<PAGE>
PaineWebber S&P 500 Index Fund Annual Report
Performance at a Glance
================================================================================
Comparison of the change of a $10,000 investment in PaineWebber S&P 500 Index
Fund (Y) and the S&P 500 Index, for the period from commencement on 12/31/97
through 5/31/99
[GRAPH]
The graph depicts the performance of PaineWebber S&P 500 Index Fund (Y) versus
the S&P 500 Index. It is important to note PaineWebber S&P 500 Index Fund is a
professionally managed mutual fund while the Index is not available for
investment and is unmanaged. The comparison is shown for illustrative purposes
only.
Past performance is no guarantee of future performance.
The performance of the other classes will vary from the performance of the
class shown because of differences in sales charges and fees paid by
shareholders investing in different classes. Class Y shares are offered to a
limited group of eligible investors and do not bear sales charges or ongoing
12b-1 fees.
Average Annual Total Returns, Periods Ended 5/31/99
1 Year Life
------ ------
Before Deducting Class A* -- 32.23%
Maximum Sales Charge Class C+ -- 31.77%
Class Y++ 20.30% 24.17%
After Deducting Class A* -- 28.92%
Maximum Sales Charge Class C+ -- 30.77%
Class Y++ 20.30% 24.17%
- ----------
o Life: since commencement of issuance on December 31, 1997 for Class Y
shares, October 2, 1998 for Class A and October 7, 1998 for Class C shares.
Class A and Class C returns represent cumulative total returns since these
share classes have not been in existence for a full year.
* Maximum sales charge for Class A shares is 2.5% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
+ Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1
distribution and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds, as well as the
trustee of the PaineWebber 401(k) Plus Plan (formerly known as PaineWebber
Savings Investment Plan). Class Y shares do not bear initial or contingent
deferred sales charges or ongoing distribution and service fees.
The investment return and the principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
1
<PAGE>
Annual Report
July 15, 1999
Dear Shareholder,
We are pleased to present you with the annual report for the PaineWebber S&P
500 Index Fund (the "Fund"), for the fiscal year ended May 31, 1999.
PaineWebber
S&P 500 Index Fund
FUND PROFILE
[arrow up]
Goal:
Replicate the total return of the S&P 500 Index before fees and expenses
[arrow up]
Portfolio Manager:
T. Kirkham Barneby, Mitchell Hutchins Asset Management Inc.
[arrow up]
Total Net Assets:
$49.2 million as of May 31, 1999
[arrow up]
Dividend Payments:
Annually
Market Review
================================================================================
Russia's currency crisis in August 1998 brought the stock market down sharply
as investors around the world fled stocks and sought the safety of U.S.
Treasury securities. Only a narrow slice of the stock market retained favor
with investors--the largest of the large-capitalization companies, which were
perceived as strong enough financially to weather the crisis. Almost all other
stocks suffered declines: mid caps, small caps and value stocks all trailed
the large-cap growth stocks. Prices began to recover in the second half of the
fiscal year, but endured considerable volatility along the way. For the fiscal
year ended May 31, 1999, the S&P 500 Index gained 21.03%.
The dominance of growth stocks that characterized 1998 reversed dramatically
beginning in April 1999. Value stock prices climbed steeply and growth stocks
fell sharply between mid-April and mid-May. Much of the resurgence in value
stocks, however, occurred among basic-industry, commodity-driven companies
such as aluminum, steel and copper producers. Earnings increases at such
companies depend on sustained inflation, which we do not foresee except for
oil prices. Nonetheless, investors seem interested in venturing beyond the
"nifty 20" stocks that have driven the market for the past 18 months. We look
for the recovery of value stocks to broaden into sectors with more sustainable
earnings as the second half of the year unfolds.
Outlook
Our 1999 expectations call for economic growth (real gross domestic product)
of about 3.5%, inflation in the 2.0-2.5% range and corporate earnings growth
of 7-9%. Our outlook is more cautious over the near term, however. While a
correction may occur at any time, we believe the general trend of equity
prices will be positive--continual economic growth is likely to produce
positive profit growth, albeit at a slower pace.
Portfolio Review
================================================================================
Performance
The Fund's total return consists of the change in net asset value with
dividends reinvested. For the fiscal year ended May 31, 1999, Class Y shares
gained 20.30%. Class A shares commenced issuance on October 2, 1998; from
commencement through May 31, 1999, Class A shares gained 32.23%. Class C
shares commenced issuance on October 7, 1998; from commencement through May
31, 1999, Class C shares gained 31.77%.
2
<PAGE>
PaineWebber S&P 500 Index Fund Annual Report
The Fund's total return may be lower for shareowners who purchased or redeemed
Fund shares during the period. After deducting the maximum applicable sales
charges, Class A shares gained 28.92% and Class C shares gained 30.77%. Class
Y shares are not subject to sales charges.
Portfolio Highlights
The Fund's objective is to replicate the total return of the Index before fees
and expenses. To achieve this objective the Fund invests substantially all of
its assets in common stocks issued by companies in the Index and in related
instruments that simulate investment in the Index.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued
support and welcome any comments or questions you may have. For a Quarterly
Review on PaineWebber S&P 500 Index Fund or another fund in the PaineWebber
Family of Funds,(1) please contact your Financial Advisor.
Sincerely,
/s/ Margo Alexander /s/ Brian M. Storms
- ------------------- -------------------
MARGO ALEXANDER BRIAN M. STORMS
Chairman and Chief Executive Officer President and Chief Operating Officer
Mitchell Hutchins Asset Management Inc. Mitchell Hutchins Asset Management Inc.
/s/ T. Kirkham Barneby
- ----------------------
T. Kirkham Barneby
Managing Director and
Chief Investment Officer--
Quantitative Investments
Mitchell Hutchins Asset Management Inc.
Portfolio Manager, PaineWebber
S&P 500 Index Fund
This letter is intended to assist shareholders in understanding how the
Fund performed during the fiscal year ended May 31, 1999, and reflects our
views at the time of writing this report. Of course, these views may change
in response to changing circumstances. We encourage you to consult your
Financial Advisor regarding your personal investment program.
* Weightings represent percentages of long term portfolio assets as of May
31, 1999, unless noted otherwise. All weightings are subject to change.
These weightings are aligned to those of the S&P 500 Index.
(1) Mutual Funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses,
and should be read carefully before investing.
PaineWebber
S&P 500
Index Fund
Top Ten Holdings*
Microsoft Corp. 3.8%
General Electric Co. 3.1%
International Business Machines 2.0%
Exxon Corp. 1.8%
Wal Mart Stores Inc. 1.8%
Intel Corp. 1.7%
AT&T Corp. 1.6%
Cisco Systems Inc. 1.6%
Coca Cola Co. 1.6%
Merck & Co. 1.5%
PaineWebber
S&P 500
Index Fund
Top Five Sectors*
Technology 21.1%
Financial Services 18.0%
Consumer Cyclical 13.6%
Healthcare 11.1%
Utilities 10.8%
3
<PAGE>
PaineWebber S&P 500 Index Fund
<TABLE>
<CAPTION>
Performance Results (unaudited)
Net Asset Value Total Return(1)
----------------------- For the Period
05/31/99 11/30/98 Ended 05/31/99
-------- -------- --------------
<S> <C> <C> <C>
Class A Shares* $16.72 $15.12 32.23%
Class C Shares* 16.64 15.10 31.77
<CAPTION>
Performance Summary Class A Shares
Net Asset Value
----------------------- Capital Gains Total
Period Covered Beginning Ending Distributed Dividends Paid Return(1)
- -------------- --------- ------ -------------- -------------- ---------
<C> <C> <C> <C> <C> <C>
10/02/98-12/31/98 $12.83 $15.75 $0.1000 $0.1186 24.56%
01/01/99-05/31/99 15.75 16.72 -- -- 6.16
-------------- -------
Total: $0.1000 $0.1186
-----
Cumulative Total Return as of 5/31/99: 32.23%
<CAPTION>
Performance Summary Class C Shares
Net Asset Value
----------------------- Capital Gains Total
Period Covered Beginning Ending Distributed Dividends Paid Return(1)
- -------------- --------- ------ -------------- -------------- ---------
<C> <C> <C> <C> <C> <C>
10/07/98-12/31/98 $12.80 $15.73 $0.1000 $0.1031 24.57%
01/01/99-05/31/99 15.73 16.64 -- -- 5.79
-------------- -------
Total: $0.1000 $0.1031
-----
Cumulative Total Return as of 5/31/99: 31.77%
</TABLE>
- ----------
(1) Figures assume reinvestment of all dividends at net asset value on the
payable dates and do not include sales charges; results for each class
would be lower if sales charges were included. Total return for periods of
less than one year has not been annualized.
* Commencement of operations for Class A and Class C shares are October 2,
1998 and October 7, 1998, respectively. Returns for the periods of less
than one year have not been annualized.
Note: The Fund offers Class Y shares to a limited group of investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds. For the twelve
months and since inception, December 31, 1997 through May 31, 1999, Class Y
shares have a total return of 20.30% and 35.89%, respectively. Class Y
shares do not have initial or contingent deferred sales charges or ongoing
distribution and service fees, or contingent deferred sales charges or
ongoing distribution and service fees.
The data above represents past performance of the Fund's shares, which is
no guarantee of future results. The principal value of an investment in the
Fund will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
4
<PAGE>
PaineWebber S&P 500 Index Fund
Portfolio of Investments May 31, 1999
Number of
Shares Value
- ------------- -----------
COMMON STOCKS--84.59%
Agriculture, Food & Beverage--3.60%
2,300 Archer-Daniels-Midland Co. .......................... $ 34,500
1,100 Bestfoods Co. ....................................... 55,000
1,700 Campbell Soup Co. ................................... 75,012
1,600 Coca-Cola Enterprises, Inc. ......................... 58,000
1,900 Conagra, Inc. ....................................... 49,519
600 General Mills, Inc. ................................. 48,225
1,400 Heinz, H. J. and Co. ................................ 67,638
600 Hershey Foods Corp. ................................. 32,550
1,600 Kellogg Co. ......................................... 55,500
5,700 Pepsico, Inc. ....................................... 204,131
900 Pioneer Hi-Bred International, Inc. ................. 33,750
500 Quaker Oats Co. ..................................... 33,031
1,300 RJR Nabisco Holdings Corp. .......................... 40,219
3,600 Sara Lee Corp. ...................................... 86,400
500 Supervalue, Inc. .................................... 12,125
1,300 Sysco Corp. ......................................... 38,594
9,600 The Coca-Cola Co. ................................... 655,800
2,232 Unilever N V ........................................ 145,777
500 Wrigley, Wm. Jr. Co. ................................ 43,531
-----------
1,769,302
-----------
Airlines--0.28%
700 AMR Corp.* .......................................... 45,544
500 Delta Air Lines, Inc. ............................... 28,688
1,300 Southwest Airlines Co. .............................. 41,681
400 US Airways Group, Inc.* ............................. 19,425
-----------
135,338
-----------
Alcohol--0.49%
1,800 Anheuser-Busch Companies, Inc. ...................... 131,513
300 Brown Forman Corp. .................................. 20,006
100 Coors Adolph Co. .................................... 4,750
1,600 Seagram Co. Ltd. .................................... 83,100
-----------
239,369
-----------
Apparel, Retail-0.49%
2,200 Gap, Inc. ........................................... 137,637
900 Limited, Inc. ....................................... 43,988
600 Nordstrom, Inc. ..................................... 21,300
1,300 TJX Companies, Inc. ................................. 39,000
-----------
241,925
-----------
Apparel, Textiles--0.20%
300 Liz Claiborne, Inc. ................................. 10,800
1,100 Nike, Inc. .......................................... 67,031
500 V. F. Corp. ......................................... 23,000
-----------
100,831
-----------
Banks--6.95%
700 Amsouth Bancorporation .............................. 19,863
2,900 Bank of New York Co. Inc. ........................... 103,675
4,600 Bank One Corp. ...................................... 260,187
6,700 BankAmerica Corp. ................................... 433,406
1,100 BankBoston Corp. .................................... 52,112
400 Bankers Trust New York Corp. ........................ 37,025
Number of
Shares Value
- ------------- -----------
Banks--(concluded)
1,200 BB & T Corp. ........................................ $ 43,800
8,800 Citigroup, Inc. ..................................... 583,000
600 Comerica, Inc. ...................................... 36,262
1,000 Fifth Third Bancorp ................................. 68,187
3,900 First Union Corp. ................................... 179,644
2,700 Firstar Corp. ....................................... 77,794
2,200 Fleet Financial Group, Inc. ......................... 90,475
800 Huntington Bancshares, Inc. ......................... 27,700
1,800 KeyCorp ............................................. 62,550
2,000 Mellon Bank Corp. ................................... 71,375
600 Mercantile Bancorporation, Inc. ..................... 35,062
700 Morgan, (J.P.) & Co., Inc. .......................... 97,519
1,300 National City Corp. ................................. 86,044
400 Northern Trust Corp. ................................ 36,150
1,200 PNC Bank Corp. ...................................... 68,700
900 Regions Financial Corp. ............................. 34,088
400 Republic New York Corp. ............................. 27,175
700 South Trust Corp. ................................... 27,256
600 State Street Corp. .................................. 45,750
700 Summit Bancorp, Inc. ................................ 28,656
1,200 Suntrust Banks, Inc. ................................ 81,000
1,100 Synovus Financial Corp. ............................. 22,138
3,300 The Chase Manhattan Corp. ........................... 239,250
600 Union Planters Corp. ................................ 24,788
2,800 US Bancorp, Inc. .................................... 91,000
800 Wachovia Corp. ...................................... 70,600
6,400 Wells Fargo and Co.* ................................ 256,000
-----------
3,418,231
-----------
Chemicals--2.26%
900 Air Products & Chemicals, Inc. ...................... 36,900
300 Ashland, Inc. ....................................... 12,225
400 Avery Dennison Corp. ................................ 23,950
900 Dow Chemical Co. .................................... 109,350
4,400 DuPont (E.I.) de Nemours & Co. ...................... 287,925
300 Eastman Chemical Co. ................................ 15,188
500 Ecolab, Inc. ........................................ 21,250
600 Engelhard Corp. ..................................... 12,150
200 FMC Corp.* .......................................... 13,238
200 Great Lakes Chemical Corp. .......................... 9,038
400 Hercules, Inc. ...................................... 13,975
1,000 Illinois Tool Works, Inc. ........................... 76,750
1,600 Minnesota Mining & Manufacturing Co. ................ 137,200
2,400 Monsanto Co. ........................................ 99,600
500 Morton International, Inc. .......................... 19,500
300 Nalco Chemical Co. .................................. 10,050
1,400 Occidental Petroleum Corp. .......................... 29,575
700 PPG Industries, Inc. ................................ 42,481
600 Praxair, Inc. ....................................... 29,287
700 Rohm & Haas Co. ..................................... 28,087
300 Sealed Air Corp.* ................................... 18,637
700 Sherwin Williams Co. ................................ 21,569
700 Tenneco, Inc. ....................................... 16,319
500 Union Carbide Corp. ................................. 25,656
-----------
1,109,900
-----------
5
<PAGE>
PaineWebber S&P 500 Index Fund
Number of
Shares Value
- ------------- -----------
COMMON STOCKS--(continued)
Computer Hardware--6.55%
1,400 3Com Corp.* ......................................... $ 38,237
500 Apple Computer, Inc.* ............................... 22,031
900 Ascend Communications, Inc.* ........................ 83,419
700 Cabletron Systems, Inc.* ............................ 10,413
6,200 Cisco Systems Inc.* ................................. 675,800
6,600 Compaq Computer Corp. ............................... 156,337
9,900 Dell Computer Corp.* ................................ 340,931
2,000 EMC Corp.* .......................................... 199,250
600 Gateway, Inc.* ...................................... 36,488
4,000 Hewlett-Packard Co. ................................. 377,250
600 Ikon Office Solutions Inc. .......................... 8,363
7,200+ International Business Machines ..................... 837,450
1,100 Pitney Bowes, Inc. .................................. 70,125
1,000 Seagate Technology, Inc.* ........................... 30,188
800 Silicon Graphics, Inc.* ............................. 9,900
3,000 Sun Microsystems Inc.* .............................. 179,250
2,600 Xerox Corp. ......................................... 146,087
-----------
3,221,519
-----------
Computer Software--4.13%
200 Adobe Systems, Inc. ................................. 14,825
200 Autodesk, Inc.* ..................................... 5,525
900 BMC Software, Inc.* ................................. 44,494
2,100 Computer Associates International, Inc. ............. 99,356
1,400 Compuware Corp.* .................................... 43,487
19,700 Microsoft Corp.* .................................... 1,589,544
1,300 Novell, Inc.* ....................................... 30,550
5,600 Oracle Systems Corp.* ............................... 138,950
1,100 Parametric Technology Corp.* ........................ 15,263
900 Peoplesoft, Inc.* ................................... 14,569
1,000 Unisys Corp.* ....................................... 37,937
-----------
2,034,500
-----------
Construction--0.16%
200 Armstrong World Industries, Inc. .................... 11,650
300 Centex Corp. ........................................ 11,119
300 Fluor Corp. ......................................... 11,175
1,300 Masco Corp. ......................................... 37,131
200 Owens-Corning Fiberglass ............................ 7,875
-----------
78,950
-----------
Consumer Durables--0.14%
400 Black & Decker Corp. ................................ 22,775
400 Maytag Corp. ........................................ 28,225
300 Whirlpool Corp. ..................................... 19,350
-----------
70,350
-----------
Defense/Aerospace--1.12%
2,200 Allied-Signal, Inc. ................................. 127,737
3,700 Boeing Co. .......................................... 156,325
500 General Dynamics Corp. .............................. 32,875
300 Goodrich, B.F. Co. .................................. 12,150
1,500 Lockheed Martin Corp. ............................... 60,656
300 Northrop Grumman Corp. .............................. 20,250
1,300 Raytheon Co. ........................................ 88,481
600 Textron, Inc. ....................................... 53,438
-----------
551,912
-----------
Number of
Shares Value
- ------------- -----------
Diversified Retail--2.50%
900 Costco Co. Inc.* .................................... $ 65,250
1,700 Dayton Hudson Corp. ................................. 107,100
500 Dillard Department Stores, Inc. ..................... 17,563
800 Federated Department Stores, Inc.* .................. 43,600
1,900 K Mart Corp.* ....................................... 29,212
600 Kohls Corp.* ........................................ 40,912
1,350 May Department Stores Co. ........................... 58,472
1,100 Penney, (J.C.), Inc. ................................ 56,856
1,500 Sears Roebuck & Co. ................................. 71,719
17,400 Wal Mart Stores, Inc. ............................... 741,675
-----------
1,232,359
-----------
Drugs & Medicine--6.41%
300 Allergan, Inc. ...................................... 27,900
400 Alza Corp.* ......................................... 14,275
5,100 American Home Products Corp. ........................ 293,888
2,000 Amgen, Inc.* ........................................ 126,500
7,700 Bristol-Myers Squibb Co. ............................ 528,412
1,100 Cardinal Health, Inc. ............................... 66,413
4,300 Lilly, Eli & Co. .................................... 307,181
1,100 McKesson HBOC, Inc. ................................. 37,469
9,300 Merck & Co., Inc. ................................... 627,750
5,100 Pfizer, Inc. ........................................ 545,700
2,000 Pharmacia & Upjohn, Inc. ADR ........................ 110,875
5,700 Schering-Plough Corp. ............................... 256,856
400 Sigma-Aldrich Corp. ................................. 12,800
3,200 Warner Lambert Co. .................................. 198,400
-----------
3,154,419
-----------
Electric Utilities--1.93%
700 AES Corp.* .......................................... 34,825
500 Ameren Corp. ........................................ 20,469
700 American Electric Power, Inc. ....................... 30,363
600 Carolina Power & Light Co. .......................... 26,250
800 Central & South West Corp. .......................... 20,600
600 Cinergy Corp. ....................................... 20,475
400 CMS Energy Corp. .................................... 18,600
900 Consolidated Edison of New York, Inc. ............... 43,706
600 Constellation Energy Group Inc. ..................... 18,713
800 Dominion Resources, Inc. ............................ 34,550
600 DTE Energy Co. ...................................... 26,138
1,400 Duke Energy Corp. ................................... 84,437
1,400 Edison International, Inc. .......................... 38,500
1,000 Entergy Corp. ....................................... 32,437
900 First Energy Corp. .................................. 28,631
700 FPL Group, Inc. ..................................... 40,731
500 General Public Utilities Corp. ...................... 21,781
500 New Century Energies Inc. .......................... 20,219
800 Niagara Mohawk Holdings Inc.* ....................... 11,900
600 Northern States Power Co. ........................... 15,638
1,200 PacifiCorp .......................................... 21,825
800 PECO Energy Co. ..................................... 39,150
600 Pennsylvania Power & Light Co. ...................... 18,000
1,500 PG&E Corp. .......................................... 50,625
900 Public Service Enterprise Group, Inc. ............... 37,744
1,100 Reliant Energy Inc. ................................. 33,550
6
<PAGE>
PaineWebber S&P 500 Index Fund
Number of
Shares Value
- ------------- -----------
COMMON STOCKS--(continued)
Electrical Utilities--(concluded)
2,700 Southern Co. ........................................ $ 76,612
1,100 Texas Utilities Co. ................................. 49,500
800 Unicom Corp. ........................................ 33,850
-----------
949,819
-----------
Electrical Equipment--2.90%
1,000 Corning, Inc. ....................................... 54,625
500 Danaher Corp. ....................................... 30,219
300 Eaton Corp. ......................................... 26,156
700 General Instrument Corp.* ........................... 27,081
300 Harris Corp. ........................................ 11,344
500 Honeywell, Inc. ..................................... 47,312
400 ITT Industries, Inc. ................................ 15,100
300 Johnson Controls, Inc. .............................. 18,919
400 KLA-Tencor Corp. * .................................. 18,200
10,300 Lucent Technologies, Inc. ........................... 585,812
2,300 Motorola, Inc. ...................................... 190,469
2,600 Nortel Networks Corp. ............................... 195,000
300 PE Corporation ...................................... 24,037
300 Raychem Corp. ....................................... 10,425
300 Scientific-Atlanta, Inc. ............................ 10,594
1,000 Solectron Corp.* .................................... 54,750
1,600 Tellabs, Inc.* ...................................... 93,600
700 Thermo Electron Corp.* .............................. 13,388
-----------
1,427,031
-----------
Electrical Power--0.44%
400 Cooper Industries, Inc. ............................. 19,825
200 Cummins Engine Co., Inc. ............................ 10,125
1,700 Emerson Electric Co. ................................ 108,587
400 Grainger,W.W., Inc. ................................. 21,225
200 Phelps Dodge Corp. 10,363
700 Rockwell International Corp. ........................ 38,631
200 Thomas & Betts Corp. ................................ 8,563
-----------
217,319
-----------
Energy Reserves & Production--4.54%
400 Amerada Hess Corp. .................................. 23,975
500 Anadarko Petroleum Corp. ............................ 18,750
500 Apache Corp. ........................................ 18,000
1,300 Atlantic Richfield Co. .............................. 108,794
700 Burlington Resources, Inc. .......................... 30,056
2,500 Chevron Corp. ....................................... 231,719
9,600 Exxon Corp. ......................................... 766,800
400 Kerr-McGee Corp. .................................... 18,600
3,000 Mobil Corp. ......................................... 303,750
1,000 Phillips Petroleum Co. .............................. 52,437
8,400 Royal Dutch Petroleum Co. ........................... 475,125
2,100 Texaco, Inc. ........................................ 137,550
1,000 Union Pacific Resources Group, Inc. ................. 13,938
900 Unocal Corp. ........................................ 35,775
-----------
2,235,269
-----------
Entertainment--0.22%
2,400 Carnival Corp. 98,400
300 King World Productions, Inc.* 10,013
-----------
108,413
-----------
Number of
Shares Value
- ------------- -----------
Environmental Services--0.30%
600 Browning Ferris Industries, Inc. .................... $ 24,900
2,300 Waste Management, Inc. .............................. 121,613
-----------
146,513
-----------
Financial Services--5.32%
1,800 American Express Co. ................................ 218,137
1,050 AON Corp. ........................................... 45,150
2,800 Associates First Capital Corp. ...................... 114,800
400 Block, H&R, Inc. .................................... 19,275
300 Capital One Financial Corp. ......................... 45,206
3,300 Cendant Corp.* ...................................... 60,844
400 Countrywide Credit Industries, Inc. ................. 16,450
600 Equifax, Inc. ....................................... 21,600
2,600 Federal Home Loan Mortgage Corp. .................... 151,612
4,000 Federal National Mortgage Association ............... 272,000
12,800 General Electric Co. ................................ 1,301,600
1,900 Household International, Inc. ....................... 82,413
400 Kansas City Southern Industries, Inc. ............... 22,500
1,000 Marsh & McLennan Companies, Inc. .................... 72,750
3,100 MBNA Corp. .......................................... 85,638
500 Providian Corp. ..................................... 47,969
600 SLM Holding Corp. ................................... 24,900
200 Temple-Inland, Inc. ................................. 13,400
-----------
2,616,244
-----------
Food Retail--0.61%
1,000 Albertson's, Inc. ................................... 53,500
1,100 American Stores Co. ................................. 36,300
200 Great Atlantic & Pacific Tea, Inc. .................. 6,550
1,600 Kroger Co.* ......................................... 93,700
1,900 Safeway Inc.* ....................................... 88,350
600 Winn Dixie Stores, Inc. ............................. 21,487
-----------
299,887
-----------
Forest Products, Paper--0.84%
200 Bemis, Inc. ......................................... 7,550
200 Boise Cascade Corp. ................................. 7,925
400 Champion International Corp. ........................ 20,500
900 Fort James Corp. .................................... 32,962
400 Georgia-Pacific Corp. ............................... 34,575
1,645 International Paper Co. ............................. 82,250
2,100 Kimberly Clark Corp. ................................ 123,244
500 Louisiana Pacific Corp. ............................. 10,125
400 Mead Corp. .......................................... 14,950
400 Westvaco Corp. ...................................... 11,425
800 Weyerhaeuser Co. .................................... 49,650
400 Willamette Industries, Inc. ......................... 16,950
-----------
412,106
-----------
Freight, Air, Sea & Land--0.16%
1,200 FDX Corp.* .......................................... 66,075
1,500 Laidlaw, Inc. ....................................... 10,500
-----------
76,575
-----------
7
<PAGE>
PaineWebber S&P 500 Index Fund
Number of
Shares Value
- ------------- -----------
COMMON STOCKS--(continued)
Gas Utility--0.14%
300 Columbia Energy Group ............................... $ 16,050
400 Consolidated Natural Gas Co. ........................ 23,775
200 NICOR Inc. ......................................... 7,525
900 Sempra Energy ....................................... 19,350
-----------
66,700
-----------
Heavy Machinery--0.25%
300 Case Corp. .......................................... 14,100
1,400 Caterpillar, Inc. ................................... 76,825
900 Deere & Co. ......................................... 34,256
-----------
125,181
-----------
Hotels--0.08%
500 Harrah's Entertainment, Inc.* ....................... 10,813
1,000 Hilton Hotels Corp. ................................. 13,750
800 Mirage Resorts, Inc.* ............................... 16,400
-----------
40,963
-----------
Household Products--2.14%
300 Alberto Culver Co. .................................. 7,931
1,000 Avon Products, Inc. ................................. 49,437
500 Clorox Co. .......................................... 50,469
1,100 Colgate-Palmolive Co. ............................... 109,862
700 Fortune Brands, Inc. ................................ 28,613
4,300 Gillette Co. ........................................ 219,300
400 International Flavors and Fragrances ................ 16,450
200 National Service Industries, Inc. ................... 7,363
1,072 Newell Rubbermaid Inc. .............................. 43,416
5,200 Procter & Gamble Co. ................................ 485,550
1,300 Ralston Purina Co. .................................. 35,425
-----------
1,053,816
-----------
Industrial Parts--0.52%
100 Briggs & Stratton Corp. ............................. 6,250
300 Crane Co. ........................................... 9,019
900 Dover Corp. ......................................... 33,919
600 Ingersoll Rand Co. .................................. 38,212
300 McDermott International, Inc. ....................... 7,688
500 Pall Corp. .......................................... 10,031
400 Parker-Hannifin Corp. ............................... 17,475
300 Snap-On, Inc. ....................................... 10,856
400 Stanley Works ....................................... 13,025
1,800 United Technologies Corp. ........................... 111,712
-----------
258,187
-----------
Industrial Services/Supplies--0.01%
300 Ryder Systems, Inc. ................................. 7,200
-----------
Information & Computer Services--2.01%
4,000 America Online Inc.* ................................ 477,500
2,400 Automatic Data Processing, Inc. ..................... 98,850
600 Ceridian Corp.* ..................................... 19,800
600 Computer Sciences Corp.* ............................ 38,812
600 Dun & Bradstreet Corp. .............................. 21,000
1,900 Electronic Data Systems Corp. ....................... 106,875
1,700 First Data Corp. .................................... 76,394
Number of
Shares Value
- ------------- -----------
Information & Computer Services--(concluded)
1,200 IMS Health, Inc. .................................... $ 29,550
500 Interpublic Group Companies, Inc. ................... 37,875
700 Omnicom Group Inc. .................................. 49,000
900 Paychex, Inc. ....................................... 26,663
100 Shared Medical System Corp. ......................... 6,575
-----------
988,894
-----------
Leisure--0.33%
400 Brunswick Corp. ..................................... 9,600
1,300 Eastman Kodak Co. ................................... 87,913
800 Hasbro, Inc. ........................................ 22,900
1,600 Mattel, Inc. ........................................ 42,300
-----------
162,713
-----------
Life Insurance--0.93%
600 Aetna Life & Casualty Co. ........................... 54,487
1,000 AFLAC Incorporated .................................. 51,000
1,000 American General Corp. .............................. 72,250
800 CIGNA Corp. ......................................... 74,600
1,200 Conseco Inc. ........................................ 36,675
400 Jefferson-Pilot Corp. ............................... 27,075
400 Lincoln National Corp. .............................. 40,700
500 Provident Cos, Inc. ................................. 19,531
500 Torchmark, Inc. ..................................... 16,688
500 Transamerica Corp. .................................. 36,688
500 UNUM Corp. .......................................... 26,906
-----------
456,600
-----------
Long Distance & Phone Companies--6.64%
4,300 Ameritech Corp. ..................................... 282,994
12,300 AT&T Corp. .......................................... 682,650
6,100 Bell Atlantic Corp. ................................. 333,975
7,600 BellSouth Corp. ..................................... 358,625
600 Centurytel Inc. ..................................... 22,988
700 Frontier Corp. ...................................... 36,837
3,800 GTE Corp. ........................................... 239,637
7,200 MCI WorldCom Inc.* .................................. 621,900
7,600 SBC Communications, Inc. ........................... 388,550
1,700 Sprint Corp. ........................................ 191,675
2,000 U.S. West, Inc. ..................................... 108,125
-----------
3,267,956
-----------
Media--2.43%
2,800 CBS Corp.* .......................................... 116,900
1,200 Clear Channel Communications* ....................... 79,275
2,900 Comcast Corp., Class A .............................. 111,650
8,000 Disney, Walt Co. .................................... 233,000
2,400 Mediaone Group, Inc.* ............................... 177,300
200 Meredith Corp. ...................................... 6,987
4,800 Time Warner, Inc. ................................... 326,700
500 Tribune Co. ......................................... 39,469
2,700 Viacom, Inc., Class B* .............................. 103,950
-----------
1,195,231
-----------
Medical Products--3.01%
5,900 Abbott Laboratories ................................. 266,606
200 Bard, C.R., Inc. .................................... 9,138
8
<PAGE>
PaineWebber S&P 500 Index Fund
Number of
Shares Value
- ------------- -----------
COMMON STOCKS--(continued)
Medical Products--(concluded)
200 Bausch & Lomb, Inc. ................................. $ 15,275
1,100 Baxter International, Inc. .......................... 71,019
1,000 Becton, Dickinson & Co. ............................. 38,750
400 Biomet, Inc. ........................................ 15,975
1,500 Boston Scientific Corp.* ............................ 56,906
1,200 Guidant Corp.* ...................................... 60,000
5,200 Johnson & Johnson ................................... 481,650
300 Mallinckrodt Group, Inc. ............................ 10,387
2,300 Medtronic, Inc. ..................................... 163,300
400 St. Jude Medical, Inc.* ............................. 13,525
3,200 Tyco International Ltd. ............................. 279,600
-----------
1,482,131
-----------
Medical Providers--0.40%
2,500 Columbia/HCA Healthcare Corp. ....................... 58,906
500 HCR Manor Care, Inc.* ............................... 13,375
1,700 HEALTHSOUTH Corp.* .................................. 22,738
700 Humana, Inc.* ....................................... 8,794
132 Lifepoint Hospitals, Inc. ........................... 1,316
1,100 Service Corp. International ......................... 21,106
1,200 Tenet Healthcare Corp.* ............................. 29,400
132 Triad Hospitals, Inc. ............................... 1,332
700 United Healthcare Corp. ............................. 40,775
-----------
197,742
-----------
Mining & Metals--0.44%
900 Alcan Aluminum Ltd. ................................. 25,200
1,400 Alcoa, Inc. ......................................... 77,000
800 Allegheny Teldyne, Inc. ............................. 16,350
100 Ball Corp ........................................... 4,869
500 Crown Cork & Seal, Inc. ............................. 15,688
800 Inco Ltd. ........................................... 11,400
400 Nucor Corp. ......................................... 19,975
600 Owens Illinois, Inc.* ............................... 18,300
300 Reynolds Metals Co. ................................. 15,956
400 USX-U.S. Steel Group, Inc. .......................... 10,775
-----------
215,513
-----------
Motor Vehicles--1.30%
300 Cooper Tire & Rubber Co. ............................ 7,125
700 DANA Corp. .......................................... 36,137
2,147 Delphi Automotive Systems Corp. ..................... 42,141
4,700 Ford Motor Co. ...................................... 268,194
2,500 General Motors Corp. ................................ 172,500
700 Genuine Parts Co. ................................... 23,581
600 Goodyear Tire & Rubber Co. .......................... 35,813
300 Navistar International Corp.* ....................... 14,813
300 PACCAR, Inc. ........................................ 16,894
500 TRW, Inc. ........................................... 25,031
-----------
642,229
-----------
Oil Refining--0.57%
800 Coastal Corp. ....................................... 30,850
1,400 Enron Corp. ......................................... 99,925
400 Sonat, Inc. ......................................... 14,175
400 Sunoco, Inc. ........................................ 12,175
Number of
Shares Value
- ------------- -----------
Oil Refining--(concluded)
1,200 USX-Marathon Group .................................. $ 35,925
1,700 Williams Companies, Inc. ............................ 88,081
-----------
281,131
-----------
Oil Services--0.49%
1,300 Baker Hughes, Inc. .................................. 40,462
1,800 Halliburton Co. ..................................... 74,475
2,100 Schlumberger Ltd. ................................... 126,394
-----------
241,331
-----------
Other Insurance--1.98%
3,200 Allstate Corp. ...................................... 116,600
4,800 American International Group Inc. ................... 548,700
600 Chubb Corp. ......................................... 42,038
600 Cincinnati Financial Corp. .......................... 24,713
900 Hartford Financial Services Group, Inc. ............. 56,925
500 Loews Corp. ......................................... 40,656
400 MBIA Inc. ........................................... 27,325
400 MGIC Investment Corp. ............................... 19,250
500 SAFECO Corp. ........................................ 21,969
900 St. Paul Companies, Inc. ............................ 32,006
300 The Progressive Corp. ............................... 42,112
-----------
972,294
-----------
Precious Metals--0.15%
1,500 Barrick Gold Corp. .................................. 25,875
700 Freeport-McMoran Copper & Gold, Inc.* ............... 9,887
1,100 Homestake Mining Co. ................................ 8,594
700 Newmont Mining Corp. ................................ 12,469
1,400 Placer Dome, Inc. ................................... 15,575
-----------
72,400
-----------
Publishing--0.51%
300 American Greetings Corp., Class A ................... 8,588
300 Deluxe Corp. ........................................ 10,819
500 Donnelley, R.R. & Sons Co. .......................... 18,125
400 Dow Jones & Co., Inc. ............................... 21,000
1,100 Gannett, Inc. ....................................... 79,475
300 Harcourt General, Inc. .............................. 14,756
300 Knight Ridder, Inc. ................................. 15,806
800 McGraw-Hill Companies, Inc. ......................... 41,500
700 New York Times Co., Class A ......................... 23,888
300 Times Mirror Co. .................................... 17,681
-----------
251,638
-----------
Railroads--0.41%
1,800 Burlington Northern Santa Fe, Inc. .................. 55,800
900 CSX Corp. ........................................... 42,244
1,500 Norfolk Southern Corp. .............................. 49,125
1,000 Union Pacific Corp. ................................. 57,062
-----------
204,231
-----------
Restaurants--0.60%
500 Darden Restaurants, Inc. ............................ 10,656
900 Marriott International, Inc. ........................ 34,256
5,300 McDonalds Corp. ..................................... 204,050
600 Tricon Global Restaurants, Inc.* .................... 34,950
500 Wendy's International, Inc. ......................... 13,625
-----------
297,537
-----------
9
<PAGE>
PaineWebber S&P 500 Index Fund
Number of
Shares Value
- ------------- -----------
COMMON STOCKS--(concluded)
Securities & Asset Management--1.19%
400 Bear Stearns Co., Inc. .............................. $ 17,750
1,600 Charles Schwab Corp. ................................ 169,300
1,000 Franklin Resources, Inc. ............................ 43,500
500 Lehman Brothers Holdings, Inc. ...................... 27,312
1,400 Merrill Lynch & Co., Inc. ........................... 117,600
2,200 Morgan Stanley Dean Witter & Co. .................... 212,300
-----------
587,762
-----------
Semiconductor--2.09%
600 Advanced Micro Devices, Inc.* ....................... 11,100
1,400 Applied Materials, Inc.* ............................ 76,912
13,000 Intel Corp. ......................................... 702,812
600 LSI Logic Corp.* .................................... 22,238
1,000 Micron Technology, Inc.* ............................ 37,938
700 National Semiconductor Corp.* ....................... 13,563
1,500 Texas Instruments, Inc. ............................. 164,062
-----------
1,028,625
-----------
Specialty Retail--1.57%
600 Autozone, Inc.* ..................................... 17,363
400 Circuit City Stores, Inc. ........................... 28,725
400 Consolidated Stores Corp.* .......................... 13,750
1,500 CVS Corp. ........................................... 69,000
875 Dollar General Corp. ................................ 23,242
5,700 Home Depot, Inc. .................................... 324,187
1,400 Lowe's Companies, Inc. .............................. 72,712
1,000 Rite Aid Corp. ...................................... 25,000
Number of
Shares Value
- ------------- -----------
Specialty Retail--(concluded)
1,800 Staples, Inc.* ...................................... $ 51,750
400 Tandy Corp. ......................................... 33,000
1,000 Toys R Us, Inc.* .................................... 23,063
3,900 Walgreen Co. ........................................ 90,675
-----------
772,467
-----------
Thrift--0.22%
200 Golden West Financial Corp. ......................... 18,975
2,300 Washington Mutual, Inc. ............................. 87,831
-----------
106,806
-----------
Tobacco--0.79%
9,500 Philip Morris Co. Inc. .............................. 366,344
700 UST, Inc. ........................................... 21,350
-----------
387,694
-----------
Wireless Telecommunications--0.85%
2,200 Airtouch Communications, Inc.* ...................... 221,100
1,100 Alltel Corp. ........................................ 78,856
1,100 Nextel Communications, Inc.* ........................ 40,563
1,700 Sprint Corp.* ....................................... 76,500
-----------
417,019
-----------
Total Common Stocks (cost--$37,390,717) ........................ 41,630,072
-----------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Date Rate
- --------- -------- --------
<S> <C> <C> <C>
Short Term Investments--15.12%
$ 7,440 Federal National Mortgage Association Discount Notes
(cost--$7,440,000) .................................... 06/01/99 4.720% 7,440,000
-----------
Total Investments (cost--$44,830,717)--99.71% .................... 49,070,072
Other assets in excess of liabilities--0.29% ..................... 143,862
-----------
Net Assets--100.00% .............................................. $49,213,934
===========
</TABLE>
- ----------
* Non-income producing security
= A portion of principal amount pledged as collateral for open futures contracts
<TABLE>
<CAPTION>
FUTURES CONTRACTS
Number of Expiration Unrealized
Contracts Date Depreciation
--------- ---------- ------------
Long Contracts
---------------
<S> <C> <C> <C>
9 S&P 500 Index Futures Jun-99 $ (102,175)
70 S&P 500 E-Mini Futures Jun-99 (187,638)
-----------
$ (289,813)
===========
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
PaineWebber S&P 500 Index Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities May 31, 1999
<S> <C>
Assets
Investments in securities, at value (cost--$44,830,717) ........................................ $49,070,072
Cash ........................................................................................... 2,556
Receivable for investments sold ................................................................ 32,438
Receivable from affiliate ...................................................................... 6,918
Dividends receivable ........................................................................... 72,975
Receivable for shares of beneficial interest sold .............................................. 179,541
Variation margin receivable .................................................................... 64,400
Deferred organizational expenses ............................................................... 85,277
Other assets ................................................................................... 64,508
-----------
Total assets ................................................................................... 49,578,685
-----------
Liabilities
Payable for investments purchased .............................................................. 228,257
Payable for shares of beneficial interest repurchased .......................................... 60,204
Accrued expenses and other liabilities ......................................................... 76,290
-----------
Total liabilities .............................................................................. 364,751
-----------
Net assets
Beneficial interest--$0.001 par value (unlimited amount authorized) ............................ 44,417,688
Undistributed net investment income ............................................................ 114,767
Accumulated net realized gains from investment and futures transactions ........................ 731,937
Net unrealized appreciation of investments and futures ......................................... 3,949,542
-----------
Net assets ..................................................................................... $49,213,934
===========
Class A:
Net assets ..................................................................................... $18,920,365
-----------
Shares outstanding ............................................................................. 1,131,925
-----------
Net asset value and redemption value per share ................................................. $16.72
======
Maximum offering price per share (net asset value plus sales charge of 2.50% of
offering price) .............................................................................. $17.15
======
Class C:
Net assets ..................................................................................... $23,813,258
-----------
Shares outstanding ............................................................................. 1,430,884
-----------
Net asset value and offering price per share ................................................... $16.64
======
Class Y:
Net assets ..................................................................................... $ 6,480,311
-----------
Shares outstanding ............................................................................. 387,200
-----------
Net asset value, offering price and redemption value per share ................................. $16.74
======
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year
Ended
May 31, 1999
------------
<S> <C>
Investment income:
Dividends and interest (net of foreign withholding tax of $4,868) .............. $ 365,688
----------
Expenses:
Investment advisory and administration ......................................... 49,416
Service fees--Class A .......................................................... 19,281
Service and distribution fees--Class C ......................................... 73,122
Federal and state registration ................................................. 76,051
Legal and audit ................................................................ 62,846
Reports and notices to shareholders ............................................ 42,870
Custody and accounting ......................................................... 15,299
Amortization of organizational expense ......................................... 15,053
Transfer agency ................................................................ 13,500
Trustees' fees ................................................................. 10,500
Other expenses ................................................................. 24,371
----------
402,309
Less: Fee waivers and expense reimbursements from adviser ...................... (226,868)
----------
Net expenses ................................................................... 175,441
----------
Net investment income .......................................................... 190,247
----------
Realized and unrealized gains (losses) from investment activities:
Net realized gains from:
Investment transactions ..................................................... 1,092,486
Futures contracts ........................................................... 3,945
Net change in unrealized appreciation/depreciation of:
Investments ................................................................. 3,033,517
Futures ..................................................................... (289,813)
----------
Net realized and unrealized gains from investment activities ................... 3,840,135
----------
Net increase in net assets resulting from operations ........................... $4,030,382
==========
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
For the Year December 31,
Ended 1997+ through
May 31, 1999 May 31, 1998
------------ ------------
<S> <C> <C>
From operations:
Net investment income .......................................................... $ 190,247 $ 59,019
Net realized gains from investment and futures transactions .................... 1,096,431 19,970
Net change in unrealized appreciation/depreciation of investments and futures 2,743,704 1,205,838
------------ ------------
Net increase in net assets resulting from operations ........................... 4,030,382 1,284,827
------------ ------------
Dividends and distributions to shareholders from:
Net investment income--Class A ................................................. (73,805) --
Net investment income--Class C ................................................. (25,116) --
Net investment income--Class Y ................................................. (49,729) --
Net realized gains from investment transactions--Class A ....................... (62,231) --
Net realized gains from investment transactions--Class C ....................... (24,361) --
Net realized gains from investment transactions--Class Y ....................... (41,894) --
------------ ------------
Total dividends and distributions to shareholders .............................. (277,136) --
------------ ------------
From beneficial interest transactions:
Net proceeds from the sale of shares ........................................... 54,058,949 12,314,605
Cost of shares repurchased ..................................................... (22,528,886) (18,384)
Proceeds from dividends reinvested ............................................. 249,577 --
------------ ------------
Net increase in net assets from beneficial interest transactions ............... 31,779,640 12,296,221
------------ ------------
Net increase in net assets ..................................................... 35,532,886 13,581,048
Net assets:
Beginning of period ............................................................ 13,681,048 100,000
------------ ------------
End of period (including undistributed net investment income
of $114,767 and $59,019, respectively) ...................................... $ 49,213,934 $ 13,681,048
============ ============
</TABLE>
- ----------
+ Commencement of operations
See accompanying notes to financial statements
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber S&P 500 Index Fund (the "Fund")is a series of PaineWebber Index
Trust (the "Trust") and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as an open-end,
diversified management investment company. Organizational costs have been
deferred and are being amortized using the straight line method over a period
not to exceed 60 months from the date the Fund commenced operations. Prior to
the commencement of operations on December 31, 1997, the Fund had no activity
other than the sale of 4,000 Class X (formerly Class A) shares and 4,000 Class Y
shares for $100,000 on October 6, 1997 to Mitchell Hutchins Asset Management
Inc. ("Mitchell Hutchins"), the investment adviser, administrator and
distributor, and a wholly owned asset management subsidiary of PaineWebber
Incorporated ("PaineWebber").
Currently, the Fund offers Class A, Class C and Class Y shares. Each class
represents interests in the same assets of the Fund, and the classes are
identical except for differences in ongoing service charges and certain transfer
agency expenses. All classes of shares have equal voting privileges except that
Class A and Class C shares have exclusive voting rights with respect to their
service and/or distribution plan. Class Y shares have no service or distribution
plan.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies:
Valuation of Investments--Securities that are listed on stock exchanges are
valued at the last sale price on the day the securities are being 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 valued on
the exchange designated by Mitchell Hutchins. Securities traded in the
over-the-counter ("OTC") market and listed on the Nasdaq Stock Market, Inc.
("Nasdaq") are valued at the last available sale price, or last bid price
available if no sale occurs, on Nasdaq prior to the time of valuation. Where
market quotations are readily available, debt securities are valued thereon,
provided such quotations adequately reflect the fair value of the securities in
the judgment of Mitchell Hutchins. When market quotations are not readily
available, securities are valued based upon appraisals derived from information
concerning those securities or similar securities received from recognized
dealers in those securities. All other securities are valued at fair value as
determined in good faith by, or under the direction of, the Trust's board of
trustees. The amortized cost method of valuation is used to value short-term
debt securities with sixty days or less remaining to maturity, unless the
Trust's board of trustees determines that this does not represent fair value.
Repurchase Agreements--The Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Fund occasionally
participates in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins.
Investment Transactions and Investment Income--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Interest income is
recorded on an accrual basis. Dividend income is recorded on the ex-dividend
date. Discounts are accreted and premiums are amortized as adjustments to
interest income and the identified cost of investments.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares (or the value of
dividend-eligible shares, as appropriate) of each class at the beginning of the
day (after adjusting for current capital share activity of the respective
classes). Class-specific expenses are charged directly to the applicable class
of shares.
Futures Contracts--Upon entering into a financial futures contract, the Fund
is required to pledge to a broker an amount of cash and/or U.S. securities equal
to a certain percentage of the contract amount. This amount is known as the
"initial margin." Subsequently, payments, known as "variation margin" are made
or received by the Funds each day, depending on the daily fluctuations in the
value of the underlying financial futures contracts. Such variation margin is
recorded for financial statement purposes on a daily basis as unrealized gain or
loss until the financial futures contract is closed, at which time the net gain
or loss is reclassified to realized.
Using financial futures contracts involves various market risks. The maximum
amount at risk from the purchase of a futures contract is the contract value.
The Fund uses financial futures contracts as an alternative to investing
directly in the underlying securities or for hedging purposes. However,
imperfect correlations between futures contracts and the portfolio securities
being hedged, or market disruptions, do not permit full control of these risks
at all times.
Dividends and Distributions--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's board of trustees has approved an Investment Advisory and
Administration Contract ("Advisory Contract") with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Fund. In accordance with the Advisory Contract, the Fund pays Mitchell Hutchins
an investment advisory and administration fee, which is accrued daily and paid
monthly, at an annual rate of 0.20% of the Fund's average daily net assets. For
the year ended May 31, 1999, Mitchell Hutchins has voluntarily undertaken to
waive all advisory fees and reimburse a portion of other expenses.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of the Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. There is no
distribution plan with respect to the Fund's Class Y shares. Under separate
plans of service and/or distribution pertaining to Class A and Class C shares,
the Fund pays Mitchell Hutchins monthly service fees at the annual rate of 0.25%
of the average daily net assets of Class A and Class C and monthly distribution
fees at the annual rate of 0.75% of the average daily net assets of Class C.
Mitchell Hutchins also receives the proceeds of the initial sales charge paid
by the shareholders upon the purchase of Class A shares and the contingent
deferred sales charge paid by shareholders upon certain redemptions of Class C
shares. Mitchell Hutchins has informed the Fund that for the year ended May 31,
1999, it earned $78,684 in sales charges.
TRANSFER AGENCY SERVICE FEES
PaineWebber provides transfer agency related services to the Fund pursuant
to a delegation of authority from PFPC, Inc., the Fund's transfer agent, and is
compensated for the services by PFPC, Inc., not the Fund. For the year ended May
31, 1999, PaineWebber received from PFPC, Inc., not the Fund, approximately 42%
of the total transfer agency and related service fees collected by PFPC, Inc.
from the Fund.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SECURITY LENDING
The Fund may lend securities up to 33 1/3% of its total assets to qualified
institutions. The loans are secured at all times by cash, U.S. government
securities or irrevocable letters of credit that meet certain guidelines
established by Mitchell Hutchins, in an amount at least equal to the market
value of the securities loaned, plus accrued interest, determined on a daily
basis and adjusted accordingly. The Fund will regain record ownership of loaned
securities to exercise certain beneficial rights, however, the Fund may bear the
risk of delay in recovery of, or even loss of rights in, the securities loaned
should the borrower fail financially. The Fund receives compensation for lending
its securities from interest earned on the cash or U.S. government securities
held as collateral, net of fee rebates paid to the borrower plus reasonable
administrative and custody fees. During the year ended May 31, 1999, the Fund
did not lend securities.
BANK LINE OF CREDIT
The Fund may participate with other funds managed by Mitchell Hutchins in a
$200 million committed credit facility ("Facility") to be utilized for temporary
financing until the settlement of sale or purchase of portfolio securities, the
repurchase or redemption of shares of the Fund at the request of the
shareholders and other temporary or emergency purposes. In connection therewith,
the Fund has agreed to pay a commitment fee, pro rata, based on the relative
asset size of the funds in the Facility. Interest is charged to the Fund at
rates based on prevailing market rates in effect at the time of borrowings. For
the year ended May 31, 1999, the Fund did not borrow under the Facility.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at May 31, 1999
was $45,762,925. At May 31, 1999, the components of net unrealized appreciation
of investments (excluding futures contracts) were as follows:
Gross appreciation (investments having an
excess of value over cost) ...................... $ 4,506,906
Gross depreciation (investments having an
excess of cost over value) ...................... (1,199,759)
Net unrealized appreciation of investments ......... $ 3,307,147
For the year ended May 31, 1999, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
Purchases .......................................... $ 39,247,926
Sales .............................................. $ 15,143,044
FEDERAL TAX STATUS
The Fund intends to distribute substantially all of its taxable income and to
comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year,
substantially all of its net investment income, capital gains and certain other
amounts, if any, the Fund intends not to be subject to a federal excise tax.
To reflect reclassifications arising from permanent "book/tax" differences
for the year ended May 31, 1999, undistributed net investment income was
increased by $14,151, accumulated net realized gains/losses was decreased by
$255,978 and capital stock was increased by $241,827.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
BENEFICIAL INTEREST
There is an unlimited number of $0.001 par value shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Class A* Class C**
-------------------------- --------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
For the year ended May 31, 1999:
Shares sold ............................... 1,409,840 $ 21,361,104 1,620,838 $ 25,846,090
Shares repurchased ........................ (285,423) (193,103) (3,095,455) (28,956
Dividends reinvested ...................... 7,508 111,868 3,149 46,857
Shares converted from Class X to Class Y -- -- -- --
---------- ------------ ---------- ------------
Net increase (decrease) ................... 1,131,925 $ 16,958,230 1,430,884 $ 22,797,492
========== ============ ========== ============
<CAPTION>
Class X*** Class Y
----------------------- --------------------------
Shares Amount Shares Amount
-------- ----------- ----------- -----------
For the year ended May 31, 1999:
Shares sold ............................... 171,810 $ 2,361,185 295,702 $ 4,490,570
Shares repurchased ........................ (28,956) (398,536) (1,026,540) (14,520,153)
Dividends reinvested ...................... -- -- 6,097 90,852
Shares converted from Class X to Class Y (198,767) (2,627,695) 198,616 2,627,695
-------- ----------- ----------- -----------
Net increase (decrease) ................... (55,913) $ (665,046) (526,125) $(7,311,036)
======== =========== =========== ===========
For the period December 31, 1997+ through May 31, 1998:
Shares sold ............................... 51,913 $725,507 910,607 $11,589,098
Shares repurchased ........................ -- -- (1,282) (18,384)
-------- ----------- ----------- -----------
Net increase .............................. 51,913 $725,507 909,325 $11,570,714
======== =========== =========== ===========
</TABLE>
- ----------
* Commencement of issuance of shares--October 2, 1998
** Commencement of issuance of shares--October 7, 1998
*** Shares of former Class A were renamed Class X and then converted into
Class Y on September 30, 1998.
+ Commencement of operations
17
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
Class A Class C Class X Class Y
------- ------- --------------------------- ----------------------
For the For the For the For the For the
Period Period Period Period Period
October 2, October 7, June 1, 1998 December 31, For the December 31,
1998+ 1998+ through 1997+ Year 1997+
through through September 30, through Ended through
May 31, May 31, 1998++ May 31, May 31, May 31,
1999 1999 (unaudited) 1998 1999 1998
------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 12.83 $ 12.80 $ 14.11 $ 12.50 $ 14.12 $ 12.50
------- ------- ------- -------- ------- -------
Net investment income ............................... 0.08* 0.02* 0.05* 0.03 0.16* 0.06
Net realized and unrealized gains (losses) from
investments and futures ............................ 4.03* 4.02* (0.94)* 1.58 2.68* 1.56
------- ------- ------- -------- ------- -------
Net increase (decrease) from investment operations .. 4.11 4.04 (0.89) 1.61 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 $ 13.22 $ 14.11 $ 16.74 $ 14.12
======= ======= ======= ======== ======= =======
Total investment return (1) ......................... 32.23% 31.77% (6.31)% 12.88% 20.30% 12.96%
======= ======= ======= ======== ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's) ................... $18,920 $23,813 $ 0 $ 789 $ 6,480 $12,892
Expenses to average net assets net of waivers and
reimbursements from adviser ........................ 0.60%** 1.35%* 0.40%* 0.40%** 0.35% 0.35%**
Expenses to average net assets before waivers and
reimbursements from adviser ........................ 1.52%** 2.24%* 1.29%** 2.25%** 1.29% 2.22%**
Net investment income to average net assets net
of waivers and reimbursements from adviser ......... 0.87%** 0.17%* 1.19%** 1.26%** 1.12% 1.41%**
Net investment income (loss) to average net assets
before waivers and reimbursements from adviser ..... (0.06)%** (0.73)%** 0.29%** (0.60)%** 0.18 (0.46)%**
Portfolio turnover rate ............................. 62% 62% 73% 1% 62% 1%
</TABLE>
- ----------
* Calculated using average daily shares outstanding for the period
** Annualized
+ Commencement of issuance of shares
++ Shares of former Class A were renamed Class X and then converted into Class Y
on September 30, 1998
(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 return for the
periods of less than one year has not been annualized.
18
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Trustees and Shareholders of
PaineWebber S&P 500 Index Fund
We have audited the accompanying statement of assets and liabilities of the
PaineWebber S&P 500 Index Fund (the "Fund"), including the portfolio of
investments, as of May 31, 1999, and the related statement of operations for the
year ended May 31, 1999, and the statements of changes in net assets and the
financial highlights for the year ended May 31, 1999 and for the period December
31, 1997 through May 31, 1998. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
investments owned at May 31, 1999 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund at May 31, 1999, the results of its operations for the year May 31, 1999,
and changes in net assets and financial highlights for the year ended May 31,
1999 and for the period December 31, 1997 through May 31, 1998, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
---------------------
New York, New York
July 22, 1999
19
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
TAX INFORMATION (unaudited)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (May 31,
1999) as to federal tax status of distributions received by shareholders during
such fiscal year. Accordingly, we are advising you that the following
distributions paid during the fiscal year are taxable and are derived from the
following sources:
Class A Class C Class Y
------- ------- -------
Per Share Data:
- ---------------
Net investment income* ......................... $ 0.12 $ 0.10 $ 0.12
Short-term capital gains* ....................... $ 0.10 $ 0.10 $ 0.10
Percentage of ordinary income dividends
qualifying for the dividends received
deduction available to corporate shareholders .. 11.98% 11.98% 11.98%
- ----------
* Taxable as ordinary income
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh
and 403(b)(7) plans) may need this information for their annual information
reporting.
Since the Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar year 1999. The second notification, which
will reflect the amount to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 2000. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in the Fund.
20
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
================================================================================
TRUSTEES
E. Garrett Bewkes, Jr.
Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
Brian M. Storms
PRINCIPAL OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Paul H. Schubert
Vice President and Treasurer
T. Kirkham Barneby
Vice President
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
A prospectus containing more complete information for any of the Funds listed on
the back cover can be obtained from a PaineWebber Financial Advisor or
corresponding firm. Read the prospectus carefully before investing.
This report is not to be used in conjunction with the offering of shares of the
Fund unless accompanied or preceded by an effective prospectus.
<PAGE>
===
PaineWebber offers a family of 27 funds which encompass a diversified range
of investment goals.
BOND FUNDS
o High Income Fund
o Investment Grade Income Fund
o Low Duration U.S. Government Income Fund
o Strategic Income Fund
o U.S. Government Income Fund
TAX-FREE BOND FUNDS
o California Tax-Free Income Fund
o Municipal High Income Fund
o National Tax-Free Income Fund
o New York Tax-Free Income Fund
STOCK FUNDS
o Financial Services Growth Fund
o Growth Fund
o Growth and Income Fund
o Mid Cap Fund
o Small Cap Fund
o S&P 500 Index Fund
o Tax-Managed Equity Fund
o Utility Income Fund
ASSET ALLOCATION FUNDS
o Balanced Fund
o Tactical Allocation Fund
GLOBAL FUNDS
o Asia Pacific Growth Fund
o Emerging Markets Equity Fund
o Global Equity Fund
o Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
o Aggressive Portfolio
o Moderate Portfolio
o Conservative Portfolio
PAINEWEBBER MONEY MARKET FUND
[PaineWebber Logo]
(Copyright) 1999 PaineWebber Incorporated
Member SIPC
[PaineWebber Logo]
==============================================
S&P 500
INDEX
FUND
Annual Report
MAY 31, 1999
