<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
For Registration Under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on Form N-8B-2
A. Exact name of Trust:
THE PAINEWEBBER PATHFINDERS TRUST,
TREASURY AND GROWTH STOCK,
SERIES 25
B. Name of Depositor:
PAINEWEBBER INCORPORATED
C. Complete address of Depositor's principal
executive office:
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas,
New York, New York 10019
D. Name and complete address of agents for service:
PAINEWEBBER INCORPORATED
Attention: Mr. Robert E. Holley
1200 Harbor Boulevard
Weehawken, N.J. 07087
copy to:
CARTER LEDYARD & MILBURN
Attention: Kathleen H. Moriarty, Esq.
2 Wall Street,
New York, NY 10005
E. Title and amount of securities being registered:
An indefinite number of Units pursuant to Rule 24f-2
under the Investment Company Act of 1940.
F. Proposed maximum aggregate offering price to
the public of the securities being registered:
Indefinite
G. Amount of filing fee, computed at one-thirty-fourth
of 1 percent of the proposed maximum aggregate
offering price to the public:
None Required
Pursuant to Rule 24f-2
H. Approximate date of proposed sale to public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF
THE REGISTRATION STATEMENT
The registrant hereby amends this Registration
Statement on such date or dates as may be necessary
to delay its effective date until the registrant
shall file a further amendment which specifically
states that this Registration Statement shall
thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
THE PAINEWEBBER PATHFINDERS TRUST,
TREASURY AND GROWTH STOCK,
SERIES 25
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction 1
as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of Trust ) Front Cover
(b) Title of securities issued )
2. Name and address of Depositor ) Back Cover
3. Name and address of Trustee ) Back Cover
4. Name and address of principal ) Back Cover
Underwriter )
5. Organization of Trust ) Nature of Trust
6. Execution and termination of ) Nature of Trust
Trust Agreement ) Termination of the Trust
7. Changes of name ) *
8. Fiscal Year ) *
9. Litigation ) *
II. General Description of the Trust
and Securities of the Trust
10. General Information regarding ) Summary of Portfolio
Trust's Securities and Rights ) Rights of Certificate-
of Holders ) holders
- ----------
*Not applicable, answer negative or not required.
<PAGE>
(a) Type of Securities ) Creation of Trust
(Registered or Bearer) )
(b) Type of Securities ) Creation of Trust
(Cumulative or Distributive) )
(c) Rights of Holders as to ) Rights of Certificate-
Withdrawal or Redemption ) holders
) Redemption of Units by
) Trustee
) The Municipal Bond Trust
) Reinvestment Program
(d) Rights of Holders as to ) Secondary Market for
conversion, transfer, etc. ) Units, Exchange Option
(e) Rights of Trust issues ) *
periodic payment plan )
certificates )
(f) Voting rights as to Secu- ) Rights of Certificate-
rities, under the Indenture ) holders
(g) Notice to Holders as to )
change in )
(1) Assets of Trust ) Amendment of the Indenture
(2) Terms and Conditions ) Supervision of Trust
of Trust's Securities ) Investments
(3) Provisions of Trust ) Amendment of the Indenture
(4) Identity of Depositor ) Administration of the
and Trustee ) Trust
(h) Consent of Security Holders )
required to change )
(1) Composition of assets ) Amendment of the Indenture
of Trust
(2) Terms and conditions ) Amendment of the Indenture
of Trust's Securities )
(3) Provisions of Indenture ) Amendment of the Indenture
(4) Identity of Depositor ) Administration of the
and Trustee ) Trust
11. Type of securities comprising ) *
periodic payment certificates )
- ----------
*Not applicable, answer negative or not required.
<PAGE>
12. (a) Load, fees, expenses, etc. ) Public Offering Price of
) Units Expenses of the
) Trust
(b) Certain information regard- ) *
ing periodic payment )
certificates )
(c) Certain percentages ) *
(d) Certain other fees, etc. ) Expenses of the Trust
payable by holders )
(e) Certain profits receivable ) Public Offering Price of
by depositor, principal ) Units
underwriters, trustee or ) Public Offering of Units
affiliated persons )
(f) Ratio of annual charges ) *
to income )
13. Issuance of trust's securities ) Nature of the Trust
) Public Offering of Units
14. Receipt and handling of ) *
payments from purchasers )
15. Acquisition and disposition of ) Acquisition of Securities
underlying securities ) for the Trust Supervision
) of Trust Investments
16. Withdrawal or redemption ) Redemption of Units by
) Trustee
17. (a) Receipt and disposition of ) Distributions to Certifi-
income ) cateholders
(b) Reinvestment of )
distributions ) *
(c) Reserves or special fund ) Distributions to Certifi-
) cateholders
(d) Schedule of distribution ) *
18. Records, accounts and report ) Statements to Certificate-
) holders Administration of
) the Trust
- ----------
*Not applicable, answer negative or not required.
<PAGE>
19. Certain miscellaneous ) Administration of the
provisions of trust agreement ) Trust
20. Loans to security holders ) *
21. Limitations on liability ) Limitation of Liabilities
22. Bonding arrangements ) Included in Form N-8B-2
23. Other material provisions of ) *
trust agreement )
III. Organization Personnel and
Affiliated Persons of Depositor
24. Organization of Depositor ) Sponsor
25. Fees received by Depositor ) Public Offering Price of
) Units Expenses of the
) Trust
26. Business of Depositor ) Sponsor
27. Certain information as to ) Sponsor
officials and affiliated )
persons of Depositor )
28. Voting securities of Depositor ) *
29. Persons controlling Depositor ) Sponsor
30. Payments by Depositor for ) *
certain other services trust )
31. Payments by Depositor for ) *
certain other services )
rendered to trust )
32. Remuneration of employees of ) *
Depositor for certain services )
rendered to trust )
33. Remuneration of other persons ) *
for certain services rendered )
to trust )
- ----------
*Not applicable, answer negative or not required.
<PAGE>
IV. Distribution and Redemption of Securities
34. Distribution of trust's ) Public Offering of Units
securities by states )
35. Suspension of sales of trust's ) *
securities )
36. Revocation of authority to ) *
distribute )
37. (a) Method of distribution ) Public Offering of Units
(b) Underwriting agreements )
(c) Selling agreements )
38. (a) Organization of principal ) Sponsor
underwriter )
(b) N.A.S.D. membership of ) Sponsor
principal underwriter )
39. Certain fees received by ) Public Offering Price of
principal underwriter ) Units
40. (a) Business of principal ) Sponsor
underwriter )
(b) Branch officers of )
principal underwriter )
(c) Salesman of principal ) *
underwriter )
41. Ownership of trust's securities ) *
by certain persons )
42. Certain brokerage commissions ) *
received by principal )
underwriter )
43. (a) Method of valuation ) Public Offering Price
) Units
(b) Schedule as to offering ) *
price )
(c) Variation in offering ) Public Offering
price to certain persons ) Units
44. Suspension of redemption rights ) *
- ----------
*Not applicable, answer negative or not required.
<PAGE>
45. (a) Redemption valuation ) Redemption of Units by
) Trustee
(b) Schedule as to redemption ) *
price )
V. Information concerning the Trustee or Custodian
46. Maintenance of position in ) Secondary Market for Units
underlying securities ) Redemption of Units by
) Trustee
) Evaluation of the Trust
47. Organization and regulation of ) Administration of the
Trustee ) Trust Trustee
48. Fees and expenses of Trustee ) Expenses of the Trust
49. Trustee's lien ) Expenses of the Trust
VI. Information concerninq Insurance of Holders of Securities
50. (a) Name and address of ) *
Insurance Company )
(b) Type of policies ) *
(c) Type of risks insured and ) *
excluded )
(d) Coverage of policies ) *
(e) Beneficiaries of policies ) *
(f) Terms and manner of ) *
cancellation )
(g) Method of determining ) *
premiums )
(h) Amount of aggregate ) *
premiums paid )
(i) Who receives any part of ) *
premiums )
(j) Other material provisions ) *
of the Trust relating to )
insurance )
- ----------
*Not applicable, answer negative or not required.
<PAGE>
VII. Policy of Registrant
51. (a) Method of selecting and ) Acquisition of Securities
eliminating securities ) for the Trust
from the Trust )
(b) Elimination of securities ) *
from the Trust )
(c) Policy of Trust regarding ) Supervision of Trust
substitution and elimina- ) Investment
tion of securities )
(d) Description of any funda- ) Acquisition of Securities
mental policy of the Trust ) for the Trust
) Supervision of Trust
) Investments
52. (a) Taxable status of the Trust ) Tax status of the Trust
(b) Qualification of the Trust ) Tax status of the Trust
as a mutual investment )
company )
VIII. Financial and Statistical Information
53. Information regarding the ) *
Trust's past ten fiscal years )
54. Certain information regarding ) *
periodic payment plan certifi- )
cates )
55. Certain information regarding ) *
periodic payment plan certifi- )
cates )
56. Certain information regarding ) *
periodic payment plan certifi- )
cates )
57. Certain information regarding ) *
periodic payment plan certifi- )
cates )
58. Financial statements ) Statement of Financial
(Instruction 1(c) to Form S-6) ) Condition
- ----------
*Not applicable, answer negative or not required.
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d)
of the Securities Exchange Act of 1934, the undersigned
registrant hereby undertakes to file with the Securities and
Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by
any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that
section.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO THE REGISTRATION STATEMENT OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH JURISDICTION.
Subject to Completion, Dated March 17, 1999
PAINEWEBBER PATHFINDERS TRUST
Treasury and Growth Stock Series 25
[GRAPHIC OMITTED]
(A Unit Investment Trust)
- --------------------------------------------------------------------------------
PORTFOLIO OF "ZERO-COUPON" U.S. TREASURY OBLIGATIONS AND COMMON STOCKS
DESIGNED FOR PRESERVATION OF CAPITAL AND POTENTIAL CAPITAL APPRECIATION
- --------------------------------------------------------------------------------
THIS PROSPECTUS CONSISTS OF TWO PARTS: PART A AND PART B. PARTS A AND B SHOULD
BOTH BE ATTACHED FOR THIS PROSPECTUS TO BE COMPLETE.
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS
ABOUT THIS TRUST NOT CONTAINED IN THIS PROSPECTUS, AND YOU SHOULD NOT RELY ON
ANY OTHER INFORMATION. READ AND KEEP BOTH PARTS OF THIS PROSPECTUS FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------
SPONSOR:
PAINEWEBBER INCORPORATED
PROSPECTUS DATED , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART A PAGE
----
Brief Description of the Trust's Investment Portfolio ............ A-3
ls this Trust Appropriate for You? ............................... A-4
Summary of Risks ................................................. A-4
Essential Information Regarding the Trust ........................ A-7
Report of Independent Auditors ................................... A-9
Statement of Net Assets .......................................... A-10
Schedule of Investments .......................................... A-11
PART B
The Trust's Objective ............................................ B-1
The Composition of the Portfolio ................................. B-1
Trust ............................................................ B-4
Risk Factors and Special Considerations .......................... B-5
Federal Income Taxes ............................................. B-8
Public Offering of Units ......................................... B-10
Public Offering Price ........................................... B-10
Sales Charge and Volume Discount ................................ B-11
Employee Discount ............................................... B-13
Exchange Option ................................................. B-13
Conversion Option ............................................... B-14
Distribution of Units ........................................... B-15
Secondary Market for Units ...................................... B-15
Sponsor's Profits ............................................... B-15
Redemption ....................................................... B-16
Valuation ........................................................ B-17
Comparison of Public Offering Price and Redemption Value ......... B-18
Expenses of the Trust ............................................ B-18
Rights of Unitholders ............................................ B-19
Distributions .................................................... B-20
Administration of the Trust ...................................... B-20
Accounts ........................................................ B-20
Reports and Records ............................................. B-20
Portfolio Supervision ........................................... B-21
Reinvestment .................................................... B-22
Amendment of the Indenture ....................................... B-22
Termination of the Trust ......................................... B-22
Sponsor .......................................................... B-23
Trustee .......................................................... B-23
Independent Auditors ............................................. B-24
Legal Opinions ................................................... B-24
</TABLE>
A-2
<PAGE>
BRIEF DESCRIPTION OF THE TRUST'S INVESTMENT PORTFOLIO
1. THE TRUST'S OBJECTIVE.
The Trust seeks to provide preservation of capital and potential capital
appreciation through an investment in a portfolio of stripped "zero-coupon"
United States Treasury obligations maturing on and common stocks.
Because the maturity value of the Treasury Obligations is backed by the
full faith and credit of the United States, the Sponsor believes that the
Trust provides an attractive combination of safety and appreciation for
purchasers who hold Units until , the Trust's "Mandatory Termination
Date".
As of the date of this Prospectus Part A, % of the Trust's Portfolio is
invested in interest-only portions of United States Treasury obligations
and the remaining % was invested in common stocks as described briefly
below.
The stripped "zero-coupon" U.S. Treasury Obligations make no payment of
current interest, but rather make a single payment upon their stated
maturity. PaineWebber chose the stocks in the Trust's Portfolio for their
capital appreciation potential, not for their income potential. Many of the
stocks currently pay little or no dividend income.
The Trust has been formulated so that the portion of the Trust invested in
stripped Treasury Obligations is designed to provide an approximate return
of principal invested on the Mandatory Termination Date for purchasers on
the Initial Date of Deposit. (See "Essential Information-- Distributions".)
Therefore, even if the Stocks are valueless upon termination of the Trust,
and if the Treasury Obligations are held until their maturity in proportion
to the Units outstanding, purchasers will receive, at the termination of
the Trust, $1,000 per 1,000 Units purchased. This feature of the Trust
provides that Unitholders who purchased their Units at or below $1,000 per
1,000 Units and who hold their units to the Mandatory Termination Date will
receive the same amount as they originally invested, although they would
have foregone earning any interest on the amounts involved and will not
protect their principal on a present value basis, assuming the Stocks are
valueless.
2. BRIEF DESCRIPTION OF THE TRUST'S PORTFOLIO.
The Trust is a unit investment trust which means that, unlike a mutual
fund, the Trust's Portfolio is not managed and the Trust Portfolio's
investments are not sold because of market changes.
Unless terminated sooner, the Trust is scheduled to terminate on or about
regardless of market conditions at the time. The Trust plans to hold
until its termination the U.S. Treasury obligations maturing and a
diversified group of stocks, all as shown on the "Schedule of Investments"
in this Prospectus Part A.
The main objective of PaineWebber in constructing the portfolio of stocks
to be included in the Trust is to select a group of stocks which, in
PaineWebber's view, would be capable of, over the long term, closely
tracking the performance of the market as measured by the S&P 500. The S&P
500 is an unmanaged index of 500 stocks calculated under the auspices of
Standard & Poor's, which, in PaineWebber's view, is a broadly diversified,
representative segment of the market of all publicly traded stocks in the
United States.
In constructing the Trust's Portfolio, a computer program was generated
against the 500 S&P stocks to identify a combination of 35 S&P 500 stocks
(excluding General Electric and those stocks rated "Unattractive" or "Sell"
by PaineWebber Equity Research) which, when equally weighted, have the
highest correlation with the S&P 500 Index with the smallest tracking
error.
A-3
<PAGE>
[As of , 1999, the Trust Portfolio holds * stocks, of which are
in the .]
The common stocks in the Trust's Portfolio have been issued by companies
who receive income and derive revenues from multiple industry sources, but
whose primary industry is listed in the "Schedule of Investments" in this
Prospectus Part A. [A brief description of these issuers can be found in
Part B of this Prospectus.]
<TABLE>
<CAPTION>
APPROXIMATE PERCENT
OF AGGREGATE
PRIMARY INDUSTRY SOURCE MARKET VALUE OF THE TRUST
<S> <C>
%
</TABLE>
IS THIS TRUST APPROPRIATE FOR YOU?
Yes, if you are a long-term investor seeking capital protection combined
with potential capital appreciation over the life of the Trust. You will
benefit from a professionally selected portfolio whose risk is reduced by
investing in stocks of several different issuers.
No, if you want a speculative investment that changes to take advantage of
market movements, if you are unable or unwilling to assume the risks involved
generally with equity investment or if you need current income.
SUMMARY OF RISKS
YOU CAN LOSE MONEY BY INVESTING IN THE TRUST. This can happen for various
reasons. A further discussion of the risks summarized below can be found in
Part B of this Prospectus.
1. RISKS OF INVESTING IN THE TRUST
Certain risks are involved with an investment in a unit trust which holds
stripped "zero-coupon" U.S. Treasury Obligations and common stocks. For
example:
The Trust, unlike a mutual fund, is not "managed", so neither the U.S.
Treasury Obligations nor the stocks will be sold by the Trust to take
advantage of market fluctuations.
The Trust Portfolio may not remain constant during the life of the Trust.
The Trustee is required to sell stocks to reimburse the Sponsor for initial
costs incurred in organizing the Trust, may be required to sell stocks to
pay Trust expenses, to tender stocks under certain circumstances or to sell
stocks in the event certain negative events occur.
The sale of stocks from the Trust in the period prior to termination and
upon termination may result in a lower amount than might otherwise be
realized if such sale were not required at such time due to impending or
actual termination of the Trust. For this reason, among others, the amount
you receive upon termination may be less than the amount you paid.
A-4
<PAGE>
If many investors sell their Units, the Trust will have to sell Portfolio
Securities. This could reduce the diversification of your investment and
increase your share of Trust expenses.
The price of your Units depends upon the full range of economic and market
influences including the prices of bonds and equity securities, current
interest rates, the condition of the bond and stock markets and other
economic influences that affect the global or United States economy.
Assuming no changes occur in the prices of the U.S. Treasury Obligations
and the stocks held by the Trust, the price you paid for your Units will
generally be less than the price you paid because your purchase price
included a sales charge.
The stocks in the Trust's Portfolio will generally trade on a domestic
stock exchange or in the over- the-counter market. We cannot assure you
that a liquid trading market will exist. The value of the Trust's
Portfolio, and of your investment, may be reduced if trading in one or more
stocks is limited or absent.
Additional stocks and U.S. Treasury Obligations may be acquired by the
Trust when additional Units are to be offered to the public. Costs incurred
in acquiring such additional stocks and Treasury Obligations will be borne
by the Trust. Unitholders will experience a dilution of their investment as
a result of such brokerage fees and other expenses paid by the Trust during
the additional deposits of securities purchased by the Trustee with cash or
cash equivalents.
INVESTING ALWAYS INVOLVES RISK. The risks described below are the most
significant risks associated with investing in the U.S. Treasury Obligations
and stocks held by the Trust.
2. RISKS OF INVESTING IN STRIPPED "ZERO-COUPON" U.S. TREASURY OBLIGATIONS
The value of the stripped Treasury Securities in the Trust may increase or
decrease depending upon market and economic conditions. Also, the Trust's
stripped Treasury Securities are purchased at a deep discount and do not
make any periodic payments of interest. Instead, the entire payment of
proceeds will be made upon maturity of such Treasury Obligations. Owners of
deep discount bonds which make no current interest payments earn a fixed
yield not only on the original investment but also on all earned discount
during the life such obligation. This implicit reinvestment of earnings at
the same, fixed rate eliminates the owner's ability to reinvest at higher
rates in the future. For this reason, sale of Units prior to the
termination date of the Trust will involve substantially greater price
fluctuations during periods of changing market interest rates than would be
experienced in connection with sale of Units of a Trust which held Treasury
Obligations which made scheduled interest payments on a current basis.
3. RISKS OF INVESTING IN STOCKS
Holders of common stocks such as those held by the Trust have rights that
are generally inferior to the holders of debt obligations or preferred
stocks.
Common stocks are not obligations of the issuer. Therefore, they do not
provide any assurance of income or provide the degree of protection of debt
securities.
The stocks held by the Trust can be expected to fluctuate in value
depending on a wide variety of factors, such as economic and market
influences affecting corporate profitability, financial condition of
issuers, changes in worldwide or national economic conditions, the prices
of equity securities in general and the Trust's stocks in particular.
A-5
<PAGE>
Certain of the stocks in the Trust may be American Depositary Receipts or
"ADRs" which are subject to additional risks. (See "Schedule of
Investments" herein.) ADRs are subject to certain investment risks that are
different from those experienced by Stocks issued by domestic issuers.
These investment risks include potential future political and economic
developments and the potential establishment of exchange controls, new or
higher levels of taxation, or other governmental actions which might
adversely affect the payment or receipt of payment of dividends on the
common stock of foreign issuers underlying such ADRS. ADRs may also be
subject to current foreign taxes, which could reduce the yield on such
securities.
The securities underlying the ADRs held in the Trust are generally
denominated, and pay dividends, in foreign currency and are therefore
subject to currency exchange rate risk. Currency exchange rate risk occurs
because the U.S. dollar value of the shares underlying the ADRs and of
their dividends will vary with the fluctuations in the U.S. dollar foreign
exchange rates for the relevant currency in which the shares underlying the
ADRs are denominated. Exchange rate fluctuations are dependent on a number
of economic factors including the world economy and the economic conditions
within the relevant country, supply and demand of the relevant currency,
interest rate differentials between currencies, the balance of imports and
exports of goods and services, monetary and fiscal policies of the relevant
country, perceived political stability and investor psychology, especially
that of institutional investors predicting the future relative strength or
weakness of a particular currency.
YEAR 2000 PROBLEM RISK
Many computer systems were designed in such a way that they may be unable
to distinguish between the year 2000 and the year 1900 and therefore may not
properly process and calculate date-related information and data (commonly
known as the "Year 2000 Problem"). As with all investment and financial
companies, the Year 2000 Problem may have an adverse impact upon the Trust. The
Sponsor and the Trustee are taking steps to address the Year 2000 Problem with
respect to the computer systems they use and to obtain reasonable assurances
that similar steps are being taken by the Trust's other service providers. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Trust. The year 2000 Problem is
expected to have an impact on all corporations, including those whose stocks
are contained in the Trust's Portfolio. The Sponsor cannot predict what impact,
if any, the year 2000 Problem will have on the stocks in the Trust.
A-6
<PAGE>
ESSENTIAL INFORMATION REGARDING THE TRUST
AS OF , 1999+
<TABLE>
<CAPTION>
<S> <C>
Initial Date of Deposit: , 1999
Aggregate Value of Securities in Trust: ...................... $
Number of Units: ............................................. 1,000,000
Fractional Undivided Interest in the Trust Represented by
Each Unit: .................................................. 1/1,000,000th
Calculation of Public Offering Price Per Unit*
Public Offering Price per Unit .............................. $ 1.00
Less Reimbursement to Sponsor for Initial Organizational
Costs*** .................................................. $
Less Initial Sales Charge++ of 4.75% of Public Offering
Price (4.99% of net amount invested per Unit) ............. $
Net Asset Value per Unit .................................... $
Net Asset Value for 1,000,000 Units ......................... $
Divided by 1,000,000 Units .................................. $
Redemption Value:+++ ........................................... $
Evaluation Time: ............................................... 4:00 P.M. New York time.
Distribution Dates**: .......................................... Quarterly, commencing
, 1999.
Record Date: ................................................... , 1999, and quarterly
thereafter.
Mandatory Termination Date: .................................... (15 days after
maturity of the Treasury
Obligations).
Discretionary Liquidation Amount: .............................. 20% of the value of the Securities
upon completion of the deposit
of the Securities.
Estimated Initial Organizational Costs of the Trust*** ......... $ per Unit.
Estimated Annual Expenses of the Trust****: .................... $ per Unit.
</TABLE>
- ----------
* On the date of this Prospectus (the "Initial Date of Deposit"), the
Public Offering Price is based on the value of the Securities as of the
close of business on (the business day preceding the Initial Date of
Deposit). However, if the public offering price determined with reference
to values of the Securities as of the close of business on the Initial
Date of Deposit is less than $.975 per Unit, the purchase orders received
on the Initial Date of Deposit will be filled on the basis of such lower
price. Beginning , 1999, the Public Offering Price will be based on
the value of the Securities next computed following receipt of the
purchase order plus the applicable sales charge. (See "Valuation").
** No distributions of less than $.0050 per Unit need be made from the
Capital Account on any Distribution Date. See "Distributions".
*** Investors purchasing Units during the initial offering period will
reimburse the Sponsor for all or a portion of the costs incurred by the
Sponsor in connection with organizing the Trust and offering the Units for
sale described more fully in "Public Offering Price" (collectively, the
"Initial Organizational Costs"). These costs have been estimated at $
per Unit based upon the expected number of Units to be created during the
initial offering period. Certain Securities purchased with the proceeds of
the Public Offering Price will be sold by the Trustee at the completion of
the initial public offering period to reimburse the Sponsor for Initial
Organizational Costs actually incurred. If the actual Initial
Organizational Costs are less than the estimated amount, only the actual
Initial Organizational Costs will be deducted from the assets of the
Trust. If, however, the amount of the actual Initial Organizational Costs
are greater than the estimated amount, only the estimated amount of the
Initial Organizational Costs will be deducted from the assets of the
Trust.
continued on page A-8
A-7
<PAGE>
ESSENTIAL INFORMATION REGARDING THE TRUST (CONTINUED)
**** See "Expenses of the Trust". Estimated dividends from the Stocks, based
upon last dividends actually paid, are expected by the Sponsor to be
sufficient to pay estimated annual expenses of the Trust. If such
dividends paid are insufficient to pay such annual expenses, the Trustee
is authorized to sell Securities in an amount sufficient to pay such
expenses. (See "Administration of the Trust" and "Expenses of the
Trust".)
+ The date prior to the Initial Date of Deposit.
++ The sales charge will not be assessed on these Securities sold to
reimburse the Sponsor for the Initial Organizational Costs.
+++ This figure reflects deduction of the maximum Sales Charges of $ per
Unit. As of the close of the initial offering period, the Redemption Value
will be reduced to reflect the payment of Initial Organizational Costs
(see "Summary of Risk Factors" and "Comparison of Public Offering Price
and Redemption Value").
A-8
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSOR AND TRUSTEE
THE PAINEWEBBER PATHFINDERS TRUST,
TREASURY AND GROWTH STOCK SERIES 25
We have audited the accompanying Statement of Net Assets of The
PaineWebber Pathfinders Trust, Treasury and Growth Stock Series 25,
including the Schedule of Investments, as of , 1999. This
financial statement is the responsibility of the Trustee. Our
responsibility is to express an opinion on this financial statement
based on our audit.
We conducted our audit 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 statement is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statement. Our procedures included confirmation with Investors Bank &
Trust Company, Trustee, of an irrevocable letter of credit deposited
for the purchase of securities, as shown in the financial statement as
of , 1999. An audit also includes assessing the accounting
principles used and significant estimates made by the Trustee, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the financial position of The
PaineWebber Pathfinders Trust, Treasury and Growth Stock Series 25 at
, 1999, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
______________, 1999
A-9
<PAGE>
THE PAINEWEBBER PATHFINDERS TRUST,
TREASURY AND GROWTH STOCK SERIES 25
STATEMENT OF NET ASSETS
AS OF INITIAL DATE OF DEPOSIT,_________, 1999
<TABLE>
<CAPTION>
<S> <C>
NET ASSETS
----------
Sponsor's Contracts to Purchase underlying Securities backed by
irrevocable letter of credit (a) ................................. $
Reimbursement to Sponsor for Initial Organizational Costs (b) ..... ( )
--------
Total ......................................................... $
========
Units outstanding: ................................................ 1,000,000
ANALYSIS OF NET ASSETS
----------------------
Cost to investors (c) ............................................ $1,000,000
Less: Gross underwriting commissions (d) ......................... ( )
Reimbursement to Sponsor for Initial Organizational Costs ( )
----------
Net Assets .................................................... $
==========
</TABLE>
- ----------
(a) The aggregate cost to the Trust of the securities listed under
"Schedule of Investments" is determined by the Trustee on the basis set forth
above under "Public Offering of Units--Public Offering Price." See also the
column headed Cost of Securities to Trust under "Schedule of Investments."
Pursuant to contracts to purchase securities, an irrevocable letter of credit
drawn on , in the amount of $ has been deposited with the
Trustee, Investors Bank & Trust Company for the purchase of $ aggregate
value of Securities in the initial deposit and for the purchase of Securities
in subsequent deposits.
(b) Investors purchasing Units during the initial offering period will
reimburse the Sponsor for all or a portion of the costs incurred by the Sponsor
in connection with organizing the Trust and offering the Units for sale as
described more fully in "Public Offering Price" (collectively, the "Initial
Organizational Costs"). These costs have been estimated at $ per Unit based
upon the expected number of Units to be created during the initial offering
period. Certain Securities purchased with the proceeds of the Public Offering
Price will be sold by the Trustee at the completion of the initial public
offering period to reimburse the Sponsor for Initial Organizational Costs
actually incurred. If the actual Initial Organizational Costs are less than the
estimated amount, only the actual Initial Organizational Costs will be deducted
from the assets of the Trust. If, however, the amount of the actual Initial
Organizational Costs are greater than the estimated amount, only the estimated
amount of the Initial Organizational Costs will be deducted from the assets of
the Trust.
(c) The aggregate public offering price is computed on the basis set forth
under "Public Offering of Units--Public Offering Price."
(d) Sales charge of 4.75% of the Public Offering Price per Unit is
computed on the basis set forth under "Public Offering of Units--Sales Charge
and Volume Discount."
A-10
<PAGE>
THE PAINEWEBBER PATHFINDERS TRUST
TREASURY AND GROWTH STOCK SERIES 25
SCHEDULE OF INVESTMENTS
AS OF INITIAL DATE OF DEPOSIT,_________, 1999
<TABLE>
<CAPTION>
COST OF
SECURITIES
NAME OF SECURITY COUPON MATURITY VALUE MATURITY DATE TO TRUST(2)
---------------- ------ -------------- ------------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury Interest
Payments (3) ( %) ......... 0% $1,000,000 $
</TABLE>
COMMON STOCKS ( %) (1)
<TABLE>
<CAPTION>
COST OF
NUMBER OF SECURITIES
NAME OF ISSUER SHARES TO TRUST(2)
-------------- --------- -----------
<S> <C> <C>
TOTAL COMMON STOCKS ......... $
----------
TOTAL INVESTMENTS ........... $
==========
</TABLE>
- ----------
(1) All Securities are represented entirely by contracts to purchase
Securities.
(2) Valuation of Securities by the Trustee was made as described in
"Valuation" as of the close of business on the business day prior to the
Initial Date of Deposit. The bid side evaluation of the Treasury
Obligations on the business day prior to the Initial Date of Deposit was
$ .
(3) This security does not pay interest. On the maturity date thereof, the
entire maturity value becomes due and payable. Generally, a fixed yield
is earned on such security which takes into account the semi-annual
compounding of accrued interest. (See "The Trust" and "Federal Income
Taxes" herein.)
(4) The gain [loss] to the Sponsor on the Initial Date of Deposit is $ .
* Non-income producing.
+ These shares are U.S. dollar denominated and pay dividends in U.S.
dollars but are subject to investment risks generally facing common
stocks of foreign issuers. (See "Risk Factors and Special
Considerations.")
A-11
<PAGE>
PAINEWEBBER PATHFINDERS TRUST
TREASURY AND GROWTH STOCK SERIES 25
PROSPECTUS PART B
- -------------------------------------------------------------------------------
PART B OF THIS PROSPECTUS MAY NOT BE DISTRIBUTED
UNLESS ACCOMPANIED BY PART A.
Part B contains a description of the important features of the PaineWebber
Pathfinders Trust Treasury and Growth Stock Series 25 and also includes a more
detailed discussion of the investment risks that a Unitholder might face while
holding Trust Units.
THE TRUST'S OBJECTIVE
The objective of the PaineWebber Pathfinders Trust, Treasury and Growth
Stock Series 24 (the "Trust") is preservation of capital and capital
appreciation through an investment in the principal or interest portions of
stripped "zero-coupon" United States Treasury notes or bonds as the case may be
(the "Treasury Obligations"), and equity stocks (the "Stock" or "Stocks", and
together with the Treasury Obligations, the "Securities") which, in Sponsor's
opinion on the Initial Date of Deposit, have potential for capital
appreciation. The stripped Treasury Obligations in the Trust portfolio are
interest-only portions of United States Treasury Obligations (as further
discussed under "Risk Factors and Special Considerations"), maturing May 15,
2012 and which represent approximately 52% of the aggregate market value of the
Trust portfolio. The Stocks represent approximately 48% of the aggregate market
value of the Trust portfolio. The stripped Treasury Obligations, as discussed
below, make no payment of current interest, but rather make a single payment
upon their stated maturity. Because the maturity value of the Treasury
Obligations is backed by the full faith and credit of the United States, the
Sponsor believes that the Trust provides an attractive combination of safety
and appreciation for purchasers who hold Units until the Trust's termination.
The Trust has been formulated so that the portion of the Trust invested in
stripped Treasury Obligations is designed to provide an approximate return of
principal invested on the Mandatory Termination Date for purchasers on the
Initial Date of Deposit. (See "Essential Information--Distributions".)
Therefore, even if the Stocks are valueless upon termination of the Trust, and
if the Treasury Obligations are held until their maturity in proportion to the
Units outstanding, purchasers will receive, at the termination of the Trust,
$1,000 per 1,000 Units purchased. This feature of the Trust provides that
Unitholders who purchased their units (the "Units") at or below $1,000 per
1,000 Units and who hold their units to the Mandatory Termination Date of the
Trust on May 30, 2012 will receive the same amount as they originally invested,
although they would have foregone earning any interest on the amounts involved
and will not protect their principal on a present value basis, assuming the
Stocks are valueless. Therefore, the Trust may be an attractive investment to
those persons who buy their Units during the initial offering period and hold
such Units throughout the life of the Trust until the Trust matures.
THE COMPOSITON OF THE PORTFOLIO
PaineWebber understands the importance of long-term financial goals such
as planning for retirement, funding a child's education, or trying to build
wealth toward some other objective.
In PaineWebber's view, one of the most important investment decisions an
investor faces may be determining how to best allocate his investments to
capture growth opportunities without exposing his
B-1
<PAGE>
portfolio to undue risk. For long-term capital growth, many investment experts
recommend stocks. As with all investments, the higher return potential of
equities is typically associated with higher risk. With this in mind,
PaineWebber designed a portfolio to meet the needs of investors interested in
building wealth prudently over a long-term time horizon by pairing the security
of U.S. Treasury bonds with the growth potential of equity securities. The
Trust is a balanced portfolio with approximately equal portions in U.S.
Treasury bonds and equity securities. Therefore, should interest rates decline
significantly prior to maturity, there is a potential for achieving greater
returns by liquidating the portfolio before the final maturity date.
Unitholders can sell units at any time at the then current net asset value with
no additional sales charge. (See "Public Offering of Units--Secondary Market
for Units and Redemption".)
PaineWebber's main objective in constructing the portfolio of Stocks to be
included in the Trust was to select a group of stocks which, in PaineWebber's
view, would be capable of, over the long term, closely tracking the performance
of the market as measured by the "S&P 500 Index". The S&P 500 Index is an
unmanaged index of 500 stocks the value of which is calculated by Standard &
Poor's Corporation, which index, in PaineWebber's view, is a broadly
diversified, representative segment of the market of all publicly traded stocks
in the United States.
In constructing the Trust's portfolio, a computer program was generated
against the 500 S&P Index stocks to identify a combination of S&P 500 Index
stocks (excluding General Electric and those stocks rated "Unattractive" or
"Sell" by PaineWebber Equity Research) which, when equally weighted, are highly
correlated (97%) with the S&P 500 Index within a 3% tracking error.
The Trust portfolio, in PaineWebber's opinion, is comprised of a
diversified group of large, well-known companies representing various
industries. These are common stocks issued by companies who may receive income
and derive revenues from multiple industry sources but whose primary source is
listed in the table below. For a list of the individual common stocks
comprising each industry group, investors should consult the "Schedule of
Investments" in Part A above.
The Sponsor anticipates that, based upon last dividends actually paid,
dividends from the Stock will be sufficient (i) to pay expenses of the Trust
(see "Expenses of the Trust"), and (ii) after such payment, to make
distributions of such dividends to Unitholders as described below under
"Distributions".
Additional Deposits. After the initial deposit on the Initial Date of
Deposit the Sponsor may, from time to time, cause the deposit of additional
Securities in the Trust where additional Units are to be offered to the public,
replicating the original percentage relationship between the maturity values of
the Treasury Obligations and the number of shares of the Stocks deposited on
the Initial Date of Deposit, subject to certain adjustments. The Trustee
purchases additional Securities with cash or cash equivalents based on
instructions to purchase such Securities. Costs incurred in acquiring
additional Stocks which are either not listed on any national securities
exchange or are ADRs, including brokerage fees, stamp taxes and certain other
costs associated with purchasing such additional Stocks, will be borne by the
Trust. Investors purchasing Units during the initial public offering period
will experience a dilution of their investment as a result of the payment of
brokerage fees and other expenses paid by the Trust when the Trustee makes
additional deposits of Securities. (See "The Trust" and "Risk Factors and
Special Considerations".)
Termination. As directed by the Sponsor, approximately 30 days prior to
the Mandatory Termination Date the Trustee will begin to sell the Stocks held
in the Trust. Stocks having the greatest amount of capital appreciation will be
sold first. In certain circumstances, and if there is no regulatory impediment,
monies held upon the sale of Securities may, at the direction of the Sponsor,
be invested for the benefit of Unitholders in United States Treasury
obligations which mature on or prior to the next distribution
B-2
<PAGE>
date ("Short-Term Treasury Obligations," and together with the Stocks and the
Treasury Obligations, the "Securities") (see "Administration of the
Trust--Reinvestment"). Otherwise, cash received by the Trust upon the sale or
maturity of Securities will be held in non-interest bearing accounts (created
under the Indenture) until distributed and will be of benefit to the Trustee.
During the term of the Trust, Securities will not be sold to take advantage of
market fluctuations. The Trust will terminate within 15 days after the Treasury
Obligations mature. (See "Termination of the Trust and "Federal Income Taxes".)
Public Offering Price. The Public Offering Price per Unit is computed by
dividing the Trust Fund Evaluation by the number of Units outstanding and then
adding a sales charge of 4.75% of the Public Offering Price (4.99% of the net
amount invested). The sales charge is reduced after the second year and is also
reduced on a graduated scale for sales involving at least $50,000 or 50,000
Units and will be applied on whichever basis is more favorable to the
purchaser. (See "Public Offering of Units--Sales Charge and Volume Discount".)
The public offering price on the Initial Date of Deposit is determined on
the basis of the value of the Securities as of the close of business on the
preceding business day (i.e., by "backward pricing") under an exemptive order
of the Securities and Exchange Commission (the "SEC"), which applies only to
purchase orders received on the Initial Date of Deposit. As a condition of that
order, however, if the public offering price based on the value of the
Securities as of the close of business on the Initial Date of Deposit (i.e., by
"forward pricing") would be less than $.975 per Unit, then purchase orders
received on that day will be filled on the basis of the lower public offering
price. The Public Offering Price on any day subsequent to the Initial Date of
Deposit will vary from the Public Offering Price set forth on page 2. In
addition, during the initial public offering period, the Public Offering Price
will include an amount sufficient to reimburse the Sponsor for the payment of
all or a portion of the Initial Organizational Costs described more fully in
"Public Offering Price".
Distributions. The Trustee will distribute any net income and principal
received in excess of $.00500 per Unit quarterly on the Distribution Dates.
(See "Distributions".) Income with respect to the original issue discount on
the Treasury Obligations will not be distributed although Unitholders will be
subject to income tax at ordinary income tax rates as if a distribution had
occurred. (See "Federal Income Taxes".) Upon termination of the Trust, the
Trustee will distribute to each Unitholder his pro rata share of the Trust's
assets, less expenses. The sale of Stocks in the Trust in the period prior to
termination and upon termination may result in a lower amount than might
otherwise be realized if the sale were not required at such time due to
impending or actual termination of the Trust. For this reason, among others,
the amount realized by a Unitholder upon termination of the Trust may be less
than the amount paid by the Unitholder. Unless a Unitholder purchases Units on
the Initial Date of Deposit and unless the Treasury Obligations are maintained
in proportion to the Units created on the Initial Date of Deposit, total
distributions, including distributions made upon termination of the Trust, may
be less than the amount paid for a Unit by a Unitholder.
Market for Units. The Sponsor, though not obligated to do so, presently
intends to maintain a secondary market for Units based upon the value of the
Stocks and the Treasury Obligations as determined by the Trustee as set forth
under "Valuation". The public offering price in the secondary market will be
based upon the value of the Securities next determined after receipt of a
purchase order plus the applicable sales charge. (See "Public Offering of
Units--Public Offering Price" and "Valuation".) If a secondary market is not
maintained, a Unitholder may dispose of his Units only through redemption. For
redemption requests in excess of $100,000, the Sponsor may determine in its
sole discretion to direct the Trustee to redeem units "in kind" by distributing
Securities in lieu of cash to the redeeming Unitholder as directed by the
Sponsor. (See "Redemption".)
B-3
<PAGE>
TRUST
The Trust is one of a series of similar but separate unit investment
trusts created by the Sponsor under a Trust Indenture and Agreement* (the
"Indenture") dated as of the Initial Date of Deposit, among PaineWebber
Incorporated, as Sponsor, and the Investors Bank & Trust Company, as Trustee
(the "Trustee"). The objective of the Trust is preservation of capital and
capital appreciation through an investment in Treasury Obligations and Stocks.
These Stocks are equity securities which, in the Sponsor's opinion on the
Initial Date of Deposit, are capable, over the long term, of closely tracking
the performance of the public market for equity securities as measured by the
S&P 500 Index. The Stocks contained in the Trust are representative of a number
of different industries. Dividends received by the Trust, if any, may be
invested in Short-Term Treasury Obligations (if there is no regulatory
impediment). Otherwise, such dividends will be held by the Trustee in
non-interest bearing accounts until used to pay annual expenses or distributed
to Unitholders on the next Distribution Date and to the extent that funds are
held in such accounts such funds will benefit the Trustee.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
confirmations of contracts for the purchase of Securities together with an
irrevocable letter or letters of credit of a commercial bank or banks in an
amount at least equal to the purchase price of the Securities. The value of the
Securities was determined on the basis described under "Valuation". In exchange
for the deposit of the contracts to purchase Securities, the Trustee delivered
to the Sponsor a registered certificate for Units representing the entire
ownership of the Trust. On the Initial Date of Deposit the fractional undivided
interest in the Trust represented by a Unit was as described in "Essential
Information Regarding the Trust".
With the deposit on the Initial Date of Deposit, the Sponsor established a
proportionate relationship between the maturity value of the Treasury
Obligations and the number of shares of each Stock in the Trust. The Sponsor
may, from time to time, cause the deposit of additional Securities in the Trust
when additional Units are to be offered to the public, replicating the original
percentage relationship between the maturity value of the Treasury Obligations
and the number of shares of Stock deposited on the Initial Date of Deposit and
replicating any cash or cash equivalents held by the Trust (net of expenses).
The original proportionate relationship is subject to adjustment to reflect the
occurrence of a stock split or other corporate action which affects the capital
structure of the issuer of a Stock but which does not affect the Trust's
percentage ownership of the common stock equity of the issuer at the time of
such event. Taxable stock dividends received by the Trust, if any, will be sold
by the Trustee and the proceeds received will be treated as income to the
Trust.
The Treasury Obligations consist of U.S. Treasury obligations which have
been stripped of their unmatured interest coupons or interest coupons stripped
from the U.S. Treasury Obligations. The obligor with respect to the Treasury
Obligations is the United States Government. U.S. Government backed obligations
are generally considered the safest investment.
On the Initial Date of Deposit, each Unit represented the fractional
undivided interest in the Securities and net income of the Trust set forth
under "Essential Information Regarding the Trust". However, if additional Units
are issued by the Trust (through either the deposit of (i) additional
Securities or (ii) cash for the purchase of additional Securities for purposes
of the sale of additional Units), the aggregate value of Securities in the
Trust will be increased and the fractional undivided interest represented by
each Unit in the balance will be decreased. If any Units are redeemed, the
aggregate value of Securities in the Trust will be reduced, and the fractional
undivided interest represented by each remaining Unit in the balance will be
increased. Units will remain outstanding until redeemed upon tender to the
Trustee by any Unitholder (which may include the Sponsor) or until the
termination of the Trust. (See "Termination of the Trust".)
- ----------
* Reference is made to the Trust Indenture and Agreement and any statements
contained in this Prospectus are qualified in their entirety by the
provisions of the Trust Indenture and Agreement.
B-4
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
Risk Factors
An investment in the Trust should be made with the understanding of the
risks inherent in an investment in deep discount or "zero-coupon" debt
obligations and the risks associated with an investment in common stocks in
general.
The Trust contains stripped Treasury securities described below. (See
"Schedule of Investments.") Stripped Treasury securities consist of
"interest-only" or "principal-only" portions of Treasury Obligations.
Interest-only portions of Treasury Obligations represent the rights only to
payment of interest on a date certain, and principal-only portions of Treasury
Obligations represent the rights only to payment of principal at a stated
maturity. Interest-only and principal-only portions of Treasury Obligations are
deep discount obligations that are economically identical to zero-coupon
obligations; that is, all such instruments are debt obligations which make no
periodic payment of interest prior to maturity. THE STRIPPED TREASURY
SECURITIES IN THE TRUST WERE PURCHASED AT A DEEP DISCOUNT AND DO NOT MAKE ANY
PERIODIC PAYMENTS OF INTEREST. Instead, the entire payment of proceeds will be
made upon maturity of such Treasury Obligations. The effect of owning deep
discount bonds which do not make current interest payments (such as the
stripped Treasury Obligations in the Trust Portfolio) is that a fixed yield is
earned not only on the original investment but also, in effect, on all earned
discount during the life of the discount obligation. This implicit reinvestment
of earnings at the same rate eliminates the risk of being unable to reinvest
the income on such obligations at a rate as high as the implicit yield on the
discount obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, while the full faith
and credit of the United States Government provides a high degree of protection
against credit risks, the sale of Units prior to the termination date of the
Trust will involve substantially greater price fluctuations during periods of
changing market interest rates than would be experienced in connection with
sale of Units of a Trust which held Treasury Obligations and which made
scheduled interest payments on a current basis.
An investment in Units of the Trust should also be made with an
understanding of the risks inherent in an investment in common stocks in
general. The general risks are associated with the rights to receive payments
from the issuer of the Stocks, which rights are generally inferior to creditors
of, or holders of debt obligations or preferred stocks issued by, the issuer.
Holders of common stocks have a right to receive dividends only when and if,
and in the amounts, declared by the issuer's board of directors, and to
participate in amounts available for distribution by the issuer only after all
other claims against the issuer have been paid or provided for. By contrast,
holders of preferred stocks have the right to receive dividends at a fixed rate
when and as declared by the issuer's board of directors, normally on a
cumulative basis, but do not participate in other amounts available for
distribution by the issuer. Dividends on cumulative preferred stock typically
must be paid before any dividends are paid on common stock. Preferred stocks
are also entitled to rights on liquidation which are senior to those of common
stocks. For these reasons, preferred stocks generally entail less risk than
common stocks.
Common stocks do not represent an obligation of the issuer. Therefore they
do not offer any assurance of income or provide the degree of protection
offered by debt securities. The issuance of debt securities or preferred stock
by an issuer will create prior claims for payment of principal, interest and
dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the rights of holders
of common stock with respect to assets of the issuer upon liquidation or
bankruptcy. Unlike debt securities which typically have a stated principal
amount payable at maturity, common stocks do not have a fixed principal amount
or a maturity. Additionally, the value of
B-5
<PAGE>
the Stocks in the Trust, like the Treasury Obligations, may be expected to
fluctuate over the life of the Trust to values higher or lower than those
prevailing on the Initial Date of Deposit. The Stocks may appreciate or
depreciate in value (or pay dividends) depending on the full range of economic
and market influences affecting corporate profitability, the financial
condition of issuers and the prices of equity securities in general and the
Stocks in particular.
Certain of the Stocks in the Trust may be ADRs which are subject to
additional risks. (See "Schedule of Investments".) ADRs evidence American
Depositary Shares ("ADS"), which, in turn, represent common stock of foreign
issuers deposited with a custodian in a depositary. (For purposes of this
Prospectus, the term "ADR" generally includes "ADS".) ADRs involve certain
investment risks that are different from those found in stocks issued by
domestic issuers. These investment risks include potential political and
economic developments, potential establishment of exchange controls, new or
higher levels of taxation, or other governmental actions which might adversely
affect the payment or receipt of payment of dividends on the common stock of
foreign issuers underlying such ADRs. ADRs may also be subject to current
foreign taxes, which could reduce the yield on such securities. Also, certain
foreign issuers are not subject to reporting requirements under U.S. securities
laws and therefore may make less information publicly available than that
provided by domestic issuers. Further, foreign issuers are not necessarily
subject to uniform financial reporting, auditing and accounting standards and
practices which are applicable to publicly traded domestic issuers.
In addition, the securities underlying the ADRs held in the Trust are
generally denominated, and pay dividends, in foreign currency. An investment in
securities denominated and principally traded in foreign currencies involves
investment risk substantially different than an investment in securities that
are denominated and principally traded in U.S. dollars. This is due to currency
exchange rate risk, because the U.S. dollar value of the shares underlying the
ADRs and of their dividends will vary with the fluctuations in the U.S. dollar
foreign exchange rates for the relevant currency in which the shares underlying
the ADRs are denominated. The Trust, however, will compute its income in United
States dollars, and to the extent any of the Stocks in the Trust pay income or
dividends in foreign currency, the Trust's computation of income will be made
on the date of its receipt by the Trust at the foreign exchange rate then in
effect. PaineWebber observes that, in the recent past, most foreign currencies
have fluctuated widely in value against the U.S. dollar for many reasons,
including the soundness of the world economy, supply and demand of the relevant
currency, and the strength of the relevant regional economy as compared to the
economies of the United States and other countries. Exchange rate fluctuations
are also dependent, in part, on a number of economic factors including economic
conditions within the relevant country, interest rate differentials between
currencies, the balance of imports and exports of goods and services, and the
transfer of income and capital from one country to another. These economic
factors in turn are influenced by a particular country's monetary and fiscal
policies, perceived political stability (particularly with respect to transfer
of capital) and investor psychology, especially that of institutional
investors, who make assessments of the future relative strength or weakness of
a particular currency. As a general rule, the currency of a country with a low
rate of inflation and a favorable balance of trade should increase in value
relative to the currency of a country with a high rate of inflation and
deficits in the balance of trade.
There is no assurance that the Trust's objectives will be achieved. Under
ordinary circumstances, dividends and principal received upon the sale of
Stocks may not be reinvested, and such money will be held in a non-interest
bearing account until the next distribution made on the Distribution Date.
Under certain limited circumstances and if there is no regulatory impediment,
such dividends and principal may be reinvested in Short-Term Treasury
Obligations maturing on or before the next Distribution Date. (See
"Administration of the Trust--Reinvestment".) The value of the Securities and,
therefore, the value of Units may be expected to fluctuate.
B-6
<PAGE>
Investors should note that the creation of additional Units subsequent to
the Initial Date of Deposit may have an effect upon the value of Units held by
Unitholders. To create additional Units, the Sponsor may deposit cash (or cash
equivalents, e.g., a bank letter of credit in lieu of cash) with instructions
to purchase Securities in amounts sufficient to replicate the original
percentage relationship among the Securities based on the price of the
Securities (at the Evaluation Time) on the date the cash is deposited. To the
extent the price of a Security (or the relevant foreign currency exchange rate,
if applicable) increases or decreases between the time cash is deposited with
instructions to purchase the Security and the time the cash is used to purchase
the Security, Units will represent less or more of that Security and more or
less of the other Securities in the Trust. Unitholders will be at risk because
of price (and currency) fluctuations during this period since if the price of
shares of a Security increases, Unitholders will have an interest in fewer
shares of that Security, and if the price of a Security decreases, Unitholders
will have an interest in more shares of that Security, than if the Security had
been purchased on the date cash was deposited with instructions to purchase the
Security. In order to minimize these effects, the Trust will attempt to
purchase Securities as closely as possible to the Evaluation Time or at prices
as close as possible to the prices used to evaluate the Trust at the Evaluation
Time. Thus price (and currency) fluctuations during this period will affect the
value of every Unitholder's Units and the income per Unit received by the
Trust. In addition, costs incurred in connection with the acquisition of
Securities not listed on any national securities exchange (due to differentials
between bid and offer prices for the Securities) and brokerage fees, stamp
taxes and other costs incurred in purchasing stocks will be at the expense of
the Trust and will affect the value of every Unitholder's Units.
Special Considerations
In the event a contract to purchase a Security fails, the Sponsor will
refund to each Unitholder the portion of the sales charge attributable to such
failed contract. Principal and income, if any, attributable to such failed
contract will be distributed to Unitholders of record on the last business day
of the month in which the fail occurs within 20 days of such record date.
BECAUSE THE TRUST IS ORGANIZED AS A UNIT INVESTMENT TRUST, RATHER THAN AS
A MANAGEMENT INVESTMENT COMPANY, THE TRUSTEE AND THE SPONSOR DO NOT HAVE
AUTHORITY TO MANAGE THE TRUST'S ASSETS FULLY IN AN ATTEMPT TO TAKE ADVANTAGE OF
VARIOUS MARKET CONDITIONS TO IMPROVE THE TRUST'S NET ASSET VALUE, BUT MAY
DISPOSE OF SECURITIES ONLY UNDER LIMITED CIRCUMSTANCES. (SEE "ADMINISTRATION OF
THE TRUST--PORTFOLIO SUPERVISION".)
Many computer systems were designed in such a way that they may be unable
to distinguish between the Year 2000 and the Year 1900 and, therefore, may not
properly process and calculate date-related information (commonly known as the
"Year 2000 Problem"). The Sponsor and Trustee are taking steps that they
believe are reasonably designed to address the Year 2000 Problem with respect
to computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by the Trust's other service providers. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Trust. The Year 2000 Problem is
expected to impact corporations, which may include issuers of Securities
contained in the Trust, to varying degrees based upon various factors,
including, but not limited to, their industry sector and degree of
technological sophistication. The Sponsor is unable to predict what impact, if
any, the Year 2000 Problem will have on issuers of the Securities contained in
the Trust.
The Sponsor may have acted as underwriter, manager, or co-manager of a
public offering of the Securities deposited into the Trust on the Initial Date
of Deposit, or as an adviser to one or more of the issuers of the Securities,
during the last three (3) years. The Sponsor or affiliates of the Sponsor may
serve as specialists in the Securities on one or more stock exchanges and may
have a long or short position in any of these Securities or in options on any
of them, and may be on the opposite sides of public orders executed on the
floor of an exchange where the Securities are listed. The Sponsor may trade for
its own
B-7
<PAGE>
account as an odd-lot dealer, market maker, block positioner and/or arbitrageur
in any of the Securities or options on them. The Sponsor, its affiliates,
directors, elected officers and employee benefits programs may have either a
long or short position in any of the Securities or in options on them.
The Sponsor does not know of any pending litigation as of the Initial Date
of Deposit that might reasonably be expected to have a material adverse effect
on the Portfolio, although pending litigation may have a material adverse
effect on the value of Securities in the Portfolio. In addition, at any time
after the Initial Date of Deposit, litigation may be initiated on a variety of
grounds, or legislation may be enacted, affecting the Securities in the
Portfolio or the issuers of such Securities. Changing approaches to regulation
may have a negative impact on certain companies represented in the Portfolio.
There can be no assurance that future litigation, legislation, regulation or
deregulation will not have a material adverse effect on the Portfolio or will
not impair the ability of issuers of the Securities to achieve their business
goals.
Certain of the Stocks may be attractive acquisition candidates pursuant to
mergers, acquisitions and tender offers. In general, tender offers involve a
bid by an issuer or other acquiror to acquire a stock based on the terms of its
offer. Payment generally takes the form of cash, securities (typically bonds or
notes), or cash and securities. The Indenture contains provisions requiring the
Trustee to follow certain procedures regarding mergers, acquisitions, tender
offers and other corporate actions. Under certain circumstances, the Trustee,
at the direction of the Sponsor, may hold or sell any stock or securities
received in connection with such corporate actions (see "Administration of the
Trust--Portfolio Supervision").
FEDERAL INCOME TAXES
In the opinion of Carter, Ledyard & Milburn, counsel for the Sponsor,
under existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes. Under the Internal Revenue Code of 1986, as amended
(the "Code"), each Unitholder will be treated as the owner of a pro rata
portion of the Trust, and income of the Trust will be treated as income of
the Unitholder.
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, exchange, redemption, or payment at maturity) or
when the Unitholder sells its Units or redeems its Units for cash. The
total tax cost of each Unit to a Unitholder is allocated among each of the
Securities in accordance with the proportion of the Trust comprised by each
Security to determine the per Unit tax cost for each Security.
3. The Trust is not an association taxable as a corporation for New York
State income tax purposes. Under New York State law, each Unitholder will
be treated as the owner of a pro rata portion of the Trust and the income
of the Trust will be treated as income of the Unitholders.
The following general discussion of the federal income tax treatment of an
investment in Units of the Trust is based on the Code and United States
Treasury Regulations (established under the Code) as in effect on the date of
this Prospectus. The federal income tax treatment applicable to a Unitholder
may depend upon the Unitholder's particular tax circumstances. The
tax-treatment applicable to non-U.S. investors is not addressed in this
Prospectus. Future legislative, judicial or administrative changes could modify
the statements below and could affect the tax consequences to Unitholders.
Accordingly, each Unitholder is advised to consult his or her own tax advisor
concerning the effect of an investment in Units.
General. Each Unitholder must report on its federal income tax return a
pro rata share of the entire income of the Trust, derived from dividends on
Stocks, original issue discount or interest on Treasury
B-8
<PAGE>
Obligations and Short-Term Treasury Obligations (if any), gains or losses upon
dispositions of Securities by the Trust and a pro rata share of the expenses of
the Trust. Unitholders should note that their taxable income from an investment
in Units will exceed cash distributions because taxable income will include
accretions of original issue discount on the Treasury Obligations.
Distributions with respect to Stock, to the extent they do not exceed
current or accumulated earnings and profits of the distributing corporation,
will be treated as dividends to the Unitholders and will be subject to income
tax at ordinary rates. Corporate Unitholders may be entitled to the
dividends-received deduction discussed below.
To the extent distributions with respect to a Stock were to exceed the
issuing corporation's current and accumulated earnings and profits, they would
not constitute dividends. Rather, they would be treated as a tax free return of
capital and would reduce a Unitholder's tax cost for such Stock. This reduction
in basis would increase any gain, or reduce any loss, realized by the
Unitholder on any subsequent sale or other disposition of Units. After the tax
cost has been reduced to zero, any additional distributions in excess of
current and accumulated earnings and profits would be taxable as gain from the
sale of Stock.
A Unitholder who is an individual, estate or trust may be disallowed
certain itemized deductions described in Code Section 67, including
compensation paid to the Trustee and administrative expenses of the Trust, to
the extent these itemized deductions, in the aggregate, do not exceed two
percent of the Unitholder's adjusted gross income. Thus, a Unitholder's taxable
income from an investment in Units may further exceed amounts distributed to
the extent amounts are used by the Trust to pay expenses.
Capital gains realized by noncorporate taxpayers are generally taxable at
a maximum rate of 20% if the taxpayer has a holding period of more than 12
months.
Corporate Dividends-Received Deduction. Corporate holders of Units may be
eligible for the dividends-received deduction with respect to distributions
treated as dividends, subject to the limitations provided in Sections 246 and
246A of the Code. The dividends-received deduction generally equals 70 percent
of the amount of the dividend. As a result, the maximum effective tax rate on
dividends received generally will be reduced from 35 percent to 10.5 percent. A
portion of the dividends-received deduction may, however, be subject to the
alternative minimum tax. Individuals, partnerships, trusts, S corporations and
certain other entities are not eligible for the dividends-received deduction.
Original Issue Discount. The Trust will contain principal or interest
portions of stripped "zero-coupon" Treasury Obligations which are treated as
bonds that were originally issued at a discount ("original issue discount").
Original issue discount represents interest for federal income tax purposes and
can generally be defined as the difference between the price at which a bond
was issued and its stated redemption price at maturity. For purposes of the
preceding sentence, stripped obligations, such as the Treasury Obligations,
which variously consist either of the right to receive payments of interest or
the right to receive payments of principal, are treated by each successive
purchaser as originally issued on their purchase dates at an issue price equal
to their respective purchase prices. The market value of the assets comprising
the Trust will be provided to a Unitholder upon request to enable the
Unitholder to calculate the original issue discount attributable to each of the
Treasury Obligations. Original issue discount on Treasury Obligations (which
were issued or treated as issued on or after July 2, 1982) is deemed earned
based on a compounded, constant yield to maturity over the life of such
obligation, taking into account the compounding of accrued interest at least
annually, resulting in an increasing amount of original issue discount
includible in income in each year. Each Unitholder is required to include in
income each year the amount of original issue discount which accrues on its pro
rata portion of each Treasury Obligation with original issue discount. The
amount of accrued original issue discount included in income for a Unitholder's
pro rata interest in Treasury Obligations is added to the tax cost for such
obligations.
B-9
<PAGE>
Gain or Loss on Sale. If a Unitholder sells or otherwise disposes of a
Unit, the Unitholder generally will recognize gain or loss in an amount equal
to the difference between the amount realized on the disposition allocable to
the Securities and the Unitholder's adjusted tax bases in the Securities. In
general, such adjusted tax bases will equal the Unitholder's aggregate cost for
the Unit increased by any accrued original issue discount. The gain or loss
will be capital gain or loss if the Unit and underlying Securities were held as
capital assets, except that the gain will be treated as ordinary income to the
extent of any accrued original issue discount not previously reported. Each
Unitholder generally will also recognize taxable gain or loss when all or part
of its pro rata portion of a Security is sold or otherwise disposed of for an
amount greater or less than the Security's per Unit tax cost.
Withholding For Citizen or Resident Investors. In the case of any
noncorporate Unitholder that is a citizen or resident of the United States a 31
percent "backup" withholding tax will apply to certain distributions of the
Trust unless the Unitholder properly completes and files, under penalties of
perjury, IRS Form W-9 (or its equivalent).
The foregoing discussion is a general summary and relates only to certain
aspects of the federal income tax consequences of an investment in the Trust.
Unitholders may also be subject to state and local taxation. Each Unitholder
should consult its own tax advisor regarding the federal, state and local tax
consequences of ownership of Units.
Investment in the Trust may be suited for purchase by funds and accounts
of individual investors that are exempt from federal income taxes such as
Individual Retirement Accounts, tax-qualified retirement plans including Keogh
Plans, and other tax-deferred retirement plans. Unitholders desiring to
purchase Units for tax-deferred plans and IRA's should consult their
PaineWebber Investment Executive for details on establishing such accounts.
Units may also be purchased by persons who already have self-directed accounts
established under tax-deferred retirement plans.
PUBLIC OFFERING OF UNITS
Public Offering Price. The public offering price per Unit on the Initial
Date of Deposit is equal to the aggregate market value of the Securities
determined on the day preceding the Initial Date of Deposit, divided by the
number of Units outstanding plus the sales charge of 4.75%, pursuant to an
exemptive order of the SEC. However, if the public offering price would be less
than $.975 per Unit, then purchase orders received that day will be filled on
the basis of the lower public offering price. Thereafter, the public offering
price during the initial offering period will be computed by dividing the
Trust's value (the "Trust Fund Evaluation"), next determined after receipt of a
purchase order, and, with respect to the Treasury Obligations, determined with
reference to the offering side evaluation, by the number of Units outstanding
plus the applicable sales charge. The initial public offering period will
terminate when the Sponsor chooses to discontinue offering Units in the initial
market. Thereafter, the Sponsor may offer Units in the secondary market. The
public offering price in the secondary market will be the Trust Fund Evaluation
per Unit next determined after receipt of a purchase order, determined for the
Treasury Obligations on the bid side of the market, plus the applicable sales
charge. (See "Valuation".) The public offering price on any date subsequent to
the Initial Date of Deposit will vary from the public offering price calculated
on the business day prior to the Initial Date of Deposit (as described on page
2) due to fluctuations in the value of Stocks and the Treasury Obligations, and
the foreign currency exchange rates (if applicable), among other factors. In
addition, during the initial public offering period, a portion of the Public
Offering Price also consists of an amount sufficient to reimburse the Sponsor
for the payment of all or a portion of the Initial Organizational Costs in the
amount shown as a per Unit amount in "Essential Information Regarding the
Trust". The Initial Organizational Costs include the cost of preparing the
B-10
<PAGE>
registration statement, trust documents and closing documents for the Trust,
registering with the SEC and the 50 States, the initial fees of the Trustee's
and Sponsor's counsel, and the initial audit of the Trust's portfolio. The
sales charge will not be assessed on those Securities held in the Trust and
sold by the Trustee at the end of the public offering period to reimburse the
Sponsor for the Initial Organizational Costs. See "Administration of the
Trust--Accounts" for a description of the method by which the Trustee will sell
such Securities.
Sales Charge and Volume Discount. The Public Offering Price of Units of
the Trust includes a sales charge which varies based upon the number of Units
purchased by a single purchaser. (See the sales charge schedule below.) Sales
charges during the initial public offering period and for secondary market
sales are described below. A discount in the sales charge is available to
volume purchasers of Units due to economies of scales in sales effort and
sales-related expenses relating to volume purchases. The sales charge
applicable to volume purchasers of Units is reduced on a graduated scale for
sales to any person of at least $50,000 or 50,000 Units, applied on whichever
basis is more favorable to the purchaser.
B-11
<PAGE>
INITIAL PUBLIC OFFERING PERIOD AND
SECONDARY MARKET THROUGH
<TABLE>
<CAPTION>
PERCENT OF
PUBLIC PERCENT OF
OFFERING NET AMOUNT
AGGREGATE DOLLAR VALUE OF UNITS* PRICE INVESTED
- ---------------------------------- ------------ -----------
<S> <C> <C>
Less than $50,000 ............. 4.75% 4.99%
$50,000 to $99,999 ............ 4.50 4.71
$100,000 to $199,999........... 4.00 4.17
$200,000 to $399,999 .......... 3.50 3.63
$400,000 to $499,999 .......... 3.00 3.09
$500,000 to $999,999 .......... 2.50 2.56
$1,000,000 or more ............ 2.00 2.04
</TABLE>
- ----------
* The sales charge applicable to volume purchasers according to the table
above will be applied on either a dollar or Unit basis, depending upon
which basis provides a more favorable purchase price to the purchaser.
SECONDARY MARKET FROM THROUGH
<TABLE>
<CAPTION>
PERCENT OF
PUBLIC PERCENT OF
OFFERING NET AMOUNT
AGGREGATE DOLLAR VALUE OF UNITS* PRICE INVESTED
- ---------------------------------- ------------ -----------
<S> <C> <C>
Less than $50,000 ............. 4.25% 4.44%
$50,000 to $99,999 ............ 4.00 4.17
$100,000 to $199,999 .......... 3.50 3.63
$200,000 to $399,999 .......... 3.00 3.09
$400,000 to $499,999 .......... 2.50 2.56
$500,000 to $999,999 .......... 2.00 2.04
$1,000,000 or more............. 1.75 1.78
</TABLE>
- ----------
* The sales charge applicable to volume purchasers according to the table
above will be applied on either a dollar or Unit basis, depending upon
which basis provides a more favorable purchase price to the purchaser.
<TABLE>
<CAPTION>
SECONDARY MARKET FROM SECONDARY MARKET ON AND
THROUGH AFTER
PERCENT OF PERCENT OF
PUBLIC PERCENT OF PUBLIC PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT
PRICE INVESTED PRICE INVESTED
- --------------------- ------------ ----------- -----------
<S> <C> <C> <C>
3.25% 3.36% 2.25% 2.30%
</TABLE>
B-12
<PAGE>
The volume discount sales charge shown above will apply to all purchases
of Units on any one day by the same person in the amounts stated above, and for
this purpose purchases of Units of this Trust will be aggregated with
concurrent purchases of any other trust which may be offered by the Sponsor.
Units held in the name of the purchaser's spouse or in the name of a
purchaser's child under the age of 21 are deemed for the purposes of
calculating the reduced sales charge to be registered in the name of the
purchaser. The reduced sales charges are also applicable to a trustee or other
fiduciary purchasing Units for a single trust estate or single fiduciary
account.
Employee Discount. Due to the realization of economies of scale in sales
effort and sales related expenses for the purchase of Units by employees of the
Sponsor and its affiliates, the Sponsor intends to permit employees of the
Sponsor and its affiliates and certain of their relatives to purchase Units of
the Trust at a per Unit price equal to the Trust Fund Evaluation next
determined after the receipt of the employee's purchase order, divided by the
number of Units outstanding. The Sponsor does not intend to impose a sales
charge on such employee sales.
Exchange Option. Unitholders may elect to exchange any or all of their
Units of this series for units of one or more of any series of PaineWebber
Municipal Bond Fund Series (the "PaineWebber Series"); The Municipal Bond
Trust, (the "National Series"); The Municipal Bond Trust, Multi-State Program
(the "Multi-State Series"); The Municipal Bond Trust, California Series (the
"California Series"); The Municipal Bond Trust, Insured Series (the "Insured
Series"); The Corporate Bond Trust, (the "Corporate Series"); The PaineWebber
Pathfinders Trust, (the "Pathfinders Series"), The PaineWebber Federal
Government Trust, (the "Government Series") or the PaineWebber Equity Trust,
(the "Equity Series") (collectively referred to as the "Exchange Trusts"), at a
Public Offering Price for the units of the Exchange Trusts to be acquired based
on a reduced sales charge of $15 per unit. Unitholders of this Trust are not
eligible for the Exchange Option into (1) any Exchange Trust designated as a
rollover series for the 30 day period prior to termination of such Trust or (2)
any Exchange Trust subject to a deferred sales charge. The purpose of such
reduced sales charge is to permit the Sponsor to pass on to the Unitholder who
wishes to exchange Units the cost savings resulting from such exchange of
Units. The cost savings result from reductions in time and expense related to
advice, financial planning and operational expense required for the Exchange
Option. Each Exchange Trust has different investment objectives, therefore a
Unitholder should read the prospectus for the applicable Exchange Trust
carefully prior to exercising this option. Exchange Trusts having as their
objective the receipt of tax-exempt interest income would not be suitable for
tax-deferred investment plans such as Individual Retirement Accounts. A
Unitholder who purchased Units of a series and paid a per unit sales charge
that was less than the per Unit sales charge of the series of Exchange Trusts
for which such Unitholder desires to exchange into, will be allowed to exercise
the Exchange Option at the Unit Offering Price plus the reduced sales charge,
provided the Unitholder has held the Units for at least five months. Any such
Unitholder who has not held the Units to be exchanged for the five-month period
will be required to exchange them at the Unit Offering Price plus a sales
charge based on the greater of the reduced sales charge, or an amount which,
together with the initial sales charge paid in connection with the acquisition
of the Units being exchanged, equals the sales charge of the series of the
Exchange Trust for which such Unitholder desires to exchange into, determined
as of the date of the exchange.
The Sponsor will permit exchanges at the reduced sales charge provided
there is either a primary market for Units or a secondary market maintained by
the Sponsor in both the Units of this series and units of the applicable
Exchange Trust and there are units of the applicable Exchange Trust available
for sale. While the Sponsor has indicated that it intends to maintain a market
for the Units of the respective Trusts, there is no obligation on its part to
maintain such a market. Therefore, there is no assurance that
B-13
<PAGE>
a market for Units will in fact exist on any given date at which a Unitholder
wishes to sell his Units of this series and thus there is no assurance that the
Exchange Option will be available to a Unitholder. Exchanges will be effected
in whole Units only. Any excess proceeds from a Unitholders' Units being
surrendered will be returned. Unitholders will be permitted to advance new
money in order to complete an exchange to round up to the next highest number
of Units. An exchange of Units under the Exchange Option will normally
constitute a "taxable event" under the Code and a Unitholder will generally
recognize a tax gain or loss at the time of exchange in the same manner as upon
a sale of Units. Unitholders are urged to consult their own tax advisors as to
the tax consequences of exchanging Units.
The Sponsor reserves the right to modify, suspend or terminate the
Exchange Option at any time without further notice to Unitholders. In the event
the Exchange Option is not available to a Unitholder at the time he wishes to
exercise it, the Unitholder will be immediately notified and no action will be
taken regarding the exchange of Units without further instruction from the
Unitholder.
To exercise the Exchange Option, a Unitholder should notify the Sponsor of
his desire to exercise the Exchange Option and to use the proceeds from the
sale of his Units to the Sponsor to purchase units of one or more of the
Exchange Trusts from the Sponsor. If units of the applicable outstanding series
of the Exchange Trust are at that time available for sale, and if such units
may lawfully be sold in the state in which the Unitholder is resident, the
Unitholder may select the series or group of series for which he desires his
investment to be exchanged. The Unitholder will be provided with a current
prospectus or prospectuses relating to each series in which he indicates
interest.
The exchange transaction will operate in a manner essentially identical to
any secondary market transaction, i.e., Units will be repurchased at a price
based on the market value of the Securities in the portfolio of the Trust next
determined after receipt by the Sponsor of an exchange request and properly
endorsed Certificate, if any, for Units. Units of the Exchange Trust will be
sold to the Unitholder at a price based upon the next determined market value
of the securities in the Exchange Trust plus the reduced sales charge. Exchange
transactions will be effected only in whole units; thus, any proceeds not used
to acquire whole units will be paid to the selling Unitholder.
For example, assume that a Unitholder, who has three thousand units of a
trust with a current price of $1.30 per unit, desires to sell his units and
seeks to exchange the proceeds for units of a series of an Exchange Trust with
a current price of $890 per unit based on the bid prices of the underlying
securities. In this example, which does not contemplate any rounding up to the
next highest number of units, the proceeds from the Unitholder's units would
aggregate $3,900. Since only whole units of an Exchange Trust may be purchased
under the Exchange Option, the Unitholder would be able to acquire four units
in the Exchange Trust for a total cost of $3,620 ($3,560 for the units and $60
for the sales charge). If all 3,000 units were tendered, the remaining $280
would be returned to the Unitholder.
Conversion Option. Owners of units of any registered unit investment trust
sponsored by another sponsor which was initially offered at a maximum
applicable sales charge of at least 3.0% (a "Conversion Trust") may elect to
apply the cash proceeds of the sale or redemption of those units directly to
acquire available units of any Exchange Trust at a reduced sales charge of $15
per unit (or per 100 units in the case of Exchange Trusts having a unit price
of approximately $10, or per 1,000 units in the case of Exchange Trusts having
a unit price of approximately $1), subject to the terms and conditions
applicable to the Exchange Option (except that no secondary market is required
for Conversion Trust units). To exercise this option, the owner should notify
his retail broker. He will be given a prospectus for each series in which he
indicates interest and for which units are available. The dealer must sell or
redeem the units of the Conversion Trust. Any dealer other than PaineWebber
must certify that the purchase of units of the
B-14
<PAGE>
Exchange Trust is being made pursuant to and is eligible for the Conversion
Option. The dealer will be entitled to two thirds of the applicable reduced
sales charge. The Sponsor reserves the right to modify, suspend or terminate
the Conversion Option at any time without further notice, including the right
to increase the reduced sales charge applicable to this conversion option (but
not in excess of $5 more per Unit (or per 100 Units or per 1,000 Units, as
applicable) than the corresponding fee then being charged for the Exchange
Option). For a description of the tax consequences of a conversion, please
refer to the Exchange Option section of this Prospectus.
Distribution of Units. The minimum purchase during the initial public
offering is $250. Only whole Units may be purchased.
The Sponsor is the sole underwriter of the Units. Sales may, however, be
made to dealers who are members of the National Association of Securities
Dealers, Inc. ("NASD") at prices which include a concession of $.03 per Unit,
during the initial offering period and one-half of the highest applicable sales
charge during the secondary market, subject to change from time to time. The
difference between the sales charge and the dealer concession will be retained
by the Sponsor. In the event that the dealer concession is 90% or more of the
sales charge per Unit, dealers taking advantage of such concession may be
deemed to be underwriters under the Securities Act of 1933, as amended (the
"Securities Act").
The Sponsor reserves the right to reject, in whole or in part, any order
for the purchase of Units. The Sponsor intends to qualify the Units in all
states of the United States, the District of Columbia and the Commonwealth of
Puerto Rico.
Secondary Market for Units. While not obligated to do so, the Sponsor
intends to maintain a secondary market for the Units and continuously offer to
purchase Units at the Trust Fund Evaluation per Unit next computed after
receipt by the Sponsor of an order from a Unitholder. The Sponsor may cease to
maintain a market at any time, and from time to time, without notice. In the
event that a secondary market for the Units is not maintained by the Sponsor, a
Unitholder desiring to dispose of Units may tender Units to the Trustee for
redemption, at the price calculated in the manner described under "Redemption".
Redemption requests in excess of $100,000 may be redeemed "in kind" as
described under "Redemption." The Sponsor does not in any way guarantee the
enforceability, marketability, value or price of any Stocks in the Trust, nor
that of the Units.
Investors should note the Trust Fund Evaluation per Unit at the time of
sale or tender for redemption may be less than the price at which the Unit was
purchased.
The Sponsor may redeem any Units it has purchased in the secondary market
if it determines for any reason that it is undesirable to continue to hold
these Units in its inventory. Factors which the Sponsor may consider in making
this determination will include the number of units of all series of all trusts
which it holds in its inventory, the saleability of the Units, its estimate of
the time required to sell the Units and general market conditions.
Sponsor's Profits. In addition to the applicable sales charge, the Sponsor
realizes a profit (or sustains a loss) in the amount of any difference between
the cost of the Securities to the Sponsor and the price (including foreign
currency rates, if any) at which it deposits the Securities in the Trust, which
is the value of the Securities, determined by the Trustee as described under
"Valuation" at the close of business on the business day prior to the Initial
Date of Deposit. The cost of Securities to the Sponsor includes the amount paid
by the Sponsor for brokerage commissions. These amounts are an expense of the
Trust.
Cash, if any, received from Unitholders prior to the settlement date for
the purchase of Units or prior to the payment for Securities upon their
delivery may be used in the Sponsor's business subject to the limitations of
Rule 15c3-3 under the Securities Exchange Act of 1934, as amended and may be of
benefit to the Sponsor.
B-15
<PAGE>
In selling any Units in the initial public offering after the Initial Date
of Deposit, the Sponsor may realize profits or sustain losses resulting from
fluctuations in the net asset value of outstanding Units during that period. In
maintaining a secondary market for the Units, the Sponsor may realize profits
or sustain losses in the amount of any differences between the price at which
it buys Units and the price at which it resells or redeems such Units.
REDEMPTION
Units may be tendered to the Trustee, Investors Bank & Trust Company, for
redemption at its office in person, or by mail at Hancock Towers, P.O. Box
9130, Boston, MA 02117-9130 upon payment of any transfer or similar tax which
must be paid to effect the redemption. At the present time, there are no such
taxes. No redemption fee will be charged by the Sponsor or the Trustee. If
Units are represented by a certificate, it must be properly endorsed
accompanied by a letter requesting redemption. If held in uncertificated form,
a written instrument of redemption must be signed by the Unitholder.
Unitholders must sign exactly as their names appear on the records of the
Trustee with signatures guaranteed by an eligible guarantor institution or in
such other manner as may be acceptable to the Trustee. In certain instances the
Trustee may require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or administrator,
or certificates of corporate authority. Unitholders should contact the Trustee
to determine whether additional documents are necessary. Units tendered to the
Trustee for redemption will be cancelled if not repurchased by the Sponsor.
Units will be redeemed at the redemption value per Unit (the "Redemption
Value") next determined after receipt of the redemption request in good order
by the Trustee. The Redemption Value per Unit is determined by dividing the
Trust Fund Evaluation by the number of Units outstanding. (See "Valuation.")
A redemption request is deemed received on the business day (See
"Valuation" for a definition of business day) when such request is received
prior to 4:00 p.m. If it is received after 4:00 p.m., it is deemed received on
the next business day. During the period in which the Sponsor maintains a
secondary market for Units, the Sponsor may repurchase any Unit presented for
tender to the Trustee for redemption no later than the close of business on the
second business day following such presentation and Unitholders will receive
the Redemption Value next determined after receipt by the Trustee of the
redemption request. Proceeds of a redemption will be paid to the Unitholder by
the seventh calendar day following the date of tender (or if the seventh
calendar day is not a business day on the first business day prior to the
seventh calendar day).
With respect to cash redemptions, amounts representing income received
shall be withdrawn from the Income Account, and, to the extent such balance is
insufficient, from the Capital Account. The Trustee is empowered, to the extent
necessary, to sell Securities in the manner as is directed by the Sponsor,
which direction will be given to maximize the objectives of the Trust. In the
event that no such direction is given by the Sponsor, the Trustee is empowered
to sell Securities as follows: Treasury Obligations will be sold to maintain in
the Trust Treasury Obligations in an amount which, upon maturity, will equal at
least $1.00 per Unit outstanding after giving effect to such redemption and
Stocks having the greatest amount of capital appreciation will be sold first.
(See "Administration of the Trust".) However, with respect to redemption
requests in excess of $100,000, the Sponsor may determine in its discretion to
direct the Trustee to redeem Units "in kind" by distributing Securities to the
redeeming Unitholder. When Stock is distributed, a proportionate amount of
Stock will be distributed, rounded to avoid the distribution of fractional
shares and using cash or checks where rounding is not possible. The Sponsor may
direct the Trustee to redeem Units "in kind" even if it is then maintaining a
secondary market in Units of the Trust.
B-16
<PAGE>
Securities will be valued for this purpose as set forth under "Valuation". A
Unitholder receiving a redemption "in kind" may incur brokerage or other
transaction costs in converting the Securities distributed into cash. The
availability of redemption "in-kind" is subject to compliance with all
applicable laws and regulations, including the Securities Act.
To the extent that Securities are redeemed in kind or sold, the size and
diversity of the Trust will be reduced. Sales will usually be required at a
time when Securities would not otherwise be sold and may result in lower prices
than might otherwise be realized. The price received for Units upon redemption
may be more or less than the amount paid by the Unitholder depending on the
value of the Securities in the portfolio at the time of redemption. In
addition, because of the minimum amounts in which Securities are required to be
sold, the proceeds of sale may exceed the amount required at the time to redeem
Units; these excess proceeds will be distributed to Unitholders on the
Distribution Dates.
The Trustee may, in its discretion, and will, when so directed by the
Sponsor, suspend the right of redemption, or postpone the date of payment of
the Redemption Value, for more than seven calendar days following the day of
tender for any period during which the New York Stock Exchange, Inc. is closed
other than for weekend and holiday closings; or for any period during which the
SEC determined that trading on the New York Stock Exchange, Inc. is restricted
or for any period during which an emergency exists as a result of which
disposal or evaluation of the Securities is not reasonably practicable; or for
such other period as the SEC may by order permit for the protection of
Unitholders. The Trustee is not liable to any person or in any way for any loss
or damages which may result from any suspension or postponement, or any failure
to suspend or postpone when done in the Trustee's discretion.
VALUATION
The Trustee will calculate the Trust Fund Evaluation per Unit at the
Evaluation Time described under "Essential Information Regarding the Trust" (1)
on each June 30 and December 31 (or the last business day prior thereto), (2)
on each business day as long as the Sponsor is maintaining a bid in the
secondary market, (3) on the business day on which any Unit is tendered for
redemption and (4) on any other day desired by the Sponsor or the Trustee, by
adding (a) the aggregate value of the Securities and other assets determined by
the Trustee as described below, (b) cash on hand in the Trust, income accrued
on the Treasury Obligations but not distributed or held for distribution and
dividends receivable on Stocks trading ex-dividend (other than any cash held in
any reserve account established under the Indenture) and (c) accounts
receivable for Securities sold and any other assets of the Trust Fund not
included in (a) and (b) above and deducting therefrom the sum of (v) taxes or
other governmental charges against the Trust not previously deducted, (w)
accrued fees and expenses of the Trustee and the Sponsor (including legal and
auditing expenses) and other Trust expenses, (x) cash allocated for
distribution to Unitholders and amounts owed to the Sponsor in reimbursement of
Initial Organizational Costs, and (y) accounts payable for Units tendered for
redemption and any other liabilities of the Trust Fund not included in (v),
(w), (x) and (y) above. The Trust Fund Evaluation per Unit is calculated by
dividing the result of the above computation by the number of Units outstanding
as of the date of the Trust Fund Evaluation. Business days do not include
Saturdays, Sundays, New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day and other days that the New York Stock Exchange is closed.
The U.S. dollar value of Stock denominated in foreign currency, if any,
contained in the Trust, will be based on the applicable foreign currency
exchange rate calculated at the Evaluation Time.
The value of Stocks will be determined by the Trustee in good faith in the
following manner: (1) if the Securities are listed on one or more national
securities exchanges, the evaluation will be based on the
B-17
<PAGE>
closing sale price on that day (unless the Trustee deems such price
inappropriate as a basis for evaluation) on the exchange which is the principal
market for the Stock (deemed to be the New York Stock Exchange if the
Securities are listed thereon) (2) if there is no such appropriate closing sale
price on such exchange, at the mean between the closing bid and asked prices on
such exchange (unless the Trustee deems such price inappropriate as a basis for
evaluation), (3) if the Stocks are not so listed or, if so listed and the
principal market for the Stock is other than on such exchange or there are no
such appropriate closing bid and asked prices available, such evaluation shall
be made by the Trustee in good faith based on the closing sale price on the
over-the-counter market (unless the Trustee deems such price inappropriate as a
basis for evaluation) or (4) if there is no such appropriate closing price,
then (a) on the basis of current bid prices, (b) if bid prices are not
available, on the basis of current bid prices for comparable securities, (c) by
the Trustee's appraising the value of the Securities in good faith on the bid
side of the market or (d) by any combination of the above.
During the initial offering period, the Treasury Obligations are valued on
the basis of offering prices; thereafter and for purposes of determining the
Redemption Value they are valued on the basis of bid prices. The aggregate
offering and bid prices of the Treasury Obligations are the prices obtained
from investment dealers or brokers (which may include the Sponsor) who
customarily deal in Treasury Obligations; or, if there is no market for the
Treasury Obligations, and bid or offering prices are not available, on the
basis of current bid or offering prices for comparable securities; or by
appraisal; or by any combination of the above, adjusted to reflect income
accrued.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION VALUE
While the Public Offering Price of Units during the initial offering
period is determined on the basis of the current offering prices of the
Treasury Obligations, the Public Offering Price of Units in the secondary
market and the Redemption Value is determined on the basis of the current bid
prices of the Treasury Obligations. The Stocks are valued on the same basis for
the initial and secondary markets and for purposes of redemptions. On the
business day prior to the Date of Deposit, the Public Offering Price per Unit
(which figure includes the sales charge) exceeded the Redemption Value, (See
"Essential Information"). The bid and offering prices of the Treasury
Obligations are expected to vary. For this reason and others, including the
fact that the Public Offering Price includes the sales charge, the amount
realized by a Unitholder upon redemption of Units may be less than the price
paid by the Unitholder for the Units. Also, as of the close of the initial
offering period, the Redemption Value per Unit will be reduced to reflect the
sale of Securities made to reimburse the Sponsor for the Initial Organizational
Costs.
EXPENSES OF THE TRUST
The Initial Organizational Costs will be paid by the Trust, as is common
for mutual funds. Historically, the Sponsors of unit investment trusts have
paid all organizational expenses. The Sponsor will receive no fee from the
Trust for its services in establishing the Trust.
The Sponsor will receive a fee, which is earned for portfolio supervisory
services, and which is based upon the largest number of Units outstanding
during the calendar year. The Sponsor's fee, which is initially $.00035 per
Unit, may exceed the actual costs of providing portfolio supervisory services
for the Trust, but at no time will the total amount it receives for portfolio
supervisory services rendered to all series of the PaineWebber Pathfinders
Trust in any calendar year exceed the aggregate cost to it of supplying such
services in such year.
For its services as Trustee and Evaluator, the Trustee will be paid in
monthly installments, at an annual rate of $.00145 per Unit computed monthly
based upon the largest number of Units outstanding
B-18
<PAGE>
in the Trust during the preceding month. In addition, the regular and recurring
expenses of the Trust are estimated to be $.00085 per Unit, which include, but
are not limited to certain mailing, printing, and auditing expenses. Expenses
in excess of this estimate will be borne by the Trust. The Trustee could also
benefit to the extent that it may hold funds in non-interest bearing accounts
created under the Indenture.
The Sponsor's fee and Trustee's fee may be increased without approval of
the Unitholders by an amount not exceeding a proportionate increase in the
category entitled "All Services Less Rent" in the Consumer Price Index
published by the United States Department of Labor or if the Consumer Price
Index is no longer published, a similar index as determined by the Trustee and
Sponsor.
In addition to the above, the following charges are or may be incurred by
the Trust and paid from the Income Account, or, to the extent funds are not
available in the Income Account, from the Capital Account (see "Administration
of the Trust-Accounts"): (1) fees for the Trustee for extraordinary services;
(2) expenses of the Trustee (including legal and auditing expenses) and of
counsel; (3) various governmental charges; (4) expenses and costs of any action
taken by the Trustee to protect the Trust and the rights and interests of the
Unitholders; (5) indemnification of the Trustee for any loss, liabilities or
expenses incurred by it in the administration of the Trust without gross
negligence, bad faith or wilful misconduct on its part; (6) brokerage
commissions and other expenses incurred in connection with the purchase and
sale of Securities; and (7) expenses incurred upon termination of the Trust. In
addition, to the extent then permitted by the SEC, the Trust may incur expenses
of maintaining registration or qualification of the Trust or the Units under
Federal or state securities laws so long as the Sponsor is maintaining a
secondary market (including, but not limited to, legal, auditing and printing
expenses).
The accounts of the Trust shall be audited not less than annually by
independent auditors selected by the Sponsor. The expenses of the audit shall
be an expense of the Trust. So long as the Sponsor maintains a secondary
market, the Sponsor will bear any audit expense which exceeds $.00050 per Unit.
Unitholders covered by the audit during the year may receive a copy of the
audited financial statements upon request.
The fees and expenses described above are payable out of the Trust and
when unpaid will be secured by a lien on the Trust. Based upon the last
dividend paid prior to the Initial Date of Deposit, dividends on the Stocks are
expected to be sufficient to pay the estimated annual expenses of the Trust. To
the extent that dividends paid with respect to the Stocks are not sufficient to
meet such expenses of the Trust, the Trustee is authorized to sell Securities
in the same manner as provided in "Redemption" herein.
RIGHTS OF UNITHOLDERS
Ownership of Units is evidenced by recordation on the books of the
Trustee. In order to avoid additional operating costs and for investor
convenience, certificates will not be issued unless a request, in writing with
signature guaranteed by an eligible guarantor institution or in such other
manner as may be acceptable to the Trustee, is delivered by the Unitholder to
the Sponsor. Issued certificates are transferable by presentation and surrender
to the Trustee at its office in Boston, Massachusetts properly endorsed or
accompanied by a written instrument or instruments of transfer. Uncertificated
Units are transferable by presentation to the Trustee at its office of a
written instrument of transfer.
Certificates may be issued in denominations of one Unit or any integral
multiple of one Unit as deemed appropriate by the Trustee. A Unitholder may be
required to pay $2.00 per certificate reissued or transferred, and shall be
required to pay any governmental charge that may be imposed in connection with
each transfer or interchange. For new certificates issued to replace destroyed,
mutilated, stolen or lost certificates, the Unitholder must furnish indemnity
satisfactory to the Trustee and must pay any expenses that the Trustee may
incur. Mutilated certificates must be surrendered to the Trustee for
replacement.
B-19
<PAGE>
DISTRIBUTIONS
The Trustee will distribute any net income received, if any, from the
Income Account, quarterly on the Distribution Dates to Unitholders of record on
the preceding Record Date. Income with respect to the original issue discount
on the Treasury Obligations will not be distributed although Unitholders will
be subject to tax as if a distribution had occurred. Distributions from the
Capital Account will be made on quarterly Distribution Dates to Unitholders of
record on the preceding Record Date, provided however, that distributions of
less than $.00500 per Unit need not be made from the Capital Account on any
Distribution Date. (See "Federal Income Taxes".)
Within a reasonable period after the Trust is terminated, each Unitholder
will, upon surrender of his Certificates for cancellation, receive his pro rata
share of the amounts realized upon disposition of the Securities plus any other
assets of the Trust, less expenses of the Trust. (See "Termination".)
ADMINISTRATION OF THE TRUST
Accounts. All dividends received and interest, if any, accrued on
Securities, proceeds from the sale of Securities or other monies received by
the Trustee on behalf of the Trust shall be held in trust in Short-Term
Treasury Obligations (if permissible) or in non-interest bearing accounts until
required to be disbursed.
The Trustee will credit on its books to the Income Account any dividends
(including stock dividends which were sold) and interest, if any, accrued by
the Trust. All other receipts (i.e. return of principal, and gains) are
credited on its books to a Capital Account. Stock dividends received by the
Trust, if any, will be sold by the Trustee and the proceeds therefrom be
treated as income to the Trust. A record will be kept of qualifying dividends
within the Income Account. The pro rata share of the Income Account and the pro
rata share of the Capital Account represented by each Unit will be computed by
the Trustee as set forth under "Valuation".
The Trustee will deduct from the Income Account and, to the extent funds
are not sufficient in the Income Account, from the Capital Account, amounts
necessary to pay annual expenses incurred by the Trust. (See "Expenses of the
Trust.") In addition, the Trustee may withdraw from the Income Account and the
Capital Account any amounts that may be necessary to cover redemption of Units
by the Trustee. (See "Redemption.") In addition, distributions of amounts
necessary to pay the Initial Organizational Costs will be made from the Capital
Account to special accounts maintained by the Trustee for purpose of
reimbursing the Sponsor. To the extent that funds are not available in the
Capital Account to meet certain charges or expenses, the Trustee may sell
Securities. Upon notification from the Sponsor that the initial offering period
is terminated, the Trustee, at the direction of the Sponsor, will cause the
sale of Securities in an amount equal to the Initial Organizational Costs as
certified to it by the Sponsor.
The Trustee may establish reserves (the "Reserve Account") within the
Trust for state and local taxes, if any, and any other governmental charges
payable out of the Trust.
Reports and Records. With the distribution of income from the Trust,
Unitholders will be furnished with a statement setting forth the amount being
distributed from each account.
The Trustee keeps records and accounts of the Trust at its office in
Boston, including records of the names and addresses of Unitholders, a current
list of underlying Securities in the portfolio and a copy of the Indenture.
Records pertaining to a Unitholder or to the Trust (but not to other
Unitholders) are available to the Unitholder for inspection at reasonable times
during business hours.
B-20
<PAGE>
Within a reasonable period of time after the end of each calendar year,
starting with calendar year 1999, the Trustee will furnish each person who was
a Unitholder at any time during the calendar year an annual report containing
the following information, expressed in reasonable detail both as a dollar
amount and as a dollar amount per Unit: (1) a summary of transactions for the
year in the Income, Capital and Reserve Accounts; (2) any Securities sold
during the year and the Securities held at the end of the year; (3) the Trust
Fund Evaluation per Unit, computed as of the 31st day of December of such year
(or the last business day prior thereto); and (4) amounts distributed to
Unitholders during such year.
Portfolio Supervision. The portfolio of the Trust is not "managed" by the
Sponsor or the Trustee; their activities described in this Prospectus are
governed solely by the provisions of the Indenture. The Indenture provides that
the Sponsor may (but need not) direct the Trustee to dispose of a Security (or
tender a Security for cash in the case of paragraph (6) below):
(1) upon the failure of the issuer to declare or pay anticipated
dividends or interest;
(2) upon the institution of materially adverse action or proceeding at
law or in equity seeking to restrain or enjoin the declaration or payment
of dividends or interest on any such Securities or the existence of any
other materially adverse legal question or impediment affecting such
Securities or the declaration or payment of dividends or interest on the
same;
(3) upon the breach of covenant or warranty in any trust indenture or
other document relating to the issuer which might materially and adversely
affect either immediately or contingently the declaration or payment of
dividends or interest on such Securities;
(4) upon the default in the payment of principal or par or stated value
of, premium, if any, or income on any other outstanding securities of the
issuer or the guarantor of such securities which might materially and
adversely, either immediately or contingently, affect the declaration or
payment of dividends or interest on the Securities;
(5) upon the decline in price or the occurrence of any materially
adverse market or credit factors, that in the opinion of the Sponsor, make
the retention of such Securities not in the best interest of the
Unitholder;
(6) upon a public tender offer being made for a Security, or a merger or
acquisition being announced affecting a Security that in the opinion of
the Sponsor make the sale or tender of the Security in the best interests
of the Unitholders;
(7) upon a decrease in the Sponsor's internal rating of the Security; or
(8) upon the happening of events which, in the opinion of the Sponsor,
negatively affect the economic fundamentals of the issuer of the Security
or the industry of which it is a part.
The Indenture contains certain instructions to the Trustee regarding
corporate actions that affect Securities held in the Trust. In most cases, the
Trustee is required to use its best efforts to vote the Securities as closely
as practicable in the same manner and in the same proportion as are all other
securities held by owners other than the Trust. In cases of offers to exchange
Securities for other stock or securities (including but not limited to a tender
offer), the Trustee is required to reject such offers. If, after complying with
such procedures, the Trustee nevertheless receives stock or securities, with or
without cash, as a result of the corporate action, the Trustee, at the
direction of the Sponsor, may retain or sell the stock or securities. Any stock
or securities so retained will be subject to the terms and conditions of the
Indenture to the same extent as the Securities originally deposited in the
Trust.
B-21
<PAGE>
The Trustee may dispose of Securities where necessary to pay annual Trust
expenses or to satisfy redemption requests as directed by the Sponsor and in a
manner necessary to maximize the objectives of the Trust, or if not so
directed, in its own discretion, provided however, that Treasury Obligations
will be sold to maintain in the Trust Treasury Obligations in an amount which,
upon maturity, will equal at least $1.00 per Unit outstanding after giving
effect to the redemption and Stocks having the greatest appreciation shall be
sold first.
Reinvestment. Cash received upon the sale of Stock (except for sales to
meet redemption requests) and dividends received may, if and to the extent
there is no legal or regulatory impediment, be reinvested in Short-Term
Treasury Obligations. The Sponsor anticipates that, where permitted, such
proceeds will be reinvested in interest bearing Short-Term Treasury Obligations
unless factors exist such that reinvestment would not be in the best interest
of Unitholders or would be impractical. Such factors may include, among others,
(i) short reinvestment periods which would make reinvestment in Short-Term
Treasury Obligations undesirable or infeasible and (ii) amounts not
sufficiently large so as to make a reinvestment economical or feasible. Any
moneys held and not reinvested will be held in a non-interest bearing account
until distribution on the next Distribution Date to Unitholders of record.
AMENDMENT OF THE INDENTURE
The Indenture may be amended by the Trustee and the Sponsor without the
consent of any of the Unitholders to cure any ambiguity or to correct or
supplement any provision of the Indenture which may be defective or
inconsistent or to make other provisions that will not materially adversely
affect the interest of the Unitholders.
The Indenture may be amended in any respect by the Sponsor and the Trustee
with the consent of the holders of 51% of the Units then outstanding; provided
that no such amendment shall (1) reduce the interest in the Trust represented
by a Unit or (2) reduce the percentage of Unitholders required to consent to
any such amendment, without the consent of all Unitholders.
The Trustee will promptly notify Unitholders of the substance of any
amendment affecting Unitholders' rights or their interest in the Trust.
TERMINATION OF THE TRUST
The Indenture provides that the Trust will terminate within 15 days after
the maturity of the Treasury Obligations held in the Trust. If the value of the
Trust as shown by the Trust Fund Evaluation is less than twenty percent (20%)
of the market value of the Securities upon completion of the deposit of
Securities, the Trustee may in its discretion, and will when so directed by the
Sponsor, terminate the Trust. The Trust may also be terminated at any time by
the written consent of 51% of the Unitholders or by the Trustee upon the
resignation or removal of the Sponsor if the Trustee determines termination to
be in the best interest of the Unitholders. In no event will the Trust continue
beyond the Mandatory Termination Date as stated in "Essential Information
Regarding the Trust."
As directed by the Sponsor approximately 30 days prior to the Mandatory
Termination Date the Trustee will begin to sell the Stocks held in the Trust.
Stocks having the greatest amount of capital appreciation will be sold first.
Upon termination of the Trust, the Trustee will sell any Stocks then remaining
in the Trust and will then, after deduction of any fees and expenses of the
Trust and payment into the Reserve Account of any amount required for taxes or
other governmental charges that may be payable by the Trust, distribute to each
Unitholder, upon surrender for cancellation of his Certificate (if applicable)
after due notice of such termination, such Unitholder's pro rata share in the
Income and
B-22
<PAGE>
Capital Accounts. Monies held upon the sale of Securities will be held in
Short-Term Treasury Obligations (if permissible) or in non-interest bearing
accounts created under the Indenture until distributed and, if not re-invested,
will be of benefit to the Trustee. The sale of Stocks in the Trust in the
period prior to termination and upon termination may result in a lower amount
than might otherwise be realized if the sale were not required at such time due
to impending or actual termination of the Trust. For this reason, among others,
the amount realized by a Unitholder upon termination may be less than the
amount paid by the Unitholder.
SPONSOR
The Sponsor, PaineWebber Incorporated, is a corporation organized under
the laws of the State of Delaware. The Sponsor is a member firm of the New York
Stock Exchange, Inc. as well as other major securities and commodities
exchanges and is a member of the National Association of Securities Dealers,
Inc. The Sponsor is engaged in a security and commodity brokerage business as
well as underwriting and distributing new issues. The Sponsor also acts as a
dealer in unlisted securities and municipal bonds and in addition to
participating as a member of various selling groups or as an agent of other
investment companies, executes orders on behalf of investment companies for the
purchase and sale of securities of such companies and sells securities to such
companies in its capacity as a broker or dealer in securities.
The Indenture provides that the Sponsor will not be liable to the Trustee,
any of the Trusts or to the Unitholders for taking any action or for refraining
from taking any action made in good faith or for errors in judgment, but will
be liable only for its own wilful misfeasance, bad faith, gross negligence or
wilful disregard of its duties. The Sponsor will not be liable or responsible
in any way for depreciation or loss incurred by reason of the sale of any
Securities in the Trust.
The Indenture is binding upon any successor to the business of the
Sponsor. The Sponsor may transfer all or substantially all of its assets to a
corporation or partnership which carries on the business of the Sponsor and
duly assumes all the obligations of the Sponsor under the Indenture. In such
event the Sponsor shall be relieved of all further liability under the
Indenture.
If the Sponsor fails to undertake any of its duties under the Indenture,
becomes incapable of acting, becomes bankrupt, or has its affairs taken over by
public authorities, the Trustee may either appoint a successor Sponsor or
Sponsors to serve at rates of compensation determined as provided in the
Indenture or terminate the Indenture and liquidate the Trust.
TRUSTEE
The Trustee is Investors Bank & Trust Company, a Massachusetts trust
company with its office at Hancock Towers, 200 Clarendon Street, Boston,
Massachusetts 02116, toll-free number 1-800-356-2754 (which is subject to
supervision by the Massachusetts Commissioner of Banks, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve
System).
The Indenture provides that the Trustee will not be liable for any action
taken in good faith in reliance on properly executed documents or the
disposition of moneys, Securities or certificates or for any valuation which it
is required to make, except by reason of its own gross negligence, bad faith or
wilful misconduct, nor will the Trustee be liable or responsible in any way for
depreciation or loss incurred by reason of the sale by the Trustee of any
Securities in the Trust. In the event of the failure of the Sponsor to act, the
Trustee may act and will not be liable for any action taken by it in good
faith. The Trustee will not be personally liable for any taxes or other
governmental charges imposed upon or in respect of the Securities or upon the
interest on the Securities or upon it as Trustee or upon or in respect of the
Trust
B-23
<PAGE>
which the Trustee may be required to pay under any present or future law of the
United States of America or of any other taxing authority having jurisdiction.
In addition, the Indenture contains other customary provisions limiting the
liability of the Trustee. The Trustee will be indemnified and held harmless
against any loss or liability accruing to it without gross negligence, bad
faith or wilful misconduct on its part, arising out of or in connection with
its acceptance or administration of the Trust, including the costs and expenses
(including counsel fees) of defending itself against any claim of liability.
INDEPENDENT AUDITORS
The Statement of Net Assets and Schedule of Investments have been audited
by Ernst & Young LLP, independent auditors and have been included in this
Prospectus in reliance upon their report given on their authority as experts in
accounting and auditing.
LEGAL OPINIONS
The legality of the Units offered by this Prospectus has been passed upon
by Carter, Ledyard & Milburn, 2 Wall Street, New York, New York, as counsel for
the Sponsor.
B-24
<PAGE>
PAINEWEBBER PATHFINDERS TRUST
Treasury and Growth Stock Series 25
[GRAPHIC OMITTED]
The Upside Potential of Equities
with the Security of U.S. Treasuries
TRUSTEE: SPONSOR:
INVESTORS BANK & TRUST COMPANY PAINEWEBBER INCORPORATED
Hancock Towers, 1200 Harbor Boulevard,
200 Clarendon Street Weehawken, N.J. 07087
Boston, Mass. 02116 (201) 902-3000
(800) 356-2754
- --------------------------------------------------------------------------------
This Prospectus does not include all of the information with respect to The
PaineWebber Pathfinders Trust, Treasury and Growth Stock, Series 25 set forth
in its Registration Statement filed with the Securities and Exchange Commission
(the "Commission") in Washington, D.C. under the:
o Securities Act of 1933 (File No. 333- ) and
o Investment Company Act of 1940 (File No. 811-4158)
TO OBTAIN COPIES FROM THE COMMISSION AT PRESCRIBED RATES--
WRITE: Public Reference Section of the Commission
450 Fifth Street, N.W., Washington, D.C. 20549
CALL: 1-800-SEC-0330
VISIT: http://www.sec.gov
- --------------------------------------------------------------------------------
No person is authorized to give any information or make any representation
about The PaineWebber Pathfinders Trust, Treasury and Growth Stock, Series 25
not contained in this Prospectus, and you should not rely on any other
information. Read and keep both parts of the Prospectus for future reference.
- --------------------------------------------------------------------------------
PROSPECTUS DATED , 1999
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following
documents:
The facing sheet.
The Prospectus.
The Undertaking to file reports.
The signatures.
The following exhibits:
1. Ex. 99.A1 Standard Terms and Conditions of Trust dated as
of July 1, 1997 between PaineWebber Incorporated, Depositor, Investors Bank &
Trust Co., Trustee (incorporated by reference to Exhibit 2 in File No.
333-22641).
2. Ex. 99.A6 Certificate of Incorporation of PaineWebber
Incorporated, as amended (incorporated by reference to Exhibit
8 in File No. 2-88344).
3. Ex. 99.A6 By-Laws of PaineWebber Incorporated, as amended
(incorporated by reference to Exhibit A(6)(a) in File No.
811-3722).
The following exhibits to be supplied by amendment:
1. Ex.99.A2 Copy of Trust Indenture and Agreement between
PaineWebber Incorporated, Depositor, and Investors Bank & Trust Co.
incorporating by reference Standard Terms and Conditions of Trust dated as of
July 1, 1997.
3. Ex.99.A5 Form of Certificate of Ownership (included in
Standard Terms and Conditions of Trust).
4. Ex.99.2 Opinion of Counsel as to legality of securities
being registered.
5. Ex.99.C1 Opinion of Counsel as to income tax status of
securities being registered.
6. Ex.99.C2 Consent of Ernst and Young, LLP, Independent
Auditors.
<PAGE>
FINANCIAL STATEMENTS
1. Statement of Condition of the Trust as shown in
the current Prospectus for this series.
2. Financial Statements of the Depositor.
PaineWebber Group-Financial Statements incorporated by
reference to Form 10-K and 10-Q, File No. 1-7367, respectively.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933, the registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned thereunto duly
authorized, all in the City of New York, and State of New York, on
this 17th day of March, 1999.
THE PAINEWEBBER PATHFINDERS TRUST,
TREASURY AND GROWTH STOCK,
SERIES 25
(Registrant)
By: PaineWebber Incorporated
(Depositor)
Robert E. Holley
Senior Vice President
Pursuant to the requirements of the Securities Act
of 1933, this Registration Statement has been signed on behalf
of PaineWebber Incorporated, the Depositor by the following
persons who constitute a majority of the Executive Committee
of its Board of Directors in the following capacities and in
the City Of New York, and State of New York, on this 17th day
of March, 1999.
PAINEWEBBER INCORPORATED
Name Office
---- ------
Donald B. Marron Chairman, Chief Executive
Officer, Director & Member of
the Executive Committee*
Regina A. Dolan Executive Vice President, Chief
Financial Officer & Director of PaineWebber
Incorporated*
Joseph J. Grano, Jr. President, Retail Sales & Marketing,
Director & Member of the Executive
Committee*
Steve P. Baum Executive Vice President, Director of
PaineWebber Incorporated*
Robert H. Silver Executive Vice President Director of
Paine Webber Incorporated*
Mark B. Sutton Executive Vice President, Director of
PaineWebber Incorporated*
Margo N. Alexander Executive Vice President, Director of
PaineWebber Incorporated*
Terry L. Atkinson Managing Director, Director of PaineWebber
Incorporated*
Brian M. Barefoot Executive Vice President, Director of
PaineWebber Incorporated*
Michael Culp Managing Director, Director of PaineWebber
Incorporated*
Edward M. Kerschner Managing Director, Director of PaineWebber
Incorporated*
James P. MacGilvray Executive Vice President, Director of
PaineWebber Incorporated*
By
-----------------------------------
Robert Holley
Attorney-in-fact*
- --------------
* Executed copies of the powers of attorney have been filed with the
Securities and Exchange Commission in connection with Post Effective
Amendment No.19 to the Registration Statement File No. 2-61279.
