PaineWebber
Tax-Managed Equity Fund
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PROSPECTUS
December 6, 1999
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This prospectus offers shares in one of PaineWebber's stock funds. The fund
offers four classes of shares -- Classes A, B, C and Y. Each class has different
sales charges and ongoing expenses. You can choose the class that is best for
you based on how much you plan to invest and how long you plan to hold your fund
shares. Class Y shares are available only to certain types of investors.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund's shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.
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PaineWebber Tax-Managed Equity Fund
CONTENTS
THE FUND
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What every investor 3 Tax-Managed Equity Fund
should know about
the fund 5 More About Risks and Investment Strategies
YOUR INVESTMENT
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Information for 7 Managing Your Fund Account
managing your fund -- Flexible Pricing
account -- Buying Shares
-- Selling Shares
-- Exchanging Shares
-- Pricing and Valuation
ADDITIONAL INFORMATION
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Additional important 12 Management
information about
the fund 13 Dividends and Taxes
14 Financial Highlights
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Where to learn more Back Cover
about PaineWebber
mutual funds
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The fund is not a complete or
balanced investment program.
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PaineWebber Tax-Managed Equity Fund
PAINEWEBBER TAX-MANAGED EQUITY FUND
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
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FUND OBJECTIVE
Maximize after-tax total return.
PRINCIPAL INVESTMENT STRATEGIES
The fund invests primarily in common stocks that Mitchell Hutchins Asset
Management Inc., its investment adviser, believes have reasonable valuations and
favorable earnings forecasts. Mitchell Hutchins seeks to minimize the taxes the
fund's shareholders incur, primarily by minimizing the fund's realized capital
gains and by realizing capital losses that can offset present or future capital
gains.
The fund may invest in U.S. dollar-denominated securities of foreign
issuers. The fund's investments may include convertible bonds, including to a
limited extent those that are not investment grade. The fund may (but is not
required to) use options, futures contracts and other derivatives as part of its
investment strategy or to help manage portfolio risks.
In buying and selling securities for the fund, Mitchell Hutchins follows a
disciplined investment process that relies on a tax-advantaged valuation model,
which screens a universe of companies and ranks them. The model may apply a
number of factors, which may include cash flow, forecasted earnings, revenues,
price momentum, profitability, financial leverage, price of the security, return
on equity and projected dividends. The model seeks to determine the
reasonableness of the valuation of individual securities by comparing their
relative valuation with other individual securities or the U.S. equity
securities market. Through the use of the model, the fund seeks to hold
individual securities for the long term, although it may hold securities for
shorter periods. Mitchell Hutchins may apply traditional fundamental analysis to
select specific securities ranked highly by the model. Mitchell Hutchins may
make changes to the model or its investment process over time.
PRINCIPAL RISKS
An investment in the fund is not guaranteed; you may lose money by investing in
the fund.
Equity securities generally fluctuate in value more than other types of
securities. The fund could lose all of its investment in a company's stock.
Notwithstanding the fund's use of tax management strategies, the fund may have
taxable income and may realize taxable capital gains from time to time.
Investors may realize capital gains when they sell their shares.
More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:
o Equity Risk
o Risks of Tax Management Strategies
o Foreign Securities Risk
o Derivatives Risk
INFORMATION ON THE FUND'S INVESTMENT STRATEGIES AND RECENT HOLDINGS CAN BE FOUND
IN ITS CURRENT ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON
ORDERING THOSE REPORTS).
The fund commenced operations on December 14, 1998. As a result, it does not
have performance information of at least one calendar year to include in a bar
chart or table reflecting average annual returns.
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PaineWebber Tax-Managed Equity Fund
EXPENSES AND FEES TABLES
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FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price) .............................................. 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
(as a % of offering price) .............................................. None 5% 1% None
Exchange Fee ............................................................... None None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fees ............................................................ 0.75% 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1) Fees ................................... 0.25 1.00 1.00 None
Other Expenses1 ............................................................ 0.52 0.47 0.46 0.37
---- ---- ---- ----
Total Annual Fund Operating Expenses1 ...................................... 1.52% 2.22% 2.21% 1.12%
==== ==== ==== ====
</TABLE>
1 These figures do not include non-recurring organizational expenses of $125,000
during the fund's initial fiscal period ended August 31, 1999. If those
expenses were included for Class A, B, C and Y shares, annualized "Other
Expenses" would be 0.87%, 0.82%, 0.81% and 0.72% and "Total Annual Fund
Operating Expenses" would be 1.87%, 2.57%, 2.56% and 1.47%, respectively.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A ............................................................. $598 $ 909 $1,242 $2,181
Class B (assuming sale of all shares at end of period) .............. 725 994 1,390 2,216
Class B (assuming no sale of shares) ................................ 225 694 1,190 2,216
Class C (assuming sale of all shares at end of period) .............. 324 691 1,185 2,544
Class C (assuming no sale of shares) ................................ 224 691 1,185 2,544
Class Y ............................................................. 114 356 617 1,363
</TABLE>
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PaineWebber Tax-Managed Equity Fund
MORE ABOUT RISKS
AND INVESTMENT STRATEGIES
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PRINCIPAL RISKS
The main risks of investing in the fund are described below.
Other risks of investing in the fund, along with further detail about some of
the risks described below, are discussed in the fund's Statement of Additional
Information ("SAI"). Information on how you can obtain the SAI is on the back
cover of this prospectus.
EQUITY RISK. The prices of common stocks and other equity securities generally
fluctuate more than those of other investments. They reflect changes in the
issuing company's financial condition and changes in the overall market. The
fund may lose a substantial part, or even all, of its investment in a company's
stock.
RISKS OF TAX MANAGEMENT STRATEGIES. By following tax-management strategies, the
fund may miss opportunities to purchase or sell securities at advantageous
times. Notwithstanding the fund's use of tax management strategies, the fund may
have taxable income and may realize taxable capital gains from time to time. In
addition, investors purchasing fund shares when the fund has large accumulated
capital gains could receive a significant part of the purchase price of their
shares back as a taxable capital gain distribution. State or federal tax laws or
regulations may be amended at any time, including adverse changes to applicable
tax rates or long-term capital gain holding periods. Over time, securities with
unrealized gains may comprise a substantial portion of the fund's assets. While
the fund may use a number of strategies to avoid having to recognize large
capital gains, these strategies may not be successful.
FOREIGN SECURITIES RISK. Foreign securities involve risks that normally are not
associated with securities of U.S. issuers. These include risks relating to
political, social and economic developments abroad and differences between U.S.
and foreign regulatory requirements and market practices.
DERIVATIVES RISK. The value of "derivatives" - so called because their value
"derives" from the value of an underlying asset, reference rate or index - may
rise or fall more rapidly than other investments. For some derivatives, it is
possible for the fund to lose more than the amount it invested in the
derivative. Options and futures contracts are examples of derivatives. If the
fund uses derivatives to adjust or "hedge" the overall risk of its portfolio, it
is possible that the hedge will not succeed. This may happen for various
reasons, including unexpected changes in the value of the derivatives that are
not matched by opposite changes in the value of the rest of the fund's
portfolio.
ADDITIONAL RISKS
YEAR 2000 RISK. The fund could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the fund, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from service providers that they are taking similar steps.
Similarly, the companies in which the fund invests and trading systems used by
the fund could be adversely affected by this issue. The ability of a company or
trading system to respond successfully to the issue requires both technological
sophistication and diligence, and there can be no assurance that any steps taken
will be sufficient to avoid an adverse impact on the fund.
ADDITIONAL INVESTMENT STRATEGIES
TEMPORARY AND DEFENSIVE POSITIONS; CASH RESERVES. In order to protect itself
from adverse market conditions, the fund may take a temporary defensive position
that is different from its normal investment strategy. This means that the fund
may temporarily invest a larger-than-normal part, or even 100%, of its assets in
cash or money market instruments. Since these investments provide relatively low
income, a defensive position may not be consistent with achieving the fund's
investment objective. The fund may invest up to 35% of its total assets in cash
or money market instruments as a cash reserve for liquidity.
SALES OF SECURITIES. If Mitchell Hutchins decides to sell a particular
appreciated security, under normal conditions management will attempt to sell
share lots that qualify for
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PaineWebber Tax-Managed Equity Fund
long-term capital gain treatment and, among those, the share lots with the
highest cost basis.
PORTFOLIO TURNOVER. The fund does not seek to use portfolio turnover to maximize
total after-tax return to its shareholders. The fund may have higher portfolio
turnover if Mitchell Hutchins believes that market conditions warrant or if
Mitchell Hutchins believes that opportunities exist to sell securities and
realize capital losses that can be used to offset capital gains. The fund does
not restrict the frequency of trading to limit expenses.
High portfolio turnover (100% or more) may increase the portion of the fund's
capital gains that are realized for tax purposes in any given year. This may
increase the fund's taxable dividends in that year. Frequent trading also may
increase the fund's realized capital gains that are considered "short-term" for
tax purposes. Shareholders will pay higher taxes on dividends that represent net
short-term capital gains than they would pay on dividends that represent net
long-term capital gains. Frequent trading also may result in higher fund
expenses due to transaction costs.
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PaineWebber Tax-Managed Equity Fund
YOUR INVESTMENT
MANAGING YOUR FUND ACCOUNT
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Tax-exempt institutions or tax-advantaged accounts such as qualified retirement
plans or individual retirement accounts ("IRAs") will not benefit from the
fund's tax-management strategies. These investors are not subject to tax on
their income and, therefore, are generally not required to pay taxes on fund
distributions.
FLEXIBLE PRICING
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The fund offers four classes of shares - Class A, Class B, Class C and Class Y.
Each class has different sales charges and ongoing expenses. You can choose the
class that is best for you, based on how much you plan to invest and how long
you plan to hold your fund shares. Class Y shares are only available to certain
types of investors.
The fund has adopted a plan under rule 12b-1 for its Class A, Class B and Class
C shares that allows it to pay service and (for Class B and Class C shares)
distribution fees for the sale of its shares and services provided to
shareholders. Because the 12b-1 distribution fees for Class B and Class C shares
are paid out of the fund's assets on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than if you paid a
front-end sales charge.
CLASS A SHARES
Class A shares have a front-end sales charge that is included in the offering
price of the Class A shares. This sales charge is not invested in the fund.
Class A shares pay an annual 12b-1 service fee of 0.25% of average net assets,
but they pay no 12b-1 distribution fees. The ongoing expenses for Class A shares
are lower than for Class B and Class C shares.
The Class A sales charges for the fund are described in the following table.
CLASS A SALES CHARGES
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF: DISCOUNT TO SELECTED DEALERS AS
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED PERCENTAGE OF OFFERING PRICE
- ------------------- -------------- ------------------- ----------------------------
<S> .................................. <C> <C> <C>
LESS THAN $50,000 .................... 4.50% 4.71% 4.25%
$50,000 TO $99,999 ................... 4.00 4.17 3.75
$100,000 TO $249,999 ................. 3.50 3.63 3.25
$250,000 TO $499,999 ................. 2.50 2.56 2.25
$500,000 TO $999,999 ................. 1.75 1.78 1.50
$1,000,000 AND OVER (1) .............. NONE NONE 1.00(2)
</TABLE>
(1) A contingent deferred sales charge of 1% of the shares' offering price or
the net asset value at the time of sale by the shareholder, whichever is
less, is charged on sales of shares made within one year of the purchase
date. Class A shares representing reinvestment of dividends are not subject
to this 1% charge. Withdrawals in the first year after purchase of up to
12% of the value of the fund account under the fund's Systematic Withdrawal
Plan are not subject to this charge.
(2) Mitchell Hutchins pays 1% to PaineWebber.
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PaineWebber Tax-Managed Equity Fund
SALES CHARGE REDUCTIONS AND WAIVERS. You may qualify for a lower sales charge if
you already own Class A shares of a PaineWebber mutual fund. You can combine the
value of Class A shares that you own in other PaineWebber funds and the purchase
amount of the Class A shares of the PaineWebber fund that you are buying.
You may also qualify for a lower sales charge if you combine your purchases with
those of:
o your spouse, parents or children under age 21;
o your Individual Retirement Accounts (IRAs);
o certain employee benefit plans, including 401(k) plans;
o a company that you control;
o a trust that you created;
o Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts created
by you or by a group of investors for your children; or
o accounts with the same adviser.
You may qualify for a complete waiver of the sales charge if you:
o Are an employee of PaineWebber or its affiliates or the spouse, parent or
child under age 21 of a PaineWebber employee;
o Buy these shares through a PaineWebber Financial Advisor who was formerly
employed as an investment executive with a competing brokerage firm that was
registered as a broker-dealer with the SEC, and
-- you were the Financial Advisor's client at the competing brokerage firm;
-- within 90 days of buying shares in a fund, you sell shares of one or more
mutual funds that were principally underwritten by the competing brokerage
firm or its affiliates, and you either paid a sales charge to buy those
shares, pay a contingent deferred sales charge when selling them or held
those shares until the contingent deferred sales charge was waived; and
-- you purchase an amount that does not exceed the total amount of money
you received from the sale of the other mutual fund.
o Acquire these shares through the reinvestment of dividends of a PaineWebber
unit investment trust;
o Are a 401(k) or 403(b) qualified employee benefit plan with 50 or more
eligible employees in the plan or at least $1 million in assets;
o Are a participant in the PaineWebber Members OnlySM Program. For investments
made pursuant to this waiver, Mitchell Hutchins may make payments out of its
own resources to PaineWebber and to participating membership organizations in
a total amount not to exceed 1% of the amount invested; or
o Acquire these shares through a PaineWebber InsightOneSM Program brokerage
account.
NOTE: See the fund's SAI for some other sales charge waivers. If you think you
qualify for any sales charge reductions or waivers, you will need to provide
documentation to PaineWebber or the fund. For more information, you should
contact your PaineWebber Financial Advisor or correspondent firm or call
1-800-647-1568. If you want information on the fund's Systematic Withdrawal
Plan, see the SAI or contact your PaineWebber Financial Advisor or correspondent
firm.
CLASS B SHARES
Class B shares have a contingent deferred sales charge. When you purchase Class
B shares, we invest 100% of your purchase in fund shares. However, you may have
to pay the deferred sales charge when you sell your fund shares, depending on
how long you own the shares.
Class B shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
If you hold your Class B shares for six years, they will automatically convert
to Class A shares, which have lower ongoing expenses.
If you sell Class B shares before the end of six years, you will pay a deferred
sales charge. We calculate the deferred sales charge by multiplying the lesser
of the net asset value of the Class B shares at the time of purchase or the net
asset value at the time of sale by the percentage shown below:
PERCENTAGE BY WHICH THE
IF YOU SELL SHARES' NET ASSET
SHARES WITHIN: VALUE IS MULTIPLIED:
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1ST YEAR SINCE PURCHASE 5%
2ND YEAR SINCE PURCHASE 4
3RD YEAR SINCE PURCHASE 3
4TH YEAR SINCE PURCHASE 2
5TH YEAR SINCE PURCHASE 2
6TH YEAR SINCE PURCHASE 1
7th year since purchase None
We will not impose the deferred sales charge on Class B shares representing
reinvestment of dividends or on with-
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PaineWebber Tax-Managed Equity Fund
drawals in any year of up to 12% of the value of your Class B shares under the
Systematic Withdrawal Plan.
To minimize your deferred sales charge, we will assume that you are selling:
o First, Class B shares representing reinvested dividends, and
o Second, Class B shares that you have owned the longest.
SALES CHARGE WAIVERS. You may qualify for a waiver of the deferred sales charge
on a sale of shares if:
o You participate in the Systematic Withdrawal Plan;
o You are older than 59-1/2 and are selling shares to take a distribution from
certain types of retirement plans;
o You receive a tax-free return of an excess IRA contribution;
o You receive a tax-qualified retirement plan distribution following
retirement;
o The shares are sold within one year of your death and you owned the shares
either (1) as the sole shareholder or (2) with your spouse as a joint tenant
with the right of survivorship; or
o You are eligible to invest in certain offshore investment pools offered by
PaineWebber, your shares are sold before March 31, 2000 and the proceeds are
used to purchase interests in one or more of these pools.
NOTE: If you think you qualify for any of these sales charge waivers, you will
need to provide documentation to PaineWebber or the fund. For more information,
you should contact your PaineWebber Financial Advisor or correspondent firm or
call 1-800-647-1568. If you want information on the Systematic Withdrawal Plan,
see the SAI or contact your PaineWebber Financial Advisor or correspondent firm.
CLASS C SHARES
Class C shares have a level load sales charge in the form of ongoing 12b-1
distribution fees. When you purchase Class C shares, we will invest 100% of your
purchase in fund shares.
Class C shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
Class C shares do not convert to another class of shares. This means that you
will pay the 12b-1 fees for as long as you own your shares.
Class C shares also have a contingent deferred sales charge. You may have to pay
the deferred sales charge if you sell your shares within one year of the date
you purchased them. We calculate the deferred sales charge on sales of Class C
shares by multiplying 1.00% by the lesser of the net asset value of the Class C
shares at the time of purchase or the net asset value at the time of sale. We
will not impose the deferred sales charge on Class C shares representing
reinvestment of dividends or on withdrawals in the first year after purchase, of
up to 12% of the value of your Class C shares under the Systematic Withdrawal
Plan.
You may be eligible to sell your shares without paying a contingent deferred
sales charge if you:
o Are a 401(k) or 403(b) qualified employee benefit plan with fewer than 100
employees or less than $1 million in assets; or
o Are eligible to invest in certain offshore investment pools offered by
PaineWebber, your shares are sold before March 31, 2000 and the proceeds are
used to purchase interests in one or more of these pools.
NOTE: If you think you qualify for any of these sales charge waivers, you will
need to provide documentation to PaineWebber or the fund. For more information,
you should contact your PaineWebber Financial Advisor or correspondent firm or
call 1-800-647-1568. If you want information on the Fund's Systematic Withdrawal
Plan, see the SAI or contact your PaineWebber Financial Advisor or correspondent
firm.
CLASS Y SHARES
Class Y shares have no sales charge. Only specific types of investors can
purchase Class Y shares. You may be eligible to purchase Class Y shares if you:
o Buy shares through PaineWebber's PACESM Multi-Advisor Program;
o Buy $10 million or more of PaineWebber fund shares at any one time;
o Are a qualified retirement plan with 5,000 or more eligible employees or $50
million in assets; or
o Are an investment company advised by PaineWebber or an affiliate of
PaineWebber.
The trustee of PaineWebber's 401(k) Plus Plan for its employees is also eligible
to purchase Class Y shares.
Class Y shares do not pay ongoing distribution or service fees or sales charges.
The ongoing expenses for Class Y shares are the lowest for all the classes.
BUYING SHARES
If you are a PaineWebber client, or a client of a PaineWebber correspondent
firm, you can purchase fund
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PaineWebber Tax-Managed Equity Fund
shares through your Financial Advisor. Otherwise, you can invest in the fund
through the fund's transfer agent, PFPC Inc. You can obtain an application by
calling 1-800-647-1568. You must complete and sign the application and mail it,
along with a check, to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
If you wish to invest in other PaineWebber Funds, you can do so by:
o Contacting your Financial Advisor (if you have an account at PaineWebber or
at a PaineWebber correspondent firm)
o Mailing an application with a check; or
o Opening an account by exchanging shares from another PaineWebber fund.
You do not have to complete an application when you make additional investments
in the same fund.
The fund and Mitchell Hutchins reserve the right to reject a purchase order or
suspend the offering of shares.
MINIMUM INVESTMENTS
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TO OPEN AN ACCOUNT ....................... $1,000
TO ADD TO AN ACCOUNT ..................... $ 100
The fund may waive or reduce these amounts for:
o Employees of PaineWebber or its affiliates; or
o Participants in certain pension plans, retirement accounts, unaffiliated
investment programs or the fund's automatic investment plans.
FREQUENT TRADING. The interests of the fund's long-term shareholders and its
ability to manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market fluctuations -- also
known as "market timing." When large dollar amounts are involved, the fund may
have difficulty implementing long-term investment strategies, because it cannot
predict how much cash it will have to invest. Market timing also may force the
fund to sell portfolio securities at disadvantageous times to raise the cash
needed to buy a market timer's fund shares. These factors may hurt the fund's
performance and its shareholders. When Mitchell Hutchins believes frequent
trading would have a disruptive effect on ability to manage its investments,
Mitchell Hutchins and the fund may reject purchase orders and exchanges into the
fund by any person, group or account that Mitchell Hutchins believes to be a
market timer. The fund may notify the market timer that a purchase order or an
exchange has been rejected after the day the order is placed.
SELLING SHARES
You can sell your fund shares at any time. If you own more than one class of
shares, you should specify which class you want to sell. If you do not, the fund
will assume that you want to sell shares in the following order: Class A, then
Class C, then Class B and last, Class Y.
If you want to sell shares that you purchased recently, the fund may delay
payment until it verifies that it has received good payment. If you purchased
shares by check, this can take up to 15 days.
If you have an account with PaineWebber or a PaineWebber correspondent firm, you
can sell shares by contacting your Financial Advisor.
If you do not have an account at PaineWebber or a correspondent firm, and you
bought your shares through the transfer agent, you can sell your shares by
writing to the fund's transfer agent. Your letter must include:
o Your name and address;
o The fund's name;
o The fund account number;
o The dollar amount or number of shares you want to sell; and
o A guarantee of each registered owner's signature. A signature guarantee may
be obtained from a financial institution, broker, dealer or clearing agency
that is a participant in one of the medallion programs recognized by the
Securities Transfer Agents Association. These are: Securities Transfer Agents
Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and the
New York Stock Exchange Medallion Signature Program (MSP). The fund will not
accept signature guarantees that are not a part of these programs.
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
If you sell Class A shares and then repurchase Class A shares of the same fund
within 365 days of the sale, you can reinstate your account without paying a
sales charge.
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PaineWebber Tax-Managed Equity Fund
It costs the fund money to maintain shareholder accounts. Therefore, the fund
reserves the right to repurchase all shares in any account that has a net asset
value of less than $500. If the fund elects to do this with your account, it
will notify you that you can increase the amount invested to $500 or more within
60 days. The fund will not repurchase shares in accounts that fall below $500
solely because of a decrease in the fund's net asset value.
EXCHANGING SHARES
You may exchange Class A, Class B or Class C shares of the fund for shares of
the same class of most other PaineWebber funds. You may not exchange Class Y
shares.
You will not pay either a front-end sales charge or a deferred sales
charge when you exchange shares. However, you may have to pay a deferred sales
charge if you later sell the shares you acquired in the exchange. The fund will
use the date that you purchased the shares in the first fund to determine
whether you must pay a deferred sales charge when you sell the shares in the
acquired fund.
Other PaineWebber funds may have different minimum investment amounts. You may
not be able to exchange your shares if your exchange is not as large as the
minimum investment amount in that other fund.
You may exchange shares of one fund for shares of another fund only after the
first purchase has settled and the first fund has received your payment.
PAINEWEBBER CLIENTS. If you bought your shares through PaineWebber or a
correspondent firm, you may exchange your shares by placing an order with your
PaineWebber Financial Advisor.
OTHER INVESTORS. If you are not a PaineWebber client, you may exchange your
shares by writing to the fund's transfer agent. You must include:
o Your name and address;
o The name of the fund whose shares you are selling and the name of the fund
whose shares you want to buy;
o Your account number;
o How much you are exchanging (by dollar amount or by number of shares to be
sold); and
o A guarantee of your signature. (See "Buying Shares" for information on
obtaining a signature guarantee.)
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
The fund may modify or terminate the exchange privilege at any time.
PRICING AND VALUATION
The price at which you may buy, sell or exchange fund shares is based on net
asset value per share. The fund calculates net asset value on days that the New
York Stock Exchange is open. The fund calculates net asset value separately for
each class as of the close of regular trading on the NYSE (generally, 4:00 p.m.,
Eastern time). The NYSE normally is not open, and the fund does not price its
shares, on most national holidays and on Good Friday. If trading on the NYSE is
halted for the day before 4:00 p.m., Eastern time, the fund's net asset value
per share will be calculated as of the time trading was halted.
Your price for buying, selling or exchanging shares will be based on the net
asset value that is next calculated after the fund accepts your order. If you
place your order through PaineWebber, your PaineWebber Financial Advisor is
responsible for making sure that your order is promptly sent to the fund.
You should keep in mind that a front-end sales charge may be applied to your
purchase if you buy Class A shares. A deferred sales charge may be applied when
you sell Class B or Class C shares.
The fund calculates its net asset value based on the current market value for
its portfolio securities. The fund normally obtains market values for its
securities from independent pricing services that use reported last sales
prices, current market quotations or valuations from computerized "matrix"
systems that derive values based on comparable securities. If a market value is
not available from an independent pricing source for a particular security, that
security is valued at a fair value determined by or under the direction of the
fund's board. The fund normally uses the amortized cost method to value bonds
that will mature in 60 days or less.
Judgment plays a greater role in valuing thinly traded securities, including
many lower-rated bonds, because there is less reliable, objective data
available.
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Prospectus Page 11
<PAGE>
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PaineWebber Tax-Managed Equity Fund
MANAGEMENT
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INVESTMENT ADVISER
Mitchell Hutchins is the fund's investment adviser and administrator. Mitchell
Hutchins is located at 51 West 52nd Street, New York, New York 10019-6114, and
is a wholly owned asset management subsidiary of PaineWebber Incorporated, which
is wholly owned by Paine Webber Group Inc., a publicly owned financial services
holding company. On October 31, 1999, Mitchell Hutchins was adviser or
sub-adviser of 33 investment companies with 76 separate portfolios and aggregate
assets of approximately $48.9 billion.
PORTFOLIO MANAGERS
Mark A. Tincher and Christopher G. Altschul are primarily responsible for the
day-to-day portfolio management of the fund.
Mr. Tincher is a managing director and chief investment officer of equities of
Mitchell Hutchins, responsible for overseeing the management of equity
investments. Mr. Tincher has held his fund responsibilities since its inception.
Prior to March 1995, Mr. Tincher worked for Chase Manhattan Private Bank
("Chase"), where he was a vice president. Mr. Tincher directed the U.S. funds
management and equity research area at Chase, and oversaw the management of all
Chase U.S. equity funds.
Mr. Altschul is a first vice president of Mitchell Hutchins and has held his
fund responsibilities since April 1999. He is currently responsible for the
quantitative equity valuation model and has various analytical responsibilities.
Prior to joining Mitchell Hutchins in April 1995, Mr. Altschul worked as an
equity analyst at Chase.
Upon his arrival at Mitchell Hutchins, Mr. Tincher formed the Mitchell Hutchins
Equity Research Team. Each analyst on the Team focuses on different industries.
As a result, the Team provides the PaineWebber stock funds with more specialized
knowledge of the various industries in which the funds generally invest. The
Equity Research Team is also assisted by members of Mitchell Hutchins' fixed
income groups, who provide input on market outlook, interest rate forecasts and
other considerations pertaining to domestic equity and fixed income investments.
ADVISORY FEES
The fund pays Mitchell Hutchins for its advisory services at the annual contract
rate of 0.75% of its average daily net assets.
OTHER INFORMATION
The fund has received an exemptive order from the SEC that permits its board to
appoint and replace sub-advisers and to amend sub-advisory contracts without
obtaining shareholder approval.
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Prospectus Page 12
<PAGE>
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PaineWebber Tax-Managed Equity Fund
DIVIDENDS AND TAXES
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DIVIDENDS
The fund normally declares and pays dividends annually.
Classes with higher expenses are expected to have lower dividends. For example,
Class B and Class C shares are expected to have the lowest dividends of any
class of the fund's shares, while Class Y shares are expected to have the
highest.
You will receive dividends in additional shares of the same class unless you
elect to receive them in cash. Contact your Financial Advisor at PaineWebber or
one of its correspondent firms if you prefer to receive dividends in cash.
TAXES
The dividends that you receive from the fund generally are subject to federal
income tax regardless of whether you receive them in additional fund shares or
in cash. If you hold fund shares through a tax-exempt account or plan, such as
an IRA or 401(k) plan, dividends on your shares generally will not be subject to
tax.
When you sell fund shares, you generally will be subject to federal income tax
on any gain you realize. If you exchange the fund's shares for shares of another
PaineWebber mutual fund, the transaction will be treated as a sale of the fund's
shares, and any gain will be subject to federal income tax.
The fund expects that its dividends will be comprised primarily of capital gain
distributions. A distribution of capital gains will be taxed at a lower rate
than ordinary income if the fund held the assets that generated the gains for
more than 12 months. The fund will tell you how you should treat its dividends
for tax purposes.
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Prospectus Page 13
<PAGE>
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PaineWebber Tax-Managed Equity Fund
FINANCIAL HIGHLIGHTS
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The following financial highlights table is intended to help you understand the
fund's financial performance for the fiscal period December 14, 1998
(commencement of operations) through August 31, 1999. Certain information
reflects financial results for a single fund share. In the table, "total
investment return" represents the rate that an investor would have earned (or
lost) on an investment in the fund, assuming reinvestment of all dividends.
The information in the financial highlights has been audited by Ernst & Young
LLP, independent auditors, whose report, along with the fund's financial
statements, is included in the fund's Annual Report to Shareholders. The Annual
Report may be obtained without charge by calling 1-800-647-1568.
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Prospectus Page 14
<PAGE>
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PaineWebber Tax-Managed Equity Fund
FINANCIAL HIGHLIGHTS
(Continued)
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<TABLE>
<CAPTION>
FOR THE PERIOD DECEMBER 14, 1998+
THROUGH AUGUST 31, 1999
-------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 12.50 $ 12.50 $ 12.50 $ 12.50
------- ------- ------- -------
Net investment income (loss) ...................... 0.04 (0.03) (0.02) 0.01
Net realized and unrealized gains
from investments ................................ 1.40 1.39 1.38 1.37
------- ------- ------- -------
Total increase from investment operations ......... 1.44 1.36 1.36 1.38
------- ------- ------- -------
Net asset value, end of period .................... $ 13.94 $ 13.86 $ 13.86 $ 13.88
======= ======= ======= =======
Total investment return (1) ....................... 11.52% 10.88% 10.88% 11.04%
======= ======= ======= =======
Ratios/Supplemental data:
Net assets, end of period (000's) ................. $ 17,728 $23,990 $19,493 $ 116
Expenses to average net assets,
net of waivers from adviser ..................... 1.62%* 2.37%* 2.37%* 1.37%*
Expenses to average net assets,
before waivers from adviser ..................... 1.87%* 2.57%* 2.56%* 1.47%*
Net investment income (loss)
to average net assets,
net of waivers from adviser ..................... 0.43%* (0.31)%* (0.31)%* 0.84%*
Net investment income (loss) to
average net assets,
before waivers from adviser ..................... 0.18%* (0.51)%* (0.50)%* 0.74%*
Portfolio turnover rate ........................... 47% 47% 47% 47%
</TABLE>
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* Annualized.
+ Commencement of operations.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of the period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of the period reported. The figures do not
include sales charges; results would be lower for Class A, B and C shares if
sales charges were included. Total investment return for the period has not
been annualized.
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Prospectus Page 15
<PAGE>
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PaineWebber Tax-Managed Equity Fund
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If you want more information about the fund, the following documents are
available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
Additional information about the fund's investments is available in the fund's
annual and semi-annual reports to shareholders. In the fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the fund's performance during the last fiscal period.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.
You may discuss your questions about the fund by contacting your PaineWebber
Financial Advisor. You may obtain free copies of annual and semi-annual reports
and the SAI by contacting the fund directly at 1-800-647-1568.
You may review and copy information about the fund, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You can get text-only copies of reports and other information about
the fund and about the operations of the SEC's Public Reference Room:
o For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
o Free, from the SEC's Internet website at: http://www.sec.gov
PaineWebber Managed Investments Trust
- -- PaineWebber Tax-Managed Equity Fund
Investment Company Act File No. 811-4040
(C) 1999 PaineWebber Incorporated. All rights reserved. Member SIPC.
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