affect any limitation on the liability of any Covered
Person or indemnification available to any Covered Person with respect to any
act or omission which occurred prior to such repeal, modification or adoption.
Section 3. Indemnification of Shareholder. If any Shareholder or former
Shareholder of any Series shall be held personally liable solely by reason of
his or her being or having been a Shareholder and not because of his or her acts
or omissions or for some other reason, the Shareholder or former Shareholder (or
his or her heirs, executors, administrators or other legal representatives or in
the case of any entity, its general successor) shall be entitled out of the
assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The Trust,
on behalf of the affected Series, shall, upon request by such Shareholder,
assume the defense of any claim made against such Shareholder for any act or
obligation of the Series and satisfy any judgment thereon from the assets of the
Series.
ARTICLE X
MISCELLANEOUS
Section 1. Trust Not a Partnership. This Trust Instrument creates a
trust and not a partnership. No Trustee shall have any power to bind personally
either the Trust's officers or any Shareholder.
Section 2. Trustee Action; Expert Advice; No Bond or Surety. The
exercise by the Trustees of their powers and discretion hereunder in good faith
and with reasonable care under the circumstances then prevailing shall be
binding upon everyone interested. Subject to the provisions of Article IX, the
Trustees shall not be liable for errors of judgment or mistakes of fact or law.
The Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Trust Instrument, and subject to the provisions of
Article IX, shall not be liable for any act or omission in accordance with such
advice or for failing to follow such advice. The Trustees shall not be required
to give any bond as such, nor any surety if a bond is obtained.
Section 3. Record Dates. The Trustees may fix in advance a date up to
ninety (90) days before the date of any Shareholders' meeting, or the date for
the payment of any dividends or other distributions, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive
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payment of such dividend or other distribution, or to receive any such allotment
of rights, or to exercise such rights in respect of any such change, conversion
or exchange of Shares. Record dates for adjourned meetings of Shareholders shall
be set according to the Trust's By-laws.
Section 4. Termination of the Trust. (a) This Trust shall have
perpetual existence. Subject to a Majority Shareholder Vote of the Trust or of
each Series to be affected, the Trustees may
(i) sell and convey all or substantially all of the assets of the Trust
or any affected Series to another Series or to another entity which is
a a Registered Investment Company, or a series thereof, for adequate
consideration, which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent, of the
Trust or any affected Series, and which may include shares of or
interests in such Series, entity, or series thereof; or
(ii) at any time sell and convert into money all or substantially all
of the assets of the Trust or any affected Series.
Upon making reasonable provision for the payment of all known liabilities of the
Trust or any affected Series in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) ratably among the Shareholders of the Trust or any affected
Series then outstanding; however, the payment to any particular Class of such
Series may be reduced by any fees, expenses or charges allocated to that Class.
Nothing in this Trust Instrument shall preclude the Trustees from distributing
such remaining proceeds or assets so that holders of the Shares of a particular
Class of the Trust or any affected Series receive as their ratable distribution
shares solely of an analogous class, as determined by the Trustees, of a
Registered Investment Company or series thereof.
(b) The Trustees may take any of the actions specified in subsection
(a) (i) and (ii) above without obtaining a Majority Shareholder Vote of the
Trust or any Series if a majority of the Trustees determines that the
continuation of the Trust or Series is not in the best interests of the Trust,
such Series, or their respective Shareholders as a result of factors or events
adversely affecting the ability of the Trust or such Series to conduct its
business and operations in an economically viable manner. Such factors and
events may include the inability of the Trust or a Series to maintain its assets
at an appropriate size, changes in laws or regulations governing the Trust or
the Series or affecting assets of the type in which the Trust or Series invests,
or economic developments or trends having a significant adverse impact on the
business or operations of the Trust or such Series.
(c) Upon completion of the distribution of the remaining proceeds or
assets pursuant to subsection (a), the Trust or affected Series shall terminate
and the Trustees and the Trust shall be discharged of any and all further
liabilities and duties hereunder with respect thereto and the right, title and
interest of all parties therein shall be canceled and discharged. Upon
termination of the Trust, following completion of winding up of its business,
the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
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Section 5. Reorganization. Notwithstanding anything else herein, to
change the Trust's form of organization the Trustees may, without Shareholder
approval, (a) cause the Trust to merge or consolidate with or into one or more
entities, if the surviving or resulting entity is the Trust or another open-end
management investment company under the 1940 Act, or a series thereof, that will
succeed to or assume the Trust's registration under the 1940 Act, or (b) cause
the Trust to incorporate to the extent permitted by law. Any agreement of merger
or consolidation or certificate of merger may be signed by a majority of
Trustees and facsimile signatures conveyed by electronic or telecommunication
means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 5 may effect any amendment to the Trust
Instrument or effect the adoption of a new trust instrument of the Trust if it
is the surviving or resulting trust in the merger or consolidation.
Section 6. Trust Instrument. The original or a copy of this Trust
Instrument and of each amendment hereto or Trust Instrument supplemental shall
be kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by a Trustee or an
officer of the Trust as to the authenticity of the Trust Instrument or any such
amendments or supplements and as to any matters in connection with the Trust.
The masculine gender herein shall include the feminine and neuter genders.
Headings herein are for convenience only and shall not affect the construction
of this Trust Instrument. This Trust Instrument may be executed in any number of
counterparts, each of which shall be deemed an original.
Section 7. Applicable Law. This Trust Instrument and the Trust created
hereunder are governed by and shall be construed and administered according to
the Delaware Act and the applicable laws of the State of Delaware; provided,
however, that there shall not be applicable to the Trust, the Trustees or this
Trust Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware
Code, or (b) any provisions of the laws (statutory or common) of the State of
Delaware (other than the Delaware Act) pertaining to trusts which relate to or
regulate (i) the filing with any court or governmental body or agency of trustee
accounts or schedules of trustee fees and charges, (ii) affirmative requirements
to post bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards of responsibilities or limitations on the acts or powers of
trustees, which are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this Trust
Instrument. The Trust shall be of the type commonly called a Delaware business
trust, and, without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a trust under Delaware law. The
Trust specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by trusts under
the Delaware Act, and the absence of a specific reference herein to any such
power,
20
<PAGE>
privilege or action shall not imply that the Trust may not exercise such power
or privilege or take such actions.
Section 8. Amendments. The Trustees may, without any Shareholder vote,
amend or otherwise supplement this Trust Instrument by making an amendment, a
Trust Instrument supplemental hereto or an amended and restated trust
instrument; provided, that Shareholders shall have the right to vote on any
amendment (a) which would affect the voting rights of Shareholders granted in
Article VI, Section 1, (b) to this Section 8, (c) required to be approved by
Shareholders by law or by the Trust's registration statement(s) filed with the
Commission, or (d) submitted to them by the Trustees in their discretion. Any
amendment submitted to Shareholders which the Trustees determine would affect
the Shareholders of any Series shall be authorized by vote of the Shareholders
of such Series and no vote shall be required of Shareholders of a Series not
affected. Notwithstanding anything else herein, any amendment to Article IX
which would have the effect of reducing the indemnification and other rights
provided thereby to Trustees, officers, employees, and agents of the Trust or to
Shareholders or former Shareholders, and any repeal or amendment of this
sentence shall each require the affirmative vote of the holders of two-thirds of
the Outstanding Shares of the Trust entitled to vote thereon.
Section 9. Fiscal Year. The fiscal year of the Trust shall end on a
specified date as set forth in the By-laws. The Trustees may change the fiscal
year of the Trust or any Series without Shareholder approval.
Section 10. Severability. The provisions of this Trust Instrument are
severable. If the Trustees determine, with the advice of counsel, that any
provision hereof conflicts with the 1940 Act, the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision hereof shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach to such provision only in such jurisdiction and shall not affect such
provision in any other jurisdiction or any other provision of this Trust
Instrument.
21
<PAGE>
Schedule A
Series of the Trust
PaineWebber S&P 500 Index Fund
Classes of Shares of Series
An unlimited number of shares of beneficial interest have been established by
the Board as Class A shares, Class C shares and Class Y shares of the above
Series. Each of the Class A shares, Class C shares and Class Y shares of the
Series represents interests in the assets of only that Series and has the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of shares, except as provided in the Trust's Trust Instrument.
22
<PAGE>
IN WITNESS WHEREOF, the undersigned, being all the Trustees of the
Trust, have executed this Amended and Restated Trust Instrument as of the date
and year first above written.
<TABLE>
<S> <C>
/s/ Margo N. Alexander /s/ Meyer Feldberg
- ---------------------------- ----------------------------
Margo N. Alexander Meyer Feldberg
/s/ E. Garrett Bewkes, Jr. /s/ George W. Gowen
- ---------------------------- ----------------------------
E. Garrett Bewkes, Jr. George W. Gowen
/s/ Richard Q. Armstrong /s/ Frederic V. Malek
- ---------------------------- ----------------------------
Richard Q. Armstrong Frederic V. Malek
/s/ Richard R. Burt /s/ Carl W. Schafer
- ---------------------------- ----------------------------
Richard R. Burt Carl W. Schafer
/s/ Mary C. Farrell /s/ Brian M. Storms
- ---------------------------- ----------------------------
Mary C. Farrell Brian M. Storms
</TABLE>
<PAGE>
Exhibit No. 2
AMENDED AND RESTATED BY-LAWS
OF
PAINEWEBBER INDEX TRUST
May 13, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I PRINCIPAL OFFICE AND SEAL.........................................1
Section 1. Principal Office........................................1
Section 2. Seal....................................................1
ARTICLE II MEETINGS OF TRUSTEES.............................................1
Section 1. Action by Trustees......................................1
Section 2. Compensation of Trustees................................1
Section 3. Retirement of Trustees..................................1
ARTICLE III COMMITTEES......................................................2
Section 1. Establishment...........................................2
Section 2. Proceedings; Quorum; Action.............................2
Section 3. Compensation of Committee Members.......................2
ARTICLE IV OFFICERS.........................................................2
Section 1. General.................................................2
Section 2. Election................................................2
Section 3. Vacancies and Newly Created Offices.....................2
Section 4. Removal and Resignation.................................2
Section 5. Chairman................................................3
Section 6. President...............................................3
Section 7. Vice President(s).......................................3
Section 8. Treasurer and Assistant Treasurer(s)....................3
Section 9. Secretary and Assistant Secretaries.....................4
Section 10. Compensation of Officers.................................4
Section 11. Surety Bond..............................................4
ARTICLE V MEETINGS OF SHAREHOLDERS..........................................4
Section 1. No Annual Meetings......................................4
Section 2. Special Meetings........................................4
Section 3. Notice of Meetings; Waiver..............................5
Section 4. Adjourned Meetings......................................5
Section 5. Validity of Proxies.....................................5
Section 6. Record Date.............................................6
Section 7. Action Without a Meeting................................6
ARTICLE VI SHARES OF BENEFICIAL INTEREST....................................6
Section 1. No Share Certificates...................................6
Section 2. Transfer of Shares......................................6
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII CUSTODY OF SECURITIES...........................................6
Section 1. Employment of a Custodian...............................6
Section 2. Termination of Custodian Agreement......................6
Section 3. Other Arrangements......................................7
ARTICLE VIII FISCAL YEAR AND ACCOUNTANT.....................................7
Section 1. Fiscal Year.............................................7
Section 2. Accountant..............................................7
ARTICLE IX AMENDMENTS.......................................................7
Section 1. General.................................................7
Section 2. By Shareholders Only....................................7
ARTICLE X NET ASSET VALUE...................................................7
ARTICLE XI MISCELLANEOUS....................................................8
Section 1. Inspection of Books.....................................8
Section 2. Severability............................................8
Section 3. Headings................................................8
</TABLE>
ii
<PAGE>
BY-LAWS
OF
PAINEWEBBER INDEX TRUST
These By-laws of PaineWebber Index Trust (the "Trust"), a Delaware
business trust, are subject to the Trust Instrument of the Trust dated as of May
27, 1997, as amended and restated as of May 13, 1999, and as from time to time
further amended, supplemented or restated (the "Trust Instrument"). Capitalized
terms used herein have the same meanings as in the Trust Instrument.
ARTICLE I
---------
PRINCIPAL OFFICE AND SEAL
-------------------------
Section 1. Principal Office. The principal office of the Trust shall be
located in New York, New York, or such other location as the Trustees determine.
The Trust may establish and maintain other offices and places of business as the
Trustees determine.
Section 2. Seal. The Trustees may adopt a seal for the Trust in such
form and with such inscription as the Trustees determine. Any Trustee or officer
of the Trust shall have authority to affix the seal to any document.
ARTICLE II
----------
MEETINGS OF TRUSTEES
--------------------
Section 1. Action by Trustees. Trustees may take actions at meetings
held at such places and times as the Trustees may determine, or without
meetings, all as provided in Article II, Section 7, of the Trust Instrument.
Section 2. Compensation of Trustees. Each Trustee who is neither an
employee of an investment adviser of the Trust or any Series nor an employee of
an entity affiliated with the investment adviser may receive such compensation
from the Trust for services as the Trustees may determine. Each Trustee may
receive such reimbursement for expenses as the Trustees may determine.
Section 3. Retirement of Trustees. Each Trustee who has attained the
age of seventy-two (72) years as of December 31 of any year shall retire from
service as a Trustee on such date unless that retirement would cause the Trust
to be required to call a meeting of Shareholders to fill the resulting vacancy
on the Board of Trustees; provided, however, that this requirement may be waived
on an annual basis for individual Trustees by resolution of the Board of
Trustees. Such waiver may include a period ending at the close of business on
December 31 of the following year. Notwithstanding anything in this Section, a
Trustee may retire at any time as provided for in the Trust Instrument.
<PAGE>
ARTICLE III
-----------
COMMITTEES
----------
Section 1. Establishment. The Trustees may designate one or more
committees of the Trustees, which may include an Executive Committee, a
Nominating Committee, and an Audit Committee. The Trustees shall determine the
number of members of each committee and its powers and shall appoint its members
and its chair. Each committee member shall serve at the pleasure of the
Trustees. The Trustees may abolish any committee at any time. Each committee
shall maintain records of its meetings and report its actions to the Trustees.
The Trustees may rescind any action of any committee, but such rescission shall
not have retroactive effect. The Trustees may delegate to any committee any of
its powers, subject to the limitations of applicable law.
Section 2. Proceedings; Quorum; Action. Each committee may adopt such
rules governing its proceedings, quorum and manner of acting as it shall deem
proper and desirable. In the absence of such rules, a majority of any committee
shall constitute a quorum, and a committee shall act by the vote of a majority
of a quorum.
Section 3. Compensation of Committee Members. Each committee member who
is not an "interested person" of the Trust, as defined in the 1940 Act
("Disinterested Trustees") may receive such compensation from the Trust for
services as the Trustees may determine. Each Trustee may receive such
reimbursement for expenses as the Trustees may determine.
ARTICLE IV
----------
OFFICERS
--------
Section 1. General. The officers of the Trust shall be a Chairman, a
President, one or more Vice Presidents, a Treasurer, and a Secretary, and may
include one or more Assistant Treasurers or Assistant Secretaries and such other
officers ("Other Officers") as the Trustees may determine.
Section 2. Election. Tenure and Qualifications of Officers. The
Trustees shall elect the officers of the Trust. Each officer elected by the
Trustees shall hold office until his or her successor shall have been elected
and qualified or until his or her earlier death, inability to serve, or
resignation. Any person may hold one or more offices, except that the Chairman
and the Secretary may not be the same individual. A person who holds more than
one office in the Trust may not act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer. No officer other than the
Chairman need be a Trustee or Shareholder.
Section 3. Vacancies and Newly Created Offices. Whenever a vacancy
shall occur in any office or if any new office is created, the Trustees may fill
such vacancy or new office.
Section 4. Removal and Resignation. Officers serve at the pleasure of
the Trustees and may be removed at any time with or without cause. The Trustees
may delegate this power to the Chairman or President with respect to any Other
Officer. Such removal shall be without
2
<PAGE>
prejudice to the contract rights, if any, of the person so removed. Any officer
may resign from office at any time by delivering a written resignation to the
Trustees, Chairman, or the President. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Section 5. Chairman. The Chairman shall preside at all meetings of the
Trustees and shall in general exercise the powers and perform the duties of the
Chairman of the Trustees. The Chairman shall exercise such other powers and
perform such other duties as the Trustees may assign to the Chairman.
Section 6. President. The President shall be the chief executive
officer of the Trust. The President shall preside at any Shareholders' meetings.
Subject to the direction of the Trustees, the President shall have general
charge, supervision and control over the Trust's business affairs and shall be
responsible for the management thereof and the execution of policies established
by the Trustees. Except as the Trustees may otherwise order, the President shall
have the power to grant, issue, execute or sign powers of attorney, proxies,
agreements or other documents. The President also shall have the power to employ
attorneys, accountants and other advisers and agents for the Trust, except as
otherwise required by the 1940 Act. At the request or in the absence or
disability of the Chairman, the President shall perform all the duties of the
Chairman and, when so acting, shall have all the powers of the Chairman.
Section 7. Vice President(s). The Vice President(s) shall have such
powers and perform such duties as the Trustees or the Chairman may determine. At
the request or in the absence or disability of the President, the Vice President
(or, if there are two or more Vice Presidents, then the senior of the Vice
Presidents present and able to act) shall perform all the duties of the
President and, when so acting, shall have all the powers of the President. The
Trustees may designate a Vice President as the principal financial officer of
the Trust or to serve one or more other functions. If a Vice President is
designated as principal financial officer of the Trust, he or she shall have
general charge of the finances and books of the Trust and shall report to the
Trustees annually regarding the financial condition of each Series as soon as
possible after the close of such Series's fiscal year. The Trustees also may
designate one of the Vice Presidents as Executive Vice President.
Section 8. Treasurer and Assistant Treasurer(s). The Treasurer may be
designated as the principal financial officer or as the principal accounting
officer of the Trust. If designated as principal financial officer, the
Treasurer shall have general charge of the finances and books of the Trust, and
shall report to the Trustees annually regarding the financial condition of each
Series as soon as possible after the close of such Series' fiscal year. The
Treasurer shall be responsible for the delivery of all funds and securities of
the Trust to such company as the Trustees shall retain as Custodian. The
Treasurer shall furnish such reports concerning the financial condition of the
Trust as the Trustees may request. The Treasurer shall perform all acts
incidental to the office of Treasurer, subject to the Trustees' supervision, and
shall perform such additional duties as the Trustees may designate.
3
<PAGE>
Any Assistant Treasurer may perform such duties of the Treasurer as the
Trustees or the Treasurer may assign, and, in the absence of the Treasurer, may
perform all the duties of the Treasurer.
Section 9. Secretary and Assistant Secretaries. The Secretary shall
record all votes and proceedings of the meetings of Trustees and Shareholders in
books to be kept for that purpose. The Secretary shall be responsible for giving
and serving notices of the Trust. The Secretary shall have custody of any seal
of the Trust and shall be responsible for the records of the Trust, including
the Share register and such other books and documents as may be required by the
Trustees or by law. The Secretary shall perform all acts incidental to the
office of Secretary, subject to the supervision of the Trustees, and shall
perform such additional duties as the Trustees may designate.
Any Assistant Secretary may perform such duties of the Secretary as the
Trustees or the Secretary may assign, and, in the absence of the Secretary, may
perform all the duties of the Secretary.
Section 10. Compensation of Officers. Each officer may receive such
compensation from the Trust for services and reimbursement for expenses as the
Trustees may determine.
Section 11. Surety Bond. The Trustees may require any officer or agent
of the Trust to execute a bond (including, without limitation, any bond required
by the 1940 Act and the rules and regulations of the Securities and Exchange
Commission ("Commission")) to the Trust in such sum and with such surety or
sureties as the Trustees may determine, conditioned upon the faithful
performance of his or her duties to the Trust, including responsibility for
negligence and for the accounting of any of the Trust's property, funds or
securities that may come into his or her hands.
ARTICLE V
---------
MEETINGS OF SHAREHOLDERS
------------------------
Section 1. No Annual Meetings. There shall be no annual Shareholders'
meetings, unless required by law.
Section 2. Special Meetings. The Secretary shall call a special meeting
of Shareholders of any Series or Class whenever ordered by the Trustees.
The Secretary also shall call a special meeting of Shareholders of any
Series or Class upon the written request of Shareholders owning at least ten
percent of the Outstanding Shares of such Series or Class entitled to vote at
such meeting; provided, that (1) such request shall state the purposes of such
meeting and the matters proposed to be acted on, and (2) the Shareholders
requesting such meeting shall have paid to the Trust the reasonably estimated
cost of preparing and mailing the notice thereof, which the Secretary shall
determine and specify to such Shareholders. If the Secretary fails for more than
thirty days to call a special meeting when required to do so, the Trustees or
the Shareholders requesting such a meeting may, in the name of the Secretary,
call the meeting by giving the required notice. The Secretary shall not call a
4
<PAGE>
special meeting upon the request of Shareholders of any Series or Class to
consider any matter that is substantially the same as a matter voted upon at any
special meeting of Shareholders of such Series or Class held during the
preceding twelve months, unless requested by the holders of a majority of the
Outstanding Shares of such Series or Class entitled to be voted at such meeting.
A special meeting of Shareholders of any Series or Class shall be held
at such time and place as is determined by the Trustees and stated in the notice
of that meeting.
Section 3. Notice of Meetings; Waiver. The Secretary shall call a
special meeting of Shareholders by giving written notice of the place, date,
time, and purposes of that meeting at least fifteen days before the date of such
meeting. The Secretary may deliver or mail, postage prepaid, the written notice
of any meeting to each Shareholder entitled to vote at such meeting. If mailed,
notice shall be deemed to be given when deposited in the United States mail
directed to the Shareholder at his or her address as it appears on the records
of the Trust.
Section 4. Adjourned Meetings. A Shareholders' meeting may be adjourned
one or more times for any reason, including the failure of a quorum to attend
the meeting. No notice of adjournment of a meeting to another time or place need
be given to Shareholders if such time and place are announced at the meeting at
which the adjournment is taken or reasonable notice is given to Persons present
at the meeting, and if the adjourned meeting is held within a reasonable time
after the date set for the original meeting. Determination of reasonable notice
and a reasonable time for purposes of the foregoing sentence is to be made by
the officers of the Trust. Any business that might have been transacted at the
original meeting may be transacted at any adjourned meeting. If after the
adjournment a new record date is fixed for the adjourned meeting, the Secretary
shall give notice of the adjourned meeting to Shareholders of record entitled to
vote at such meeting. Any irregularities in the notice of any meeting or the
nonreceipt of any such notice by any of the Shareholders shall not invalidate
any action otherwise properly taken at any such meeting.
Section 5. Validity of Proxies. Subject to the provisions of the Trust
Instrument, Shareholders entitled to vote may vote either in person or by proxy;
provided, that either (1) the Shareholder or his or her duly authorized attorney
has signed and dated a written instrument authorizing such proxy to act, or (2)
the Trustees adopt by resolution an electronic, telephonic, computerized or
other alternative to execution of a written instrument authorizing the proxy to
act, but if a proposal by anyone other than the officers or Trustees is
submitted to a vote of the Shareholders of any Series or Class, or if there is a
proxy contest or proxy solicitation or proposal in opposition to any proposal by
the officers or Trustees, Shares may be voted only in person or by written
proxy. Unless the proxy provides otherwise, it shall not be valid for more than
eleven months before the date of the meeting. All proxies shall be delivered to
the Secretary or other person responsible for recording the proceedings before
being voted. A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by one of them unless at or prior to exercise
of such proxy the Trust receives a specific written notice to the contrary from
any one of them. Unless otherwise specifically limited by their terms, proxies
shall entitle the Shareholder to vote at any adjournment of a Shareholders'
meeting. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to
5
<PAGE>
its exercise, and the burden of proving invalidity shall rest on the challenger.
At every meeting of Shareholders, unless the voting is conducted by inspectors,
the chairman of the meeting shall decide all questions concerning the
qualifications of voters, the validity of proxies, and the acceptance or
rejection of votes. Subject to the provisions of the Delaware Business Trust
Act, the Trust Instrument, or these By-laws, the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations thereunder
shall govern all matters concerning the giving, voting or validity of proxies,
as if the Trust were a Delaware corporation and the Shareholders were
shareholders of a Delaware corporation.
Section 6. Record Date. The Trustees may fix in advance a date up to
ninety days before the date of any Shareholders' meeting as a record date for
the determination of the Shareholders entitled to notice of, and to vote at, any
such meeting. The Shareholders of record entitled to vote at a Shareholders'
meeting shall be deemed the Shareholders of record at any meeting reconvened
after one or more adjournments, unless the Trustees have fixed a new record
date.
Section 7. Action Without a Meeting. Shareholders may take any action
without a meeting if a majority (or such greater amount as may be required by
law) of the Outstanding Shares entitled to vote on the matter consent to the
action in writing and such written consents are filed with the records of
Shareholders' meetings. Such written consent shall be treated for all purposes
as a vote at a meeting of the Shareholders.
ARTICLE VI
----------
SHARES OF BENEFICIAL INTEREST
-----------------------------
Section 1. No Share Certificates. Neither the Trust nor any Series or
Class shall issue certificates certifying the ownership of Shares, unless the
Trustees may otherwise specifically authorize such certificates.
Section 2. Transfer of Shares. Shares shall be transferable only by a
transfer recorded on the books of the Trust by the Shareholder of record in
person or by his or her duly authorized attorney or legal representative. Shares
may be freely transferred and the Trustees may, from time to time, adopt rules
and regulations regarding the method of transfer of such Shares.
ARTICLE VII
-----------
CUSTODY OF SECURITIES
---------------------
Section 1. Employment of a Custodian. The Trust shall at all times
place and maintain all cash, securities and other assets of the Trust and of
each Series in the custody of a custodian meeting the requirements set forth in
Article VII, Section 4 of the Trust Instrument ("Custodian"). The Custodian
shall be appointed from time to time by the Board of Trustees, who shall
determine its remuneration
Section 2. Termination of Custodian Agreement. Upon termination of any
Custodian Agreement or the inability of the Custodian to continue to serve as
custodian, in either case with respect to the Trust or any Series, the Board of
Trustees shall (a) use its best efforts to
6
<PAGE>
obtain a successor Custodian; and (b) require that the cash, securities and
other assets owned by the Trust or any Series be delivered directly to the
successor Custodian.
Section 3. Other Arrangements. The Trust may make such other
arrangements for the custody of its assets (including deposit arrangements) as
may be required by any applicable law, rule or regulation.
ARTICLE VIII
------------
FISCAL YEAR AND ACCOUNTANT
--------------------------
Section 1. Fiscal Year. The fiscal year of the Trust shall end on May
31 or such other date with respect to the Trust or a Series of the Trust as the
Trustees may hereafter determine by resolution.
Section 2. Accountant. The Trust shall employ independent certified
public accountants as its Accountant to examine the accounts of the Trust and to
sign and certify financial statements filed by the Trust. The Accountant's
certificates and reports shall be addressed both to the Trustees and to the
Shareholders. A majority of the Disinterested Trustees shall select the
Accountant, acting upon the recommendation of the Audit Committee. The
employment of the Accountant shall be conditioned upon the right of the Trust to
terminate such employment without any penalty by vote of a Majority Shareholder
Vote at any Shareholders' meeting called for that purpose.
ARTICLE IX
----------
AMENDMENTS
----------
Section 1. General. Except as provided in Section 2 of this Article,
these By-laws may be amended by the Trustees, or by the affirmative vote of a
majority of the Outstanding Shares entitled to vote at any meeting.
Section 2. By Shareholders Only. After the issue of any Shares, this
Article may only be amended by the affirmative vote of the holders of the lesser
of (a) at least two-thirds of the Outstanding Shares present and entitled to
vote at any meeting, or (b) at least fifty percent of the Outstanding Shares.
ARTICLE X
---------
NET ASSET VALUE
---------------
The term "Net Asset Value" of any Series shall mean that amount by
which the assets belonging to that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Net Asset Value per Share
shall be determined separately for each Series and each Class and shall be
determined on such days and at such times as the Trustees may determine. The
Trustees shall make such determination with respect to securities for which
market quotations are readily available, at the market value of such securities,
and with respect to other securities and assets, at the fair value as determined
in good faith by the Trustees; provided, however, that the Trustees, without
Shareholder approval, may alter the method of appraising
7
<PAGE>
portfolio securities insofar as permitted under the 1940 Act and the rules,
regulations and interpretations thereof promulgated or issued by the SEC or
insofar as permitted by any order of the SEC applicable to the Series or to the
Class. The Trustees may delegate any of their powers and duties under this
Article X with respect to appraisal of assets and liabilities. At any time the
Trustees may cause the Net Asset Value per Share last determined to be
determined again in a similar manner and may fix the time when such redetermined
values shall become effective.
ARTICLE XI
----------
MISCELLANEOUS
-------------
Section 1. Inspection of Books. The Board of Trustees shall from time
to time determine whether and to what extent, and at what times and places, and
under what conditions the accounts and books of the Trust or any Series or Class
shall be open to the inspection of Shareholders. No Shareholder shall have any
right to inspect any account or book or document of the Trust except as
conferred by law or otherwise by the Board of Trustees or by resolution of
Shareholders.
Section 2. Severability. The provisions of these By-laws are severable.
If the Board of Trustees determine, with the advice of counsel, that any
provision hereof conflicts with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of these By-laws; provided, however, that such determination shall not
affect any of the remaining provisions of these By-laws or render invalid or
improper any action taken or omitted prior to such determination. If any
provision hereof shall be held invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall attach only to such provision only in
such jurisdiction and shall not affect any other provision of these Bylaws
Section 3. Headings. Headings are placed in these By-laws for
convenience of reference only and in case of any conflict, the text of these
By-laws rather than the headings shall control.
8
<PAGE>
Exhibit No. 5(a)
PAINEWEBBER INDEX TRUST
DISTRIBUTION CONTRACT
CLASS A SHARES
CONTRACT made as of October 1, 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.
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<PAGE>
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 enter into an exclusive dealer agreement with
PaineWebber or 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
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<PAGE>
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 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
-5-
<PAGE>
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 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.
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<PAGE>
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 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.
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<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.
<TABLE>
<S> <C>
ATTEST: PAINEWEBBER INDEX TRUST
/s/ Evelyn DeSimone By: /s/ Dianne E. O'Donnell
--------------------------- ---------------------------
ATTEST: MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
/s/ Evelyn DeSimone By: /s/ Victoria E. Schonfeld
------------------------- ---------------------------
</TABLE>
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<PAGE>
Exhibit No. 5(b)
PAINEWEBBER INDEX TRUST
DISTRIBUTION CONTRACT
CLASS C SHARES
CONTRACT made as of October 1, 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.
<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
Registration 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
-4-
<PAGE>
other 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
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<PAGE>
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 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.
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<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
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<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.
<TABLE>
<S> <C>
ATTEST: PAINEWEBBER INDEX TRUST
/s/ Evelyn DeSimone By: /s/ Dianne E. O'Donnell
------------------------------- ---------------------------
ATTEST: MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
/s/ Evelyn DeSimone By: /s/ Victoria E. Schonfeld
------------------------------- --------------------------
</TABLE>
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<PAGE>
Exhibit No. 5(c)
PAINEWEBBER INDEX TRUST
DISTRIBUTION CONTRACT
CLASS Y SHARES
CONTRACT made as of October 1, 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
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<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
-4-
<PAGE>
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
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
-5-
<PAGE>
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.
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
-6-
<PAGE>
securities of the Class Y 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 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.
<TABLE>
<S> <C>
ATTEST: PAINEWEBBER INDEX TRUST
/s/ Evelyn DeSimone By: /s/ Dianne E. O'Donnell
---------------------------- -------------------------------
ATTEST: MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
/s/ Evelyn DeSimone By: /s/ Victoria E. Schonfeld
---------------------------- -------------------------------
</TABLE>
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<PAGE>
Exhibit No. 5(d)
EXCLUSIVE DEALER AGREEMENT
CLASS A SHARES OF PAINEWEBBER INDEX TRUST
AGREEMENT made as of October 1, 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
-2-
<PAGE>
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) 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.
-3-
<PAGE>
PaineWebber 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
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
(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.
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.
<TABLE>
<S> <C>
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: /s/ Evelyn DeSimone By: /s/ Dianne E. O'Donnell
----------------------------- ----------------------------
PAINEWEBBER INCORPORATED
Attest: /s/ Evelyn DeSimone By: /s/ Victoria E. Schonfeld
----------------------------- ----------------------------
</TABLE>
-8-
<PAGE>
Exhibit No. 5(e)
EXCLUSIVE DEALER AGREEMENT
CLASS C SHARES OF PAINEWEBBER INDEX TRUST
AGREEMENT made as of October 1, 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
2
<PAGE>
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 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
5
<PAGE>
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 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.
<TABLE>
<S> <C>
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: /s/ Evelyn DeSimone By: /s/ Dianne E. O'Donnell
--------------------- ---------------------------
PAINEWEBBER INCORPORATED
Attest: /s/ Evelyn DeSimone By: /s/ Victoria E. Schonfeld
-------------------- ----------------------------
</TABLE>
7
<PAGE>
Exhibit No. 5(f)
EXCLUSIVE DEALER AGREEMENT
CLASS Y SHARES OF PAINEWEBBER INDEX TRUST
AGREEMENT made as October 1, 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 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 of Class Y Shares directly through the Fund's transfer agent in
the manner set forth in the
<PAGE>
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
-2-
<PAGE>
Shares 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
-3-
<PAGE>
determines appropriate. PaineWebber agrees to submit all sales and advertising
materials developed by it 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
-4-
<PAGE>
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 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
-5-
<PAGE>
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.
(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.
<TABLE>
<S> <C>
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: /s/ Evelyn DeSimone By: /s/ Dianne E. O'Donnell
--------------------- ---------------------------
PAINEWEBBER INCORPORATED
Attest: /s/ Evelyn DeSimone By: /s/ Victoria E. Schonfeld
--------------------- ---------------------------
</TABLE>
-6-
<PAGE>
Exhibit No. 9
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
Telephone 202-778-9000
Facsimile 202-778-9100
www.kl.com
September 29, 1999
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
that may be issued during the time that Post-Effective Amendment No. 4 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) of 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.
<PAGE>
PaineWebber Index Trust
September 29, 1999
Page 2
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>
EXHIBIT 10
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 on PaineWebber
S&P 500 Index Fund dated July 22, 1999, in this Registration Statement (Form
N-1A No. 333-27917) of PaineWebber Index Trust.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
September 27, 1999
<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 ("Fund") 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 Fund has adopted a Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act with respect to the above-referenced Series and desires
to replace it with this amended Plan of Distribution ("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 Fund's board of trustees ("Board") and have
Class A shares established; and
WHEREAS, the Fund 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 Fund 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.
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 Class A 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
<PAGE>
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 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 Board
members of the Fund who are not "interested persons" of the Fund and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related thereto ("Independent Board Members"), cast in person at a
meeting (or meetings) called for the purpose of voting on such approval; and
until the Board members 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 Paragraph 3 (if applicable) and
Paragraph 4, this Plan shall take effect and continue in full force and effect
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.
For purposes of this Plan, "service activities" shall mean
activities in connection with the provision by Mitchell Hutchins or PaineWebber
of personal, continuing services to investors in the Class A shares of the
Series; provided, however, that if the National Association of Securities
Dealers, Inc. ("NASD") adopts a definition of "service fee" for purposes of
Section 2830(b)(9) of the NASD Conduct Rules that differs from the definition of
"service activities" hereunder, or if the NASD adopts a related definition
intended to define the same concept, the definition of "service activities" in
this Paragraph shall be automatically amended, without further action of the
parties, to conform to such NASD definition. 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 A shares of
any Series at any time by vote of the Board, by vote of a majority of the
Independent Board Members, or by vote of a majority of the outstanding voting
securities of the Class A shares of that Series.
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<PAGE>
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 majority of the outstanding voting securities of the Class A
shares of the affected Series and no material amendment to the Plan shall be
made unless approved in the manner provided for initial approval in Paragraph 4
hereof.
9. The amount of the service fees payable by the 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 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 service-related expenses
incurred by Mitchell Hutchins on behalf of the Class A shares 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
Board members who are not interested persons of the Fund shall be committed to
the discretion of the Board members who are not interested persons of the Fund.
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 Fund 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 Board members of the Fund and the shareholders of each Series
shall not be liable for any obligations of the Fund 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 Fund
or such Series in settlement of such right or claim, and not to such Board
members or shareholders.
3
<PAGE>
IN WITNESS WHEREOF, the Fund has executed this Amended Plan of
Distribution on the day and year set forth below in New York, New York.
Date: October 1, 1998
<TABLE>
<S> <C>
ATTEST: PAINEWEBBER INDEX TRUST
/s/ Evelyn DeSimone By: /s/ Dianne E. O'Donnell
- ------------------------------- --------------------------------
</TABLE>
4
<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 ("Fund") 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 Fund has adopted a Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act with respect to the above-referenced Series and desires
to replace it with this amended Plan of Distribution ("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 Fund's board of trustees ("Board") and have
Class C shares established; and
WHEREAS, the Fund 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 Fund hereby adopts this Plan with respect to the
Class C shares of each Series in accordance with Rule 12b-1 under the 1940 Act.
1. A. The following Series of the Fund 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 rates (on an annualized basis)
set forth below of the average daily net assets of the Series' Class C shares.
Such fees 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 Fund on behalf of such Series. All such
<PAGE>
Distribution Fee Addenda shall provide that they are subject to all terms and
conditions of this Plan.
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 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 has first been approved by 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 Board
members of the Fund who are not "interested persons" of the Fund and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related thereto ("Independent Board Members"), cast in person at a
meeting (or meetings) called for the purpose of voting on such approval; and
until the Board members 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 Paragraph 3 (if applicable) and
Paragraph 4, this Plan shall take effect and continue in full force and effect
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
2
<PAGE>
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 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 in connection with the
provision by Mitchell Hutchins or PaineWebber of personal, continuing services
to investors in the Class C shares of the Series; provided, however, that if the
National Association of Securities Dealers, Inc. ("NASD") adopts a definition of
"service fee" for purposes of Section 2830(b)(9) of the NASD Conduct Rules that
differs from the definition of "service activities" hereunder, or if the NASD
adopts a related definition intended to define the same concept, the definition
of "service activities" in this Paragraph shall be automatically amended,
without further action of the parties, to conform to such NASD definition.
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 Board Members, or by vote of a majority of the outstanding voting
securities of the Class B 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 Paragraph 1B hereof or the
amount of service fees provided for in Paragraph 1C hereof unless such amendment
is approved by a majority of the outstanding voting securities of the Class C
shares of the affected Series and no material amendment to the Plan shall be
made unless approved in the manner provided for initial approval in Paragraph 4
hereof.
9. The amount of the distribution and service fees payable by the Series
to Mitchell Hutchins under Paragraphs 1A, 1B and 1C 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 Paragraphs 1A, 1B
and 1C 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 1A, 1B and 1B 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.
3
<PAGE>
10. While this Plan is in effect, the selection and nomination of the
Board members who are not interested persons of the Fund shall be committed to
the discretion of the Board members who are not interested persons of the Fund.
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 Fund 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 Board members of the Fund and the shareholders of each Series
shall not be liable for any obligations of the Fund 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 Fund
or such Series in settlement of such right or claim, and not to such Board
members or shareholders.
IN WITNESS WHEREOF, the Fund has executed this Amended Plan of
Distribution on the day and year set forth below in New York, New York.
Date: October 1, 1998
<TABLE>
<S> <C>
ATTEST: PAINEWEBBER INDEX TRUST
/s/ Evelyn DeSimone By: /s/ Dianne E. O'Donnell
- ------------------------------ ----------------------------
</TABLE>
4
