<PAGE>
PAINEWEBBER GLOBAL ENERGY FUND
(a series of PaineWebber Investment Series)
September 8, 1995
Dear Shareholder:
The attached proxy materials describe a proposal that PaineWebber Global
Energy Fund ("Global Energy Fund") reorganize and become part of PaineWebber
Growth and Income Fund ("Growth and Income Fund"). If the proposal is approved
and implemented, each shareholder of Global Energy Fund automatically would
become a shareholder of Growth and Income Fund.
Your board of trustees recommends a vote FOR the Reorganization Proposal.
The board believes that combining the Funds will benefit Global Energy Fund's
shareholders by providing them with a portfolio that has an investment objective
similar to the investment objective of Global Energy Fund and that will have
lower operating expenses as a percentage of net assets. The attached materials
provide more information about the proposed reorganization and the Funds
involved.
Your vote is important no matter how many shares you own. Voting your
shares early will permit Global Energy Fund to avoid costly follow-up mail and
telephone solicitation. After reviewing the attached materials, please complete,
date and sign your proxy card and mail it in the enclosed return envelope today.
Very truly yours,
MARGO N. ALEXANDER
President, PaineWebber Investment Series
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EQUITY INCOME FUND, INC.
September 8, 1995
Dear Shareholder:
The attached proxy materials describe a proposal that Mitchell Hutchins/
Kidder, Peabody Equity Income Fund, Inc. ("Equity Income Fund") reorganize and
become part of PaineWebber Growth and Income Fund ("Growth and Income Fund"). If
the proposal is approved and implemented, each shareholder of Equity Income Fund
automatically would become a shareholder of Growth and Income Fund.
Your board of directors recommends a vote FOR the Reorganization Proposal.
The board believes that combining the Funds will benefit Equity Income Fund's
shareholders by providing them with a portfolio that has an investment objective
similar to the investment objective of Equity Income Fund and that will have
lower operating expenses as a percentage of net assets. The attached materials
provide more information about the proposed reorganization and the Funds
involved.
Your vote is important no matter how many shares you own. Voting your
shares early will permit Equity Income Fund to avoid costly follow-up mail and
telephone solicitation. After reviewing the attached materials, please complete,
date and sign your proxy card and mail it in the enclosed return envelope today.
Very truly yours,
MARGO N. ALEXANDER
President, Mitchell Hutchins/Kidder, Peabody
Equity Income Fund, Inc.
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY EQUITY INCOME FUND, INC.
----------------
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
October 6, 1995
----------------
To The Shareholders:
A special meeting of shareholders ("Meeting") of Mitchell Hutchins/Kidder,
Peabody Equity Income Fund, Inc. ("Equity Income Fund") will be held on October
6, 1995, at 10:00 a.m., Eastern time, at 1285 Avenue of the Americas, 38th
Floor, New York, New York 10019, for the following purposes:
(1) To approve an Amended and Restated Agreement and Plan of Reorganization
and Liquidation under which PaineWebber Growth and Income Fund ("Growth and
Income Fund"), a series of PaineWebber America Fund, would acquire the assets of
Equity Income Fund in exchange solely for shares of beneficial interest in
Growth and Income Fund and the assumption by Growth and Income Fund of Equity
Income Fund's liabilities followed by the distribution of those shares to the
shareholders of Equity Income Fund as described in the accompanying
Prospectus/Proxy Statement; and
(2) To transact such other business as may properly come before the Meeting
or any adjournment thereof.
You are entitled to vote at the Meeting and any adjournment thereof if you
owned shares of Equity Income Fund at the close of business on August 22, 1995.
If you attend the Meeting, you may vote your shares in person. If you do not
expect to attend the Meeting, please complete, date, sign and return the
enclosed proxy card in the enclosed postage paid envelope.
By order of the
board of directors,
DIANNE E. O'DONNELL
Secretary
September 8, 1995
1285 Avenue of the Americas
New York, New York 10019
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed proxy card, date
and sign the card, and return it in the envelope provided. IF YOU SIGN, DATE AND
RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED
"FOR" THE PROPOSALS NOTICED ABOVE. In order to avoid the additional expense of
further solicitation, we ask your cooperation in mailing in your proxy card
promptly. Unless proxy cards submitted by corporations and partnerships are
signed by the appropriate persons as indicated in the voting instructions on the
proxy card, they will not be voted.
<PAGE>
PAINEWEBBER GLOBAL ENERGY FUND
(a series of PaineWebber Investment Series)
----------------
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
October 6, 1995
----------------
To The Shareholders:
A special meeting of shareholders ("Meeting") of PaineWebber Global Energy
Fund ("Global Energy Fund"), a series of PaineWebber Investment Series, will be
held on October 6, 1995, at 10:00 a.m., Eastern time, at 1285 Avenue of the
Americas, 38th Floor, New York, New York 10019, for the following purposes:
(1) To approve an Amended and Restated Agreement and Plan of Reorganization
and Termination under which PaineWebber Growth and Income Fund ("Growth and
Income Fund"), a series of PaineWebber America Fund, would acquire the assets of
Global Energy Fund in exchange solely for shares of beneficial interest in
Growth and Income Fund and the assumption by Growth and Income Fund of Global
Energy Fund's liabilities followed by the distribution of those shares to the
shareholders of Global Energy Fund as described in the accompanying Prospectus/
Proxy Statement; and
(2) To transact such other business as may properly come before the Meeting
or any adjournment thereof.
You are entitled to vote at the Meeting and any adjournment thereof if you
owned shares of Global Energy Fund at the close of business on August 22, 1995.
If you attend the Meeting, you may vote your shares in person. If you do not
expect to attend the Meeting, please complete, date, sign and return the
enclosed proxy card in the enclosed postage paid envelope.
By order of the
board of trustees,
DIANNE E. O'DONNELL
Secretary
September 8, 1995
1285 Avenue of the Americas
New York, New York 10019
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed proxy card, date
and sign the card, and return it in the envelope provided. IF YOU SIGN, DATE AND
RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED
"FOR" THE PROPOSALS NOTICED ABOVE. In order to avoid the additional expense of
further solicitation, we ask your cooperation in mailing in your proxy card
promptly. Unless proxy cards submitted by corporations and partnerships are
signed by the appropriate persons as indicated in the voting instructions on the
proxy card, they will not be voted.
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
(a series of PaineWebber America Fund)
PAINEWEBBER GLOBAL ENERGY FUND
(a series of PaineWebber Investment Series)
MITCHELL HUTCHINS/KIDDER, PEABODY EQUITY
INCOME FUND, INC.
1285 Avenue of the Americas
New York, New York 10019
(Toll Free) 1-800-647-1568
Prospectus/Proxy Statement
September 8, 1995
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of PaineWebber Global Energy Fund ("Global Energy Fund"), a series
of PaineWebber Investment Series ("Investment Series"), and Mitchell Hutchins/
Kidder, Peabody Equity Income Fund, Inc. ("Equity Income Fund") (each an
"Acquired Fund" and collectively, the "Acquired Funds"), in connection with the
solicitation of proxies by Investment Series' board of trustees and Equity
Income Fund's board of directors for use at a combined special meeting of
shareholders of the Acquired Funds, to be held on October 6, 1995, at 10:00
a.m., Eastern time, and at any adjournment thereof ("Meeting").
As more fully described in this Proxy Statement, the purpose of the Meeting
is to vote on two proposed reorganizations (each a "Reorganization" and
collectively, the "Reorganizations"). In each Reorganization, PaineWebber Growth
and Income Fund ("Growth and Income Fund"), a series of PaineWebber America
Fund, would acquire the assets of an Acquired Fund in exchange solely for shares
of beneficial interest in Growth and Income Fund and the assumption by Growth
and Income Fund of that Acquired Fund's liabilities. Growth and Income Fund
shares then would be distributed to that Acquired Fund's shareholders, by class,
so that each such shareholder would receive a number of full and fractional
shares of the applicable class of Growth and Income Fund having an aggregate
value that, on the effective date of the Reorganization, is equal to the
aggregate net asset value of the shareholder's shares of the corresponding class
in the Acquired Fund. As soon as practicable following these distributions,
Global Energy Fund will be terminated and Equity Income Fund will be liquidated.
Growth and Income Fund is a diversified series of the PaineWebber America
Fund, which is an open-end management investment company. Growth and Income
Fund's investment objective is to achieve current income and capital growth. It
seeks to achieve its investment objective by investing primarily in
dividend-paying equity securities believed by Mitchell Hutchins Asset Management
Inc. to have the potential for rapid earnings growth; stocks are selected
through a disciplined methodology that utilizes quantitative measures of value,
earnings and price momentum, as well as fundamental analysis.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
This Proxy Statement, which should be retained for future reference, sets
forth concisely the information about each Reorganization and Growth and Income
Fund that a shareholder should know before voting. This Proxy Statement is
accompanied by the Prospectus of Growth and Income Fund dated May 12, 1995, and
by its Annual Report to Shareholders for the fiscal year ended August 31, 1994,
which are incorporated by this reference into this Proxy Statement. A Statement
of Additional Information dated August 31, 1995, including historical financial
statements, has been filed with the Securities and Exchange Commission ("SEC")
and is incorporated herein by this reference. Prospectuses of Global Energy
Fund, dated March 1, 1995 (as supplemented August 11, 1995), and Equity Income
Fund, dated June 1, 1995 (as supplemented August 3, 1995), and Statements of
Additional Information also dated March 1, 1995 and June 1, 1995, respectively,
have been filed with the SEC and are incorporated herein by this reference.
Copies of these documents as well as each Fund's annual report or semi-annual
report, if applicable, may be obtained without charge and further inquiries may
be made by contacting your PaineWebber Incorporated ("PaineWebber") investment
executive or PaineWebber's correspondent firms or by calling toll-free
1-800-647-1568.
<PAGE>
TABLE OF CONTENTS
VOTING INFORMATION.................................................... 1
SYNOPSIS.............................................................. 2
COMPARISON OF PRINCIPAL RISK FACTORS.................................. 14
THE PROPOSED TRANSACTIONS............................................. 15
ADDITIONAL INFORMATION ABOUT GROWTH AND INCOME FUND................... 21
MISCELLANEOUS......................................................... 23
Appendix A - Amended and Restated Agreement and Plan of Reorganization
and Termination Involving Global Energy Fund............. A-1
Appendix B - Amended and Restated Agreement and Plan of Reorganization
and Liquidation Involving Equity Income Fund............. B-1
<PAGE>
PAINEWEBBER GLOBAL ENERGY FUND
(a series of PaineWebber Investment Series)
MITCHELL HUTCHINS/KIDDER, PEABODY EQUITY INCOME FUND, INC.
----------------
PROSPECTUS/PROXY STATEMENT
Special Meeting of Shareholders
To Be Held on
October 6, 1995
----------------
VOTING INFORMATION
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of PaineWebber Global Energy Fund ("Global Energy Fund"), a series
of PaineWebber Investment Series ("Investment Series"), and Mitchell Hutchins/
Kidder, Peabody Equity Income Fund, Inc. ("Equity Income Fund") (each an
"Acquired Fund" and collectively, the "Acquired Funds"), in connection with the
solicitation of proxies by the board of trustees of Investment Series and board
of directors of Equity Income Fund for use at a combined special meeting of
shareholders of the Acquired Funds to be held on October 6, 1995, at 10:00 a.m.,
Eastern time, and at any adjournment thereof ("Meeting"). This Proxy Statement
will first be mailed to shareholders on or about September 8, 1995.
At least one-third of the shares of Equity Income Fund and a majority of
the shares of Global Energy Fund outstanding on August 22, 1995, represented in
person or by proxy, must be present for the transaction of business by that
Acquired Fund at the Meeting. If, with respect to either Acquired Fund, a quorum
is not present at the Meeting or a quorum is present but sufficient votes to
approve the proposal are not received, the persons named as proxies may propose
one or more adjournments of the Meeting with respect to that Acquired Fund to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares of the Acquired Fund represented
at the Meeting in person or by proxy. The persons named as proxies will vote
those proxies that they are entitled to vote FOR any such proposal in favor of
such an adjournment and will vote those proxies required to be voted AGAINST any
such proposal against such adjournment. A shareholder vote may be taken on one
or more of the proposals in this Proxy Statement prior to any such adjournment
if sufficient votes have been received and it is otherwise appropriate.
Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and the broker does not have discretionary voting
authority. Abstentions and broker non-votes will be counted as shares present
for purposes of determining whether a quorum is present but will not be voted
for or against any adjournment or proposal. Accordingly, abstentions and broker
non-votes effectively will be a vote against adjournment or against any proposal
where the required vote is a percentage of the shares present or outstanding.
Abstentions and broker non-votes will not be counted, however, as votes cast for
purposes of determining whether sufficient votes have been received to approve a
proposal.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your direction as indicated thereon if your proxy card is
received properly executed by you or your duly appointed agent or
attorney-in-fact. If you sign, date and return the proxy card, but give no
voting instructions, your shares will be voted in favor of approval of whichever
of the following applies to your Acquired Fund: the Amended and Restated
Agreement and Plan of Reorganization and Termination dated as of July 25, 1995
(involving Global Energy Fund) or the Amended and Restated Agreement and Plan of
Reorganization and Liquidation dated as of July 25, 1995 (involving Equity
Income Fund) (each a "Reorganization Plan"), attached to this Proxy Statement as
Appendices A and B, respectively. Under each Reorganization Plan, PaineWebber
Growth and Income Fund ("Growth and Income Fund"), a series of PaineWebber
America Fund ("America Fund"), would acquire the assets of an Acquired Fund in
exchange solely for shares of beneficial
<PAGE>
interest in Growth and Income Fund and the assumption by Growth and Income Fund
of that Acquired Fund's liabilities; those shares then would be distributed
to that Acquired Fund's shareholders. (Each of these transactions is referred to
herein as a "Reorganization.") After completion of a Reorganization, the
participating Acquired Fund will be terminated (in the case of Global Energy
Fund) or liquidated (in the case of Equity Income Fund).
In addition, if you sign, date and return the proxy card, but give no
voting instructions, the duly appointed proxies may, in their discretion, vote
upon such other matters as may come before the Meeting. The proxy card may be
revoked by giving another proxy or by letter or telegram revoking the initial
proxy. To be effective, such revocation must be received by Investment Series or
Equity Income Fund, as applicable, prior to the Meeting and must indicate your
name and account number. In addition, if you attend the Meeting in person you
may, if you wish, vote by ballot at the Meeting, thereby canceling any proxy
previously given.
As of the record date, August 22, 1995 ("Record Date"), Global Energy Fund
had 1,722,469.368 shares of beneficial interest outstanding and Equity Income
Fund had 2,719,640.263 shares outstanding. The solicitation of proxies, the cost
of which will be borne by Growth and Income Fund, Global Energy Fund and Equity
Income Fund (each a "Fund" and collectively, the "Funds") in proportion to their
respective net assets, will be made primarily by mail but also may include
telephone or oral communications by representatives of Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), who will not receive any compensation
therefor from the Funds, or by Shareholder Communications Corporation,
professional proxy solicitors retained by the Acquired Funds, who will be paid
fees and expenses of up to approximately $10,000 for soliciting services.
Management does not know of any single shareholder or "group" (as that term is
used in Section 13(d) of the Securities Exchange Act of 1934) who owns
beneficially 5% or more of the shares of Growth and Income Fund, Global Energy
Fund or Equity Income Fund. Trustees and officers of America Fund own in the
aggregate less than 1% of the shares of Growth and Income Fund.
Summarized below are the proposals the shareholders of each Acquired Fund
are being asked to consider:
Fund Proposal
---- --------
Global Energy 1. To approve a Reorganization Plan.
Equity Income 2. To approve a Reorganization Plan.
For voting purposes, the shareholders of each Acquired Fund will vote only
on the Reorganization Plan applicable to it. Approval of a Reorganization Plan
and consummation of the transactions contemplated thereby for one Acquired Fund
do not depend on the approval of the other Reorganization Plan by the other
Acquired Fund's shareholders and consummation of the transactions contemplated
thereby. With respect to Global Energy Fund, approval of the Reorganization Plan
requires the affirmative vote of a "majority of the outstanding voting
securities" thereof. As defined in the Investment Company Act of 1940 ("1940
Act"), "majority of the outstanding voting securities" means the lesser of (1)
67% of Global Energy Fund's shares present at a meeting of shareholders if the
owners of more than 50% of that Acquired Fund's shares then outstanding are
present in person or by proxy, or (2) more than 50% of that Acquired Fund's
outstanding shares ("1940 Act Majority Vote"). Under Maryland law and Equity
Income Fund's Amended and Restated Articles of Incorporation, the affirmative
vote of a majority of its outstanding shares entitled to vote at the Meeting
(which is considered a higher requirement than a 1940 Act Majority Vote) is
required to approve the Reorganization Plan. Each outstanding full share of each
Acquired Fund is entitled to one vote, and each outstanding fractional share of
each Acquired Fund is entitled to a proportionate fractional share of one vote.
If a Reorganization Plan is not approved by the requisite vote of the
shareholders of the involved Acquired Fund, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies. Although the shareholders of the Acquired Funds may exchange or
redeem out of a Fund, they do not have appraisal rights which may be accorded to
shareholders of corporations that propose similar types of reorganizations under
the laws of some states.
2
<PAGE>
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement, the prospectuses of each Fund, which are incorporated
herein by reference, and the Reorganization Plans. Shareholders should read this
Proxy Statement and the prospectus of Growth and Income Fund carefully. As
discussed more fully below, Investment Series' board of trustees and Equity
Income Fund's board of directors believe that the Reorganizations will benefit
their respective Acquired Fund's shareholders. Growth and Income Fund has an
investment objective substantively identical to that of Equity Income Fund and
generally similar to the investment objective of Global Energy Fund, although
its investment strategy may differ from the Acquired Funds' investment
strategies in some material respects. It is anticipated that, following the
Reorganizations, the Acquired Funds' shareholders will, as shareholders of
Growth and Income Fund, be subject to lower total operating expenses as a
percentage of net assets.
The Reorganizations
Investment Series' board of trustees approved a Reorganization Plan with
respect to Global Energy Fund at a meeting held on April 28, 1995. Equity Income
Fund's board of directors approved a reorganization plan at a meeting held on
April 26, 1995. The Reorganization Plan involving Global Energy Fund and the
Reorganization Plan involving Equity Income Fund, in their final forms (see
Appendices A and B) as revised to include certain changes, were considered and
approved by each Fund's board of trustees/directors at meetings held on July 20,
1995. Each Reorganization Plan provides for the acquisition by Growth and Income
Fund of the assets of an Acquired Fund in exchange solely for shares of Growth
and Income Fund and the assumption by Growth and Income Fund of the liabilities
of the Acquired Fund. Each Acquired Fund then will distribute the Growth and
Income Fund shares to its shareholders, by class, so that each shareholder will
receive the number of full and fractional shares of the class of Growth and
Income Fund that corresponds most closely in terms of fees and other
characteristics ("Corresponding Class") and that is equal in value to such
shareholder's holdings in the Acquired Fund as of the Closing Date (defined
below). Global Energy Fund then will be terminated, and Equity Income Fund then
will be liquidated, as soon as practicable thereafter.
The exchange of each Acquired Fund's assets for Growth and Income Fund
shares and Growth and Income Fund's assumption of each Acquired Fund's
liabilities will occur at or as of 4:00 p.m., eastern time, on October 13, 1995,
or such later date as the conditions to any such closing are satisfied ("Closing
Date").
Growth and Income Fund currently offers for sale four classes of shares
(each a "Class" and collectively, "Classes"), designated as Class A, Class B,
Class C and Class D shares. Global Energy Fund has three Classes of shares,
designated as Class A, Class B and Class D shares; Equity Income Fund has three
Classes of shares, designated as Class A, Class B and Class C shares. In
connection with the Reorganizations, (1) shareholders of Class A, Class B and
Class D shares of Global Energy Fund will receive Class A, Class B and Class D
shares, respectively, of Growth and Income Fund, and (2) shareholders of Class
A, Class B and Class C shares of Equity Income Fund will receive Class A, Class
D and Class C shares, respectively, of Growth and Income Fund. The following
table shows which Class of shares of Growth and Income Fund will be received by
each Class of shares of an Acquired Fund:
3
<PAGE>
Global Energy Fund Growth and Income Fund
------------------ ----------------------
Class A Class A
Class B Class B
Class D Class D
Equity Income Fund Growth and Income Fund
------------------ ----------------------
Class A Class A
Class B Class D
Class C Class C
For the reasons set forth below under "The Proposed Transactions -- Reasons
for the Reorganizations," Investment Series' board of trustees (with respect to
Global Energy Fund) and Equity Income Fund's board of directors, including the
trustees or directors who are not "interested persons," as that term is defined
in the 1940 Act, of Investment Series or Equity Income Fund, as applicable
("Independent Persons"), have determined, in each instance, that the
Reorganization is in the best interests of the participating Acquired Fund, that
the terms of the Reorganization are fair and reasonable and that the interests
of such Acquired Fund's shareholders will not be diluted as a result of the
Reorganization. Accordingly, each board recommends approval of the
Reorganizations. In addition, the board of trustees of America Fund, including
its Independent Persons, has determined that the Reorganizations are in the best
interests of Growth and Income Fund, that the terms of the Reorganizations are
fair and reasonable and that the interests of Growth and Income Fund's
shareholders will not be diluted as a result of the Reorganizations.
COMPARATIVE FEE TABLES
Reorganization of Global Energy Fund into Growth and Income Fund
The following tables show (1) shareholder transaction expenses currently
incurred by the Class A, Class B and Class D shares of Global Energy Fund and
shareholder transaction expenses that each such Class will incur after giving
effect to the Reorganization; (2) the current fees and expenses incurred by the
Class A, Class B and Class D shares of Global Energy Fund and Growth and Income
Fund for the twelve months ended February 28, 1995; and (3) pro forma fees for
Growth and Income Fund's Class A, Class B and Class D shares after giving effect
to the Reorganization.
4
<PAGE>
Shareholder Transaction Expenses
Global Energy Fund Combined Fund
------------------------- -------------------------
Class A Class B Class D Class A Class B Class D
------- ------- ------- ------- ------- -------
Maximum sales
charge (as a
percentage of
public offering
price) 4.5% None None 4.5% None None
Exchange fee $5.00 $5.00 $5.00 $5.00 $5.00 $5.00
Maximum contin-
gent deferred
sales charge
(as a percen-
tage of
redemption
proceeds) None 5% None None 5% None
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Global Energy Fund Growth and Income Fund
----------------------------- ----------------------------- Combined Fund
(Twelve Months Ended 2/28/95) (Twelve Months Ended 2/28/95) -------------------------
----------------------------- ----------------------------- (Pro Forma)
Class A Class B Class D Class A Class B Class D Class A Class B Class D
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
Fees 0.85% 0.85% 0.85% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70%
12b-1
Expenses1/ 0.25% 1.00% 1.00% 0.23% 1.00% 1.00% 0.23% 1.00% 1.00%
Other
Expenses 1.01% 1.02% 1.04% 0.27% 0.28% 0.29% 0.27% 0.28% 0.29%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Fund
Operating
Expenses2/ 2.11% 2.87% 2.89% 1.20% 1.98% 1.99% 1.20% 1.98% 1.99%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
5
<PAGE>
------------
1/ 12b-1 fees for Global Energy Fund have two components, as follows:
Class A Class B Class D
------- ------- -------
12b-1 service fee .... 0.25% 0.25% 0.25%
12b-1 distribution fee 0.00% 0.75% 0.75%
12b-1 fees for Growth and Income Fund have two components, as follows:
Class A Class B Class D
------- ------- -------
12b-1 service fee .... 0.23% 0.25% 0.25%
12b-1 distribution fee 0.00% 0.75% 0.75%
The 12b-1 service fees for Class A shares of Growth and Income Fund
reflect a blended annual rate of that Fund's average daily net assets of 0.25%
with respect to shares sold on or after December 2, 1988 and 0.15% with
respect to shares sold prior to that date. 12b-1 distribution fees are
asset-based sales charges. Long-term Class B and Class D shareholders may pay
more in direct and indirect sales charges (including distribution fees) than
the economic equivalent of the maximum front-end sales charges permitted by
the National Association of Securities Dealers, Inc. ("NASD") rules regarding
investment companies.
2/ For the fiscal year ended October 31, 1994, the ratios of total operating
expenses as a percentage of average net assets for Global Energy Fund were
1.99%, 2.82% and 2.74% for Class A, Class B and Class D shares, respectively,
and for Growth and Income Fund for the fiscal year ended August 31, 1994 were
1.20%, 1.97% and 1.94% for Class A, Class B and Class D shares, respectively.
Example of Effect of Fund Expenses
The following illustrates the expenses on a $1,000 investment under the
existing and estimated fees and expenses stated above, assuming a 5% annual
return. The fees shown below reflect a maximum initial sales charge of 4.5% of
the public offering price that normally is charged in connection with the sale
of each Fund's Class A shares. No initial sales charge will be charged in
connection with Class A shares of Growth and Income Fund distributed to Class A
shareholders of Global Energy Fund as part of the Reorganization.
One Year Three Years Five Years Ten Years
Global Energy Fund
Class A shares .......... $65 $108 $153 $278
Class B shares:
Assuming complete
redemption at end
of period ............ $79 $119 $171 $285
6
<PAGE>
Assuming no redemption $29 $89 $151 $285
Class D shares .......... $29 $89 $152 $321
Growth and Income Fund
Class A shares .......... $57 $81 $108 $184
Class B shares:
Assuming complete
redemption at end
of period ............ $70 $92 $127 $192
Assuming no redemption $20 $62 $107 $192
Class D shares .......... $20 $62 $107 $232
Combined Fund
Class A shares .......... $57 $81 $108 $184
Class B shares:
Assuming complete
redemption at end
of period ............ $70 $92 $127 $192
Assuming no redemption $20 $62 $107 $192
Class D shares .......... $20 $62 $107 $232
This Example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund Operating
Expenses remain the same in the years shown. The above tables and the assumption
in the Example of a 5% annual return are required by regulations of the
Securities and Exchange Commission ("SEC"); the assumed 5% annual return is not
a prediction of, and does not represent, the projected or actual performance of
any Class of the Funds' shares.
The Example should not be considered a representation of past or future
expenses, and a Fund's actual expenses may be more or less than those shown. The
actual expenses attributable to each Class of a Fund's shares will depend upon,
among other things, the level of average net assets and the extent to which a
Fund incurs variable expenses, such as transfer agency costs.
Reorganization of Equity Income Fund into Growth and Income Fund
The following tables show (1) shareholder transaction expenses currently
incurred by Class A, Class B and Class C shares of Equity Income Fund and
shareholder transaction expenses that the Corresponding Class of Growth and
Income Fund will incur after giving effect to the Reorganization; (2) the
current fees and expenses incurred by the Class A, Class B and Class C shares of
Equity Income Fund and the Class A, Class D and Class C shares of Growth and
Income Fund for the twelve months ended February 28, 1995; and (3) pro forma
fees for Growth and Income Fund's Class A, Class D and Class C shares after
giving effect to the Reorganization.
7
<PAGE>
Shareholder Transaction Expenses
Equity Income Fund Combined Fund1/
------------------------- -------------------------
Class A Class B Class C Class A Class D Class C
------- ------- ------- ------- ------- -------
Maximum sales
charge (as a
percentage of
public offering
price) 4.5% None None 4.5% None None
Exchange fee None None None $5.00 $5.00 N/A*
Maximum con-
tingent deferred
sales charge
(as a percentage
of redemption
proceeds) None None None None None None
------------
* Class C shares are not exchangeable.
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Equity Income Fund Growth and Income Fund1/
------------------------- ------------------------- Combined Fund
(Twelve Months Ended 2/28/95) (Twelve Months Ended 2/28/95) ------------------------
----------------------------- ----------------------------- Pro Forma1/
Class A Class B Class C Class A Class D Class C Class A Class D Class C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
Fees 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70%
12b-1
Expenses2/ 0.50% 1.00% 0.00% 0.23% 1.00% 0.00% 0.23% 1.00% 0.00%
Other
Expenses 0.43% 0.46% 0.35% 0.27% 0.29% 0.21% 0.25% 0.27% 0.18%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Fund
Operating
Expenses3/ 1.63% 2.16% 1.05% 1.20% 1.99% 0.91% 1.18% 1.97% 0.88%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
8
<PAGE>
------------
1/ Holders of Class A shares of Equity Income Fund will receive Class A
shares of Growth and Income Fund; holders of Class B shares of Equity Income
Fund will receive Class D shares of Growth and Income Fund; and holders of Class
C shares of Equity Income Fund will receive Class C shares of Growth and Income
Fund. As only Class A, Class C and Class D shares of Growth and Income Fund will
be issued to Equity Income Fund shareholders in the Reorganization, only those
classes are shown.
2/ 12b-1 fees for Equity Income Fund fees have two components, as follows:
Class A Class B Class C
------- ------- -------
12b-1 service fee .... 0.25% 0.25% 0.00%
12b-1 distribution fee 0.25% 0.75% 0.00%
12b-1 fees for Growth and Income Fund have two components, as follows:
Class A Class D Class C
------- ------- -------
12b-1 service fee .... 0.23% 0.25% 0.00%
12b-1 distribution fee 0.00% 0.75% 0.00%
The 12b-1 service fees for Class A shares of Growth and Income Fund
reflect a blended annual rate of that Fund's average daily net assets of 0.25%
with respect to shares sold on or after December 2, 1988 and 0.15% with
respect to shares sold prior to that date. 12b-1 distribution fees are
asset-based sales charges. Long-term Class D shareholders may pay more in
direct and indirect sales charges (including distribution fees) than the
economic equivalent of the maximum front-end sales charges permitted by NASD
rules regarding investment companies.
3/ For the fiscal years ended January 31, 1995 and August 31, 1994,
respectively, the ratios of total operating expenses as a percentage of average
net assets for Equity Income Fund were 1.63%, 2.13% and 1.13% for Class A, Class
B and Class C shares, respectively, and for Growth and Income Fund were 1.20%,
1.94% and 0.90% for Class A, Class D and Class C shares, respectively.
Example of Effect of Fund Expenses
The following illustrates the expenses on a $1,000 investment under the
existing and estimated fees and expenses stated above, assuming a 5% annual
return. The fees shown below reflect a maximum initial sales charge of 4.5% of
the public offering price that normally is charged in connection with the sale
of Growth and Income Class A shares and a maximum initial sales charge of 4.5%
of the public offering price that is normally charged in connection with the
sale of Equity Income Fund Class A shares. No initial sales charge will be
charged in connection with Class A shares of Growth and Income Fund distributed
to Class A shareholders of Equity Income Fund as part of the Reorganization.
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
Equity Income Fund
Class A shares... $73 $106 $141 $240
Class B shares... $22 $68 $116 $249
Class C shares... $11 $33 $58 $128
9
<PAGE>
Growth and Income Fund
Class A shares... $57 $81 $108 $184
Class D shares... $20 $62 $107 $232
Class C shares... $9 $29 $50 $112
Combined Fund
Class A shares... $56 $81 $107 $182
Class D shares... $20 $62 $106 $230
Class C shares... $9 $28 $49 $108
This Example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund Operating
Expenses remain the same in the years shown. The above tables and the assumption
in the Example of a 5% annual return are required by regulations of the SEC; the
assumed 5% annual return is not a prediction of, and does not represent, the
projected or actual performance of any Class of the Funds' shares.
The Example should not be considered a representation of past or future
expenses, and a Fund's actual expenses may be more or less than those shown. The
actual expenses attributable to each Class of a Fund's shares will depend upon,
among other things, the level of average net assets and the extent to which a
Fund incurs variable expenses, such as transfer agency costs.
10
<PAGE>
Reorganizations of Global Energy Fund and Equity Income Fund
into Growth and Income Fund
The following table shows the current fees and expenses incurred by the
Classes of shares of each Fund for the twelve months ended February 28, 1995,
and pro forma fees for Growth and Income Fund's Class A, Class B, Class C and
Class D shares after giving effect to the Reorganizations.
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Global Energy Fund Equity Income Fund Growth and Income Fund
------------------------- ------------------------- ----------------------------------
(Twelve Months (Twelve Months (Twelve Months
Ended 2/28/95) Ended 2/28/95) Ended 2/28/95)
------------------------- ------------------------- ----------------------------------
Class A Class B Class D Class A Class B Class C Class A Class B Class C Class D
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
Fees 0.85% 0.85% 0.85% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70%
12b-1
Expenses1/ 0.25% 1.00% 1.00% 0.50% 1.00% 0.00% 0.23% 1.00% 0.00% 1.00%
Other
Expenses 1.01% 1.02% 1.04% 0.43% 0.46% 0.35% 0.27% 0.28% 0.21% 0.29%
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Fund
Operating
Expenses2/ 2.11% 2.87% 2.89% 1.63% 2.16% 1.05% 1.20% 1.98% 0.91% 1.99%
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
Pro Forma
Combined Fund
----------------------------------
Class A Class B Class C Class D
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management
Fees 0.70% 0.70% 0.70% 0.70%
12b-1
Expenses1/ 0.23% 1.00% 0.00% 1.00%
Other
Expenses 0.25% 0.28% 0.20% 0.28%
---- ---- ---- ----
Total Fund
Operating
Expenses2/ 1.18% 1.98% 0.90% 1.98%
==== ==== ==== ====
</TABLE>
11
<PAGE>
------------
1/ 12b-1 fees for Global Energy Fund have two components, as follows:
Class A Class B Class D
------- ------- -------
12b-1 service fee .... 0.25% 0.25% 0.25%
12b-1 distribution fee 0.00% 0.75% 0.75%
12b-1 fees for Equity Income Fund have two components as follows:
Class A Class B Class C
------- ------- -------
12b-1 service fee .... 0.25% 0.25% 0.00%
12b-1 distribution fee 0.25% 0.75% 0.00%
12b-1 fees for Growth and Income Fund have two components, as follows:
Class A Class B Class C Class D
------- ------- ------- -------
12b-1 service fee .... 0.23% 0.25% 0.00% 0.25%
12b-1 distribution fee 0.00% 0.75% 0.00% 0.75%
The 12b-1 service fees for Class A shares of Growth and Income Fund
reflect a blended annual rate of that Fund's average daily net assets of 0.25%
with respect to shares sold on or after December 2, 1988 and 0.15% with
respect to shares sold prior to that date. 12b-1 distribution fees are
asset-based sales charges. Long-term Class B and Class D shareholders may pay
more in direct and indirect sales charges (including distribution fees) than
the economic equivalent of the maximum front-end sales charges permitted by
NASD rules regarding investment companies.
2/ For the fiscal years ended October 31, 1994, January 1, 1995 and August 31,
1994, respectively, the ratios of total operating expenses as a percentage of
average net assets for Global Energy Fund were 1.99%, 2.82% and 2.74% for
Class A, Class B and Class D, respectively, for Equity Income Fund were 1.63%,
2.13% and 1.13% for Class A, Class B and Class C, respectively, and for Growth
and Income Fund were 1.20%, 1.97%, 0.90% and 1.94% for Class A, Class B, Class C
and Class D, respectively.
Example of Effect of Fund Expenses
The following illustrates the expenses on a $1,000 investment under the
existing and estimated fees and expenses stated above, assuming a 5% annual
return. The fees shown below reflect a maximum initial sales charge of 4.5% of
the public offering price that normally is charged in connection with the sale
of each Fund's Class A shares. No initial sales charge will be charged in
connection with Class A Shares of Growth and Income Fund distributed to Class A
shareholders of each Acquired Fund as part of the Reorganizations.
12
<PAGE>
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
Global Energy Fund
Class A shares .......... $65 $108 $153 $278
Class B shares:
Assuming complete
redemption at end
of period ............ $79 $119 $171 $285
Assuming no redemption $29 $89 $151 $285
Class D shares .......... $29 $89 $152 $321
Equity Income Fund
Class A shares .......... $73 $106 $141 $240
Class B shares .......... $22 $68 $116 $249
Class C shares .......... $11 $33 $58 $128
Growth and Income Fund
Class A shares .......... $57 $81 $108 $184
Class B shares:
Assuming complete
redemption at end
of period ............ $70 $92 $127 $192
Assuming no redemption $20 $62 $107 $192
Class C shares .......... $9 $29 $50 $112
Class D shares .......... $20 $62 $107 $232
Combined Fund
Class A shares .......... $56 $81 $107 $182
Class B shares:
Assuming complete
redemption at end
of period ............ $70 $92 $127 $191
Assuming no redemption $20 $62 $107 $191
Class C shares .......... $9 $29 $50 $111
Class D shares .......... $20 $62 $107 $231
13
<PAGE>
This Example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund Operating
Expenses remain the same in the years shown. The above tables and the assumption
in the Example of a 5% annual return are required by regulations of the SEC; the
assumed 5% annual return is not a prediction of, and does not represent, the
projected or actual performance of any Class of the Funds' shares.
The Example should not be considered a representation of past or future
expenses, and a Fund's actual expenses may be more or less than those shown. The
actual expenses attributable to each Class of a Fund's shares will depend upon,
among other things, the level of average net assets and the extent to which a
Fund incurs variable expenses, such as transfer agency costs.
Forms of Organization
Equity Income Fund is an open-end management investment company organized
as a Maryland corporation. It commenced operations on November 22, 1985. It is
authorized to issue 500 million shares of common stock of par value $.01 per
share. It does not currently issue share certificates. Equity Income Fund is not
required to (and does not) hold annual meetings.
Investment Series and America Fund are open-end management investment
companies organized as Massachusetts business trusts. Growth and Income Fund
commenced operations as a series of America Fund on December 20, 1983. Global
Energy Fund commenced operations as a series of Investment Series on September
18, 1987. Each trust's Declaration of Trust authorizes its trustees to create
separate series, and within each series separate classes, of an unlimited number
of shares of beneficial interest, par value $.001 per share. The trusts are not
required to (and do not) hold annual shareholder meetings.
Shareholders of a Massachusetts business trust may, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust of each trust expressly disclaims, and provides
indemnification against, such liability. Accordingly, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which Global Energy Fund or Growth and Income Fund
itself would be unable to meet its obligations, a possibility that Mitchell
Hutchins believes is remote and, thus, does not pose a material risk.
Investment Objectives and Policies
The investment objective and policies of each Fund are set forth below.
Growth and Income Fund has an investment objective substantively identical to
that of Equity Income Fund and generally similar to the investment objective of
Global Energy Fund, although its investment strategy may differ from the
Acquired Funds' investment strategies in some material respects. There can be no
assurance that any Fund will achieve its investment objective, and each Fund's
net asset value ("NAV") fluctuates based upon changes in the value of its
portfolio securities.
Growth and Income Fund. The investment objective of Growth and Income Fund
is to provide current income and capital growth. The Fund seeks to achieve its
objective by investing primarily in dividend-paying equity securities (common
and preferred stocks) believed by Mitchell Hutchins to have the potential for
rapid earnings growth. Under normal circumstances, the Fund invests at least 65%
of its total assets in such securities. In managing the Fund, Mitchell Hutchins
follows a disciplined methodology under which stocks from a universe of
approximately 2,000 medium- to large- capitalization companies are ranked
utilizing quantitative measures of value, earnings and price momentum in the
context of Mitchell Hutchins' economic forecast. Stocks are selected for the
Fund based on fundamental analysis of the highest ranking stock. The Fund may
invest up to 35% of its total assets in equity securities not meeting all the
above criteria, as well as convertible securities (which may be rated below
investment grade), U.S. government securities, investment grade corporate debt
securities and money market instruments.
14
<PAGE>
Equity Income Fund. The investment objective of Equity Income Fund is to
provide reasonably high current dividend and interest income and to obtain
long-term capital appreciation. Under normal market conditions, the Fund
invests not less than 65% of its net assets in equity securities, limited to
dividend-paying common stock, preferred stock, warrants, rights and securities
convertible into common stock. The Fund's equity investments have tended to be
in issuers with large market capitalizations, although the Fund is not limited
by issuer size in selecting equity securities for investment. The Fund may
also invest a lesser portion of its assets in fixed income securities and, as
needed to provide liquidity in order to meet redemptions, money market
instruments. The Fund's investments in fixed income securities are limited to
direct obligations of the U.S. government (such as Treasury bills, notes or
bonds) and corporate debt securities rated Aa or better by Moody's Investors
Service, Inc. or AA or better by Standard & Poor's. For temporary defensive
purposes, the Fund may invest its assets in all classes of securities,
including equity and fixed income, in any proportions deemed prudent under
existing market and economic conditions. It is the Fund's policy not to
purchase and sell securities with a view toward obtaining short-term (less
than six months) profits.
Global Energy Fund. The investment objective of Global Energy Fund is to
achieve high total return by investing principally in securities of foreign and
domestic energy and energy service companies. Under normal market conditions, at
least 65% of the Fund's net assets are invested in equity and debt securities of
foreign and domestic energy and energy service companies based in at least three
countries, including the United States. Energy companies are the primary
producers of raw energy materials such as oil and gas. Energy service companies
are companies that provide services, supplies and equipment to energy companies.
The Fund may invest up to 35% of its assets in equity and debt securities of
issuers in any industry, including the utility sector, although no more than 25%
of the Fund's assets may be invested in any industry other than the energy or
energy service industries. The Fund may invest up to 35% of its assets in
non-investment grade securities. The policy of concentrating investments in the
energy and energy service industries may cause the value of its shares to
fluctuate more than if it invested in a broader number of industries.
Other Policies of the Funds
Additional Investment Techniques
The Funds engage in certain options and futures contracts to attempt to
hedge against the overall level of risk associated with their respective
investments.
Investment Restrictions
Global Energy Fund and Growth and Income Fund are permitted to invest in
securities rated below investment grade level. None of the Funds may invest more
than 15% of its net assets in illiquid securities. While Global Energy Fund
concentrates its investments in one industry, neither Growth and Income Fund nor
Equity Income Fund may invest more than 25% of its total assets in any one
industry. For additional discussion of these investment restrictions, see
"Comparison of Principal Risk Factors."
Operations of Growth and Income Fund Following the Reorganizations
There are differences in some of the Funds' investment policies. It is not
expected, however, that Growth and Income Fund will revise its investment
policies following the Reorganizations to reflect those of either Acquired Fund.
Since the Acquired Funds invest in securities having characteristics different
from those of Growth and Income Fund, certain of the securities currently held
in the Acquired Funds' portfolios may be sold, rather than transferred to Growth
and Income Fund. If the Reorganizations are approved, the Acquired Funds will
sell any assets that are inconsistent with the investment policies of Growth and
Income Fund prior to the effective time of the Reorganizations, and the proceeds
thereof will be held in temporary investments or reinvested in assets that
qualify to be held by Growth and Income Fund. The necessity for the Acquired
Funds to dispose of assets prior to the effective time of the Reorganizations
may result in selling securities
15
<PAGE>
at a disadvantageous time and could result in the Acquired Funds' realizing
losses that would not otherwise have been realized.
Following the Reorganizations, Mark A. Tincher, who currently is the
portfolio manager for Growth and Income Fund and who has been primarily
responsible for the day-to-day portfolio management of that Fund, will continue
as its portfolio manager. Mr. Tincher joined Mitchell Hutchins in March 1995.
Prior to joining Mitchell Hutchins, Mr. Tincher worked for Chase Manhattan
Private Bank, where he was Vice President and directed the U.S. Funds Management
and Equity Research Area. At Chase since 1988, Mr. Tincher oversaw the
management of all Chase Equity Funds (the Vista Funds and Trust Investment
Funds).
Effective on or about November 1, 1995, PW Fund's Class C and Class D
shares will be renamed Class Y and Class C shares, respectively. In addition,
Class A shares purchased after that date which are purchased without an initial
sales charge due to a sales charge waiver for purchases of $1 million or more,
and held less than one year, and Class D shares that are held for less than one
year, will be subject to a contingent deferred sales charge ("CDSC") of 1% of
the lower of (1) the NAV of the shares at the time of purchase, or (2) the NAV
of the shares at the time of redemption.
Purchases
Shares of each Fund are available through PaineWebber and its correspondent
firms or, for investors who are not clients of PaineWebber, through each Fund's
transfer agent, PFPC Inc. ("Transfer Agent"). The minimum initial investment in
Growth and Income Fund Class A, B or D shares is $1,000; each additional
investment must be $100 or more. These minimums may be waived or reduced for
investments by employees of PaineWebber or its affiliates, certain pension plans
and retirement accounts and participants in the Fund's automatic investment
plan.
The Class A shares of each Fund are all sold subject to a maximum initial
sales charge of 4.5% of the public offering price. The Class A shares of Growth
and Income Fund that will be distributed to Class A shareholders of the Acquired
Funds in connection with the Reorganizations will not be subject to any initial
sales charge.
The Class B shares of Growth and Income Fund and Global Energy Fund are
sold subject to a maximum CDSC of 5% of redemption proceeds, which declines to
zero after six years, when such Class B shares automatically convert into Class
A shares of those respective Funds. Following the Reorganizations, the Class B
shareholders of Global Energy Fund would remain subject to the maximum 5% CDSC
and six-year schedule of reducing CDSCs in effect prior to the Reorganizations.
All Class B shareholders of Global Energy Fund will be credited for the period
of time from the original date of purchase of their shares for purposes of
determining the amount of their CDSC, if any. As is currently the case for
Growth and Income Fund and Global Energy Fund, no CDSC will be applied to
redemptions of Class B shares that represent reinvested dividends or capital
gain distributions.
Equity Income Fund's Class B and Class C shares are sold without an initial
sales charge or CDSC. The Class D shares of Growth and Income Fund and Global
Energy Fund are sold without initial sales charges or CDSCs.
Class C shares of Growth and Income Fund are sold to eligible investors at
the net asset value next determined after the purchase order is received. No
initial or contingent deferred sales charge is imposed, nor are Class C shares
subject to Rule 12b-1 distribution or service fees. Growth and Income Fund and
Mitchell Hutchins reserve the right to reject any purchase order and to suspend
the offering of the Class C shares for a period of time.
The Class C shares currently are offered for sale only to the trustee of
the PaineWebber Savings Investment Plan ("PW SIP"), a defined contribution plan
sponsored by Paine Webber Group Inc. The trustee of the PW SIP purchases Class C
shares to implement the investment choices of individual plan participants with
respect to their PW SIP contributions. Class C shares also may be acquired by
present holders of Class C shares of a Mitchell Hutchins/Kidder, Peabody
("MH/KP") mutual fund when those shares are issued in connection with a
reorganization of that MH/KP mutual fund into Growth and Income Fund. This
category includes participants in the INSIGHT Program, former employees of
16
<PAGE>
Kidder, Peabody & Co., Incorporated ("Kidder, Peabody"), their associated
accounts, and present and former directors and trustees of the MH/KP mutual
funds. Effective on or about November 1, 1995, Growth and Income Fund's Class C
shares (renamed Class Y shares) will be available for purchase by INSIGHT
Program participants when purchased through that program.
INSIGHT Investment Advisory Program(Service Mark) ("INSIGHT Program") An
investor who purchases $50,000 or more of shares of participating funds may
participate in the INSIGHT Program, a total portfolio asset allocation program
sponsored by PaineWebber, and thus become eligible to purchase Class C shares.
The INSIGHT Program offers comprehensive investment services, including a
personalized asset allocation investment strategy using an appropriate
combination of funds, monitoring of investment performance and comprehensive
quarterly reports that cover market trends, portfolio summaries and personalized
account information. Participation in the INSIGHT Program is subject to payment
of an advisory fee to PaineWebber at the maximum annual rate of 1.50% of assets
held through the program (generally charged quarterly in advance), which covers
all the INSIGHT Program investment advisory services and
program administration fees. Employees of PaineWebber and its affiliates are
entitled to a 50% reduction in the fee otherwise payable for participation in
the INSIGHT Program. INSIGHT Program clients may elect to have their INSIGHT
Program fees charged to their PaineWebber accounts (by the automatic redemption
of money market fund shares) or another of their PaineWebber accounts or, for
qualified plans, invoiced.
Redemptions
Shareholders of each Fund may submit redemption requests to their
investment executives or correspondent firms in person or by telephone, mail or
wire. As each Fund's agent, PaineWebber may honor a redemption request by
repurchasing shares from a redeeming shareholder at the shares' net asset value
next determined after receipt of the request by PaineWebber's New York City
offices. Within three Business Days after receipt of the request, repurchase
proceeds (less any applicable contingent deferred sales charge) will be paid by
check or credited to the shareholder's brokerage account at the election of the
shareholder. PaineWebber investment executives and correspondent firms are
responsible for promptly forwarding redemption requests to PaineWebber's New
York City offices.
PaineWebber reserves the right not to honor any redemption request, in
which case PaineWebber promptly will forward the request to the Transfer Agent
for treatment as described below.
Shareholders of each Fund also may redeem shares through the Transfer
Agent. Shareholders should mail redemption requests directly to the Transfer
Agent: PFPC Inc., Attn: PaineWebber Mutual Funds, P. O. Box 8950, Wilmington,
Delaware 19899. A redemption request will be executed at the net asset value
next computed after it is received in "good order," and redemption proceeds will
be paid within seven days of the receipt of the request. Shareholders are
responsible for ensuring that a request for redemption is received in "good
order." "Good order" means that the request must be accompanied by the
following: (1) a letter of instruction or a stock assignment specifying the
number of shares or amount of investment to be redeemed (or that all shares
credited to the Fund account be redeemed), signed by all registered owners of
the shares in the exact names in which they are registered, (2) a guarantee of
the signature of each registered owner by an eligible institution acceptable to
the Transfer Agent and in accordance with SEC rules, such as a commercial bank,
trust company or member of a recognized stock exchange, (3) other supporting
legal documents for estates, trusts, guardianships, custodianships, partnerships
and corporations and (4) duly endorsed share certificates, if any.
A shareholder (other than a participant in the PW SIP) may have redemption
proceeds of $1 million or more wired to the shareholder's PaineWebber brokerage
account or a commercial bank account designated by the shareholder. Questions
about this option, or redemption requirements generally, should be referred to
the shareholder's PaineWebber investment executive or correspondent firm. If a
shareholder requests redemption of shares which were purchased recently, the
Fund may delay payment until it is assured that good payment has been received.
In the case of purchases by check, this can take up to 15 days.
17
<PAGE>
Because the Funds incur certain fixed costs in maintaining shareholder
accounts, each Fund reserves the right to redeem all Fund shares in any
shareholder account having a net asset value below the lesser of $500 or the
current minimum for initial purchases. If the Fund elects to do so, it will
notify the shareholder and provide the shareholder the opportunity to increase
the amount invested to the minimum required level or more within 60 days of the
notice. The Funds will not redeem accounts that fall below the minimum required
level solely as a result of a reduction in net asset value per share.
If a Reorganization is approved with respect to an Acquired Fund, purchases
of all Classes of its shares will cease on October 6, 1995, so that its shares
will no longer be available for purchase or exchange starting on October 9,
1995 (the next Business Day). If the Meeting with respect to an Acquired Fund is
adjourned and the Reorganization involving it is approved on a later date, its
shares will no longer be available for purchase or exchange on the Business Day
following the date on which the Reorganization is approved and all contingencies
have been met. Redemptions of the Acquired Fund's shares and exchanges of such
shares for shares of any other PaineWebber or MH/KP fund may be effected through
the Closing Date.
Exchanges
Except for the $5.00 exchange fee, which does not apply to exchanges of
Equity Income Fund shares, the exchange policies of the Funds are identical.
Class A, Class B and Class D shares of Growth and Income Fund and Global Energy
Fund, and Class A and B shares of Equity Income Fund, may be exchanged for
shares of the Corresponding Class of other PaineWebber and MH/KP funds, and
Class A, Class B and Class D shares of Growth and Income Fund and Global Energy
Fund, and Class A and Class B shares of Equity Income Fund may, be acquired
through an exchange of shares of the Corresponding Class of other PaineWebber
and MH/KP funds, as provided in the prospectus of each Fund. No initial sales
charge is imposed on the shares being acquired, and no CDSC is imposed on the
shares being disposed of, through an exchange. However, a CDSC may apply to
redemptions of a PaineWebber fund's Class B shares acquired through an exchange.
Exchanges may be subject to minimum investment and other requirements of the
fund into which exchanges are made. As noted above, the $5.00 service fee
currently imposed on each exchange of shares of Growth and Income Fund for
shares of any other PaineWebber or MH/KP fund will continue to be imposed
following the Reorganizations. Class C shares of Growth and Income Fund and
Equity Income Fund have no exchange privileges.
Dividends and Other Distributions
Growth and Income Fund distributes dividends from net investment income
semi-annually, whereas Equity Income Fund distributes such dividends quarterly
and Global Energy Fund declares and pays such dividends annually. Each Fund
distributes substantially all of its net capital gain (the excess of net
long-term capital gain over net short-term capital loss) and net short-term
gain, and Global Energy Fund also distributes any net realized gain from foreign
currency transactions, at least annually. Shareholders of each Fund may reinvest
dividends and other distributions in additional shares on the payment date at
those shares' NAV that day or receive them in cash. Each Fund may make
additional distributions if necessary to avoid a 4% excise tax on certain
undistributed ordinary income and capital gain.
Growth and Income Fund's dividends and other distributions on its Class C
shares are paid in additional Class C shares at NAV unless the shareholder has
requested cash payments. Class C shareholders who wish to receive dividends
and/or other distributions in cash, either mailed to the shareholder by check or
credited to the shareholder's PaineWebber account, should contact their
PaineWebber investment executives or correspondent firms. For PW SIP
participants, Growth and Income Fund's Class C dividends and distributions are
paid in additional Class C shares at NAV unless the Transfer Agent is instructed
otherwise.
On or before the Closing Date, each Acquired Fund will declare as a
distribution substantially all of its net investment income, net capital gain,
net short-term capital gain and (in the case of Global Energy Fund) net realized
foreign currency gains in order to maintain its tax status as a regulated
investment company. Each Acquired Fund will pay these distributions only in
cash. Growth and Income Fund also may declare and distribute as a dividend to
its shareholders on or before the Closing Date substantially all of any
previously undistributed net investment income.
18
<PAGE>
Federal Income Tax Consequences of the Reorganizations
America Fund has received an opinion of Kirkpatrick & Lockhart LLP, its
counsel, with respect to each Reorganization, Investment Series has received an
opinion of Kirkpatrick & Lockhart LLP, its counsel, with respect to the
Reorganization involving Global Energy Fund, and Equity Income Fund has received
an opinion of Sullivan & Cromwell, its counsel, with respect to the
Reorganization involving that Fund, each to the effect that the Reorganization
will constitute a tax-free reorganization within the meaning of section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code").
Accordingly, no gain or loss will be recognized by any of the Funds or their
shareholders as a result of the Reorganizations. See "The Proposed
Transactions--Federal Income Tax Considerations," page 18.
COMPARISON OF PRINCIPAL RISK FACTORS
The fact that the Funds' investment objectives and policies are generally
similar and that they are managed by the same investment adviser should minimize
the risks that might otherwise be associated with the Reorganizations. In
general, Growth and Income Fund's investment policies do not present investment
risks that are not also presented by the investment policies of each Acquired
Fund.
There are, however, the following primary differences in the investment
policies of Growth and Income Fund and the Acquired Funds.
Industry Concentration
Global Energy Fund concentrates its investments in the energy and energy
service industries. Under normal circumstances, at least 65% of Global Energy
Fund's net assets are invested in equity and debt securities of foreign and
domestic energy and energy service companies. In contrast, Growth and Income
Fund and Equity Income Fund do not concentrate investments in one industry and
have more diversified portfolios. The policy of concentrating investments in
energy and energy service industries may cause the value of Global Energy Fund's
shares to fluctuate more than if it invested in a greater number of industries.
Lower Rated Debt Securities
Global Energy Fund and Growth and Income Fund may invest in lower rated
securities than Equity Income Fund. The assets of those Funds may be invested in
debt securities or convertible securities rated below investment grade. Such
securities are commonly referred to as "junk bonds." While credit ratings are
general and are not absolute standards of quality, lower-rated securities
generally involve higher risks.
Lower-rated securities generally offer a higher current yield than that
available from higher-grade issues, but they involve higher risks, in that they
are especially subject to adverse changes in general economic conditions and in
the industries in which the issuers are engaged, to changes in the financial
condition of the issuers and to price fluctuation in response to changes in
interest rates. During periods of economic downturn or rising interest rates,
highly leveraged issuers may experience financial stress that could adversely
affect their ability to make payments of principal and interest (or, in the case
of convertible preferred stock, dividends) and increase the possibility of
default. In addition, such issuers may not have more traditional methods of
financing available to them and may be unable to repay debt at maturity by
refinancing. The risk of loss due to default by such issuers is significantly
greater because such securities are frequently unsecured and subordinated to the
prior payment of senior indebtedness.
19
<PAGE>
The market for lower-rated debt securities has expanded rapidly in recent
years, and its growth paralleled a long economic expansion. In the past, the
prices of many lower-rated debt securities declined substantially, reflecting an
expectation that many issuers of such securities might experience financial
difficulties. As a result, the yields on such securities rose dramatically.
However, such higher yields did not reflect the value of the income stream that
holders of such securities expected, but rather the risk that holders of such
securities could lose a substantial portion of their value as a result of the
issuer's financial restructuring or default. There can be no assurance that such
declines will not recur. The market for lower-rated debt securities generally is
thinner and less active than that for higher-quality securities, which may limit
a Fund's ability to sell such securities at their fair value in response to
changes in the economy or the financial markets. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
value and liquidity of lower-rated securities, especially in a thinly traded
market.
Foreign Securities
Investments in each Fund involve the special risks of investing in foreign
securities, although Global Energy Fund may invest without limit in foreign
securities denominated in foreign currencies, while both Equity Income Fund and
Growth and Income Fund are limited in their investments in foreign securities.
Growth and Income Fund is limited to investing not more than 25% of its total
assets in U.S. dollar-denominated securities of foreign issuers that are traded
on recognized U.S. exchanges or in the U.S. over-the-counter market. The risks
of investment in foreign securities include possible adverse political and
economic developments abroad and differing regulatory systems and differing
characteristics of foreign economies and markets, as well as the fact that there
is often less information publicly available about foreign issuers. Many of the
securities held by Global Energy Fund may be denominated in foreign currencies,
and the value of each Fund's investments can be adversely affected by
fluctuations in foreign currency values. Some foreign currencies can be volatile
and may be subject to government controls or intervention.
Hedging Strategies
Each Fund, including Growth and Income Fund, may use options, futures
contracts and options on futures contracts. There can be no assurance, however,
that any strategy utilizing these instruments will succeed. If Mitchell Hutchins
incorrectly forecasts interest rates, market values or other economic factors
utilizing a strategy for a Fund, the Fund might have been in a better position
had the Fund not hedged at all. The use of these instruments involves certain
special risks, including (1) the fact that skills needed to use hedging
instruments are different from those needed to select the Funds' securities, (2)
possible imperfect correlation, or even no correlation, between price movements
of hedging instruments and price movements of the investments being hedged, (3)
the fact that, while hedging strategies can reduce the risk of loss, they can
also reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in hedged investments and (4) the possible inability
of a Fund to purchase or sell a portfolio security at a time that otherwise
would be favorable for it to do so, or the possible need for a Fund to sell a
portfolio security at a disadvantageous time, due to the need for the Fund to
maintain "cover" or to segregate securities in connection with hedging
transactions and the possible inability of the Fund to close out or to liquidate
its hedged position.
THE PROPOSED TRANSACTIONS
Reorganization Plans
The terms and conditions under which the proposed transactions may be
consummated are set forth in the Reorganization Plans. Significant provisions of
the Reorganization Plans are summarized below; however, this summary is
qualified in its entirety by reference to the Reorganization Plans, which are
attached as Appendices A and B to this Proxy Statement.
20
<PAGE>
Each Reorganization Plan contemplates (1) Growth and Income Fund's
acquiring on the Closing Date the assets of an Acquired Fund in exchange solely
for its shares and its assumption of the Acquired Fund's liabilities and (2) the
constructive distribution of such shares to the shareholders of the Acquired
Fund.
The assets of each Acquired Fund to be acquired by Growth and Income Fund
include all cash, cash equivalents, securities, receivables and other property
owned by the Acquired Fund. Growth and Income Fund will assume from each
Acquired Fund all debts, liabilities, obligations and duties of such Fund of
whatever kind or nature; provided, however, that each Acquired Fund will use its
best efforts, to the extent practicable, to discharge all of its known debts,
liabilities, obligations and duties prior to the Closing Date. Growth and Income
Fund also will deliver its shares to each Acquired Fund, which then will be
constructively distributed to the Acquired Fund's shareholders.
The value of an Acquired Fund's assets to be acquired, and the amount of
its liabilities to be assumed, by Growth and Income Fund and the NAV of a Class
A, B, C and D share of Growth and Income Fund will be determined as of the close
of regular trading on the New York Stock Exchange, Inc. ("NYSE") on the Closing
Date. Where market quotations are readily available, portfolio securities will
be valued based upon such market quotations, provided such quotations adequately
reflect, in Mitchell Hutchins' judgment, fair value of the security. Where such
market quotations are not readily available, such securities will be valued
based upon appraisals received from a pricing service using a computerized
matrix system or based upon appraisals derived from information concerning the
security or similar securities received from recognized dealers in those
securities. The amortized cost method of valuation generally will be used to
value debt instruments with 60 days or less remaining to maturity, unless Equity
Income Fund's board of directors (with respect to Equity Income Fund) or
Investment Series' or America Fund's board of trustees (with respect to Global
Energy Fund and Growth and Income Fund, respectively) determines that this does
not represent fair value. All other securities and assets will be valued at fair
value as determined in good faith by or under the direction of Equity Income
Fund's board of directors or Investment Series' or America Fund's board of
trustees, as applicable. All investments quoted in foreign currencies will be
valued in U.S. dollars on the basis of the foreign currency exchange rates
prevailing at the time such valuation is determined by each Fund's custodian.
On, or as soon as practicable after, the Closing Date, each Acquired Fund
will distribute to its shareholders of record the shares of Growth and Income
Fund it received, by Class, so that each shareholder of the Acquired Fund will
receive a number of full and fractional shares of the Corresponding Class or
Classes of Growth and Income Fund shares equal in value to the shareholder's
holdings in the Acquired Fund; each Acquired Fund will be terminated (in the
case of Global Energy Fund) or liquidated (in the case of Equity Income Fund) as
soon as practicable thereafter. Such distribution will be accomplished by
opening accounts on the books of Growth and Income Fund in the names of the
Acquired Fund's shareholders and by transferring thereto the shares of each
Class previously credited to the account of each Acquired Fund on those books.
Fractional shares in each Class of Growth and Income Fund will be rounded to the
third decimal place.
Accordingly, immediately after each Reorganization, each former shareholder
of the participating Acquired Fund will own shares of the Class of Growth and
Income Fund that will equal the value of that shareholder's shares of the
Corresponding Class of the Acquired Fund immediately prior to the
Reorganization. Moreover, because shares of each Class of Growth and Income Fund
will be issued at NAV in exchange for the net assets applicable to the
Corresponding Class of each Acquired Fund, the aggregate value of shares of each
Class of Growth and Income Fund so issued will equal the aggregate value of
shares of the Corresponding Class of the Acquired Funds. The NAV per share of
Growth and Income Fund will be unchanged by the transactions. Thus, the
Reorganizations will not result in a dilution of any shareholder interest.
Any transfer taxes payable upon issuance of any shares of Growth and Income
Fund in a name other than that of the registered holder of the shares on the
books of an Acquired Fund shall be paid by the person to whom such shares are to
be issued as a condition of such transfer. Any reporting responsibility of an
Acquired Fund will continue to be its responsibility up to and including the
Closing Date and such later date on which such Fund is terminated or liquidated.
The cost of the Reorganizations, including professional fees and the cost
of soliciting proxies for the Meeting, consisting principally of printing and
mailing expenses, together with the cost of any supplementary solicitation, will
be
21
<PAGE>
borne by all three Funds in proportion to their respective net assets.
Mitchell Hutchins recommended this method of expense allocation to the
directors/trustees. Mitchell Hutchins based its recommendations on its belief
that this method is fair because, for the reasons discussed under "Reasons for
the Reorganizations," the Reorganizations have the potential to benefit all
Funds. The directors of Equity Income Fund and the trustees of Investment Series
considered this expense allocation method in approving the Reorganizations and
in finding that the Reorganizations are in the best interests of their
respective Funds.
The consummation of each Reorganization is subject to a number of
conditions set forth in its Reorganization Plan, some of which may be waived by
an Acquired Fund. In addition, the Plans may be amended in any mutually
agreeable manner, except that no amendment may be made subsequent to the Meeting
that would have a material adverse effect on the shareholders' interests.
Reasons for the Reorganizations
The board of directors of Equity Income Fund, including a majority of its
Independent Persons, has determined that the Reorganization involving that Fund
is in the best interests of that Fund, that the terms of the Reorganization are
fair and reasonable and that the interests of Equity Income Fund's shareholders
will not be diluted as a result of the Reorganization. Investment Series' board
of trustees, including a majority of its Independent Persons, has determined
that the Reorganization involving Global Energy Fund is in the best interests of
that Fund, that the terms of the Reorganization are fair and reasonable and that
the interests of Global Energy Fund's shareholders will not be diluted as a
result of the Reorganization. The board of trustees of America Fund, including a
majority of its Independent Persons, has determined that the Reorganizations are
in the best interests of Growth and Income Fund, that the terms of the
Reorganizations are fair and reasonable and that the interests of Growth and
Income Fund's shareholders will not be diluted as a result of the
Reorganizations.
In considering the Reorganizations, the boards of directors/trustees made
an extensive inquiry into a number of factors, including the following:
(1) the compatibility of the investment objectives, policies and
restrictions of the Funds;
(2) the effect of the Reorganizations on expected investment
performance;
(3) the effect of the Reorganizations on the expense ratio of Growth
and Income Fund relative to its current expense ratio;
(4) the expense ratio of Growth and Income Fund after the
Reorganization relative to the current expense ratio of each of
the Acquired Funds;
(5) the costs to be incurred by each Fund as a result of the
Reorganizations;
(6) the tax consequences of the Reorganizations;
(7) possible alternatives to the Reorganizations, including
continuing to operate on a stand-alone basis or liquidation; and
(8) the potential benefits of the Reorganizations to other persons,
especially Mitchell Hutchins and PaineWebber.
At meetings of the Acquired Funds' boards of directors/trustees on April 26
and 28, 1995, Mitchell Hutchins recommended, and the boards approved, the
Reorganizations. The Amended and Restated Reorganization Plans were approved in
their final form on July 20, 1995 by each Fund's board. Mitchell Hutchins
advised the directors/trustees that
22
<PAGE>
each Reorganization provided a sound alternative investment option, given the
Funds' generally similar investment objectives and policies, with the material
differences noted. Mitchell Hutchins and each Acquired Fund's board believe that
the Reorganizations offer the Acquired Fund shareholders the benefits of
investing in a larger, diversified open-end fund with an investment objective
substantially similar to those of the Acquired Funds.
In recommending the Reorganizations, Mitchell Hutchins indicated to the
boards that the investment advisory and administration fee schedule applicable
to Growth and Income Fund would be equal to or lower than that currently in
effect for each of the Acquired Funds. The boards also were advised that the
expense ratio for each Class of Growth and Income Fund's shares would likely
decrease over time as a result of the Reorganizations due to the increased size
of the combined Fund. In approving the Reorganizations, the boards noted that
the overall investment objective of current income and capital growth remains an
appropriate one to offer investors as part of an overall investment strategy.
Mitchell Hutchins further advised the boards that, while past performance
of Growth and Income Fund has not been as positive as that of the Acquired
Funds, the investment policies of Growth and Income Fund have recently been
revised. The new policies are intended to improve the Fund's performance. In
addition, Mitchell Hutchins has recently appointed Mark A. Tincher as portfolio
manager with day-to-day responsibility for Growth and Income Fund. Mr. Tincher
is experienced in managing growth and income funds. Mitchell Hutchins also
advised the boards that it did not expect to receive any immediate direct
benefits from the Reorganizations, because the compensation that would be
received by it as investment adviser to the combined Fund would be the same or
less than the aggregate compensation it received from the Funds prior to the
Reorganizations, assuming no change in aggregate net assets. However, Mitchell
Hutchins noted that it could benefit in the future if the combined Fund's assets
grow faster than would be the case for the three separate Funds in the absence
of the Reorganizations.
THE BOARDS OF TRUSTEES/DIRECTORS RECOMMEND THAT THE SHAREHOLDERS
OF THE ACQUIRED FUNDS VOTE "FOR" THE PROPOSED REORGANIZATIONS.
Description of Securities To Be Issued
America Fund is registered with the SEC as an open-end management
investment company. Its trustees are authorized to issue an unlimited number of
shares of beneficial interest of separate series (par value $.001 per share).
The trustees have established Growth and Income Fund as one of America Fund's
series and have divided its shares into four Classes. Each share in a Class
represents an equal proportionate interest in Growth and Income Fund with each
other share in that Class. Shares of Growth and Income Fund entitle their
holders to one vote per full share and fractional votes for fractional shares
held, except that each Class of shares has exclusive voting rights on matters
pertaining to its plan of distribution.
On the Closing Date, Growth and Income Fund will have outstanding four
Classes of shares, designated Class A, Class B, Class C and Class D shares. Each
Class represents interests in the same assets of the Fund. The Classes differ as
follows: (1) Class A, Class B and Class D shares, unlike Class C shares, bear
certain fees under plans of distribution and have exclusive voting rights on
matters pertaining to their plans of distribution; (2) Class A shares are
subject to an initial sales charge; (3) Class B shares bear ongoing distribution
expenses, are subject to a CDSC upon certain redemptions and automatically
convert to Class A shares approximately six years after issuance; (4) Class C
shares are subject to neither an initial sales charge nor a CDSC and bear no
ongoing service or distribution fees; (5) Class D shares are subject to neither
an initial sales charge nor a CDSC, bear no ongoing distribution fees and do not
convert to another Class; and (6) each Class may bear differing amounts of
certain Class-specific expenses. Each share of each Class of Growth and Income
Fund will be entitled to participate equally in dividends and other
distributions and the proceeds of any liquidation, except that because of the
higher expenses resulting from the distribution fees borne by the Class B and D
shares, dividends on those shares are expected to be lower than those for Class
A and Class C shares; similarly, dividends on Class A shares are expected to be
lower than those for Class C shares. Dividends on each Class also might be
affected differently by the allocation of other Class-specific expenses.
23
<PAGE>
America Fund does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing trustees
unless fewer than a majority of the trustees holding office has been elected by
shareholders, at which time the trustees then in office will call a
shareholders' meeting for the election of trustees. Under the 1940 Act,
shareholders of record of at least two-thirds of the outstanding shares of an
investment company may remove a trustee by votes cast in person or by proxy at a
meeting called for that purpose. The trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
trustee when requested in writing to do so by the shareholders of record holding
at least 10% of America Fund's outstanding shares.
Federal Income Tax Considerations
The exchange of an Acquired Fund's assets for shares of Growth and Income
Fund and Growth and Income Fund's assumption of liabilities of that Acquired
Fund is intended to qualify for federal income tax purposes as a tax-free
reorganization under section 368(a)(1)(C) of the Code. America Fund has received
an opinion of Kirkpatrick & Lockhart LLP, its counsel, with respect to each
Reorganization, Investment Series has received an opinion of Kirkpatrick &
Lockhart LLP, its counsel, with respect to the Reorganization involving Global
Energy Fund, and Equity Income Fund has received an opinion of Sullivan &
Cromwell, its counsel, with respect to the Reorganization involving Equity
Income Fund, each substantially to the effect that --
(i) Growth and Income Fund's acquisition of the Acquired Fund's assets
in exchange solely for Growth and Income Fund shares and Growth and Income
Fund's assumption of the Acquired Fund's liabilities, followed by the
Acquired Fund's distribution of those shares to its shareholders
constructively in exchange for their Acquired Fund shares, will constitute
a "reorganization" within the meaning of section 368(a)(1)(C) of the Code,
and each Fund will be "a party to a reorganization" within the meaning of
section 368(b) of the Code;
(ii) No gain or loss will be recognized to the Acquired Fund on the
transfer to Growth and Income Fund of its assets in exchange solely for
Growth and Income Fund shares and Growth and Income Fund's assumption of
the Acquired Fund's liabilities or on the subsequent distribution of those
shares to the Acquired Fund's shareholders in constructive exchange for
their Acquired Fund shares;
(iii) No gain or loss will be recognized to Growth and Income Fund on
its receipt of the transferred assets in exchange solely for Growth and
Income Fund shares and its assumption of the Acquired Fund's liabilities;
(iv) Growth and Income Fund's basis for the transferred assets will be
the same as the basis thereof in the Acquired Fund's hands immediately
prior to the Reorganization, and Growth and Income Fund's holding period
for those assets will include the Acquired Fund's holding period therefor;
(v) An Acquired Fund shareholder will recognize no gain or loss on the
constructive exchange of all its Acquired Fund shares solely for Growth and
Income Fund shares pursuant to the Reorganization; and
(vi) An Acquired Fund shareholder's basis for the Growth and Income
Fund shares to be received by it in the Reorganization will be the same as
the basis for its Acquired Fund shares to be constructively surrendered in
exchange for those Growth and Income Fund shares, and its holding period
for those Growth and Income Fund shares will include its holding period for
those Acquired Fund shares, provided they are held as capital assets by the
shareholder on the Closing Date.
Each such opinion may state that no opinion is expressed as to the effect
of the Reorganization on the Funds or any shareholder with respect to any asset
(including certain options, futures and forward contracts) as to which
unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting.
24
<PAGE>
Utilization by Growth and Income Fund after the Reorganizations of
pre-Reorganization capital losses realized by Global Energy Fund could be
subject to limitation in future years under the Code.
Shareholders of an Acquired Fund should consult their tax advisers
regarding the effect, if any, of the proposed Reorganizations in light of their
individual circumstances. Because the foregoing discussion only relates to the
federal income tax consequences of the Reorganizations, those shareholders also
should consult their tax advisers as to state and local tax consequences, if
any, of the Reorganizations. Individual participants in the PW SIP should
consult the Plan Documents and their own tax advisers for information on the tax
consequences associated with participating in the PW SIP.
25
<PAGE>
Capitalization
The following tables show the capitalization of each Fund as of February
28, 1995 and on a pro forma combined basis (unaudited) as of that date, giving
effect to the Reorganizations and assuming that the Acquired Funds indicated
participate in the Reorganizations.
If only Global Energy Fund participates in a Reorganization:
Growth
and Global
Income Energy Pro Forma
Fund Fund Combined
------------ ----------- -----------
Net Assets
Class A ....... $180,816,735 $8,951,715 $189,768,450
Class B ....... $239,383,165 $12,442,509 $251,825,674
Class C ....... $14,543,879 -- $14,543,879
Class D ....... $29,927,874 $635,332 $30,563,206
NAV Per Share
Class A ....... $19.15 $9.92 $19.15
Class B ....... $19.10 $9.92 $19.10
Class C ....... $19.14 -- $19.14
Class D ....... $19.15 $9.80 $19.15
Shares Outstanding
Class A ....... 9,441,600 902,281 9,908,996
Class B ....... 12,533,576 1,254,095 13,184,917
Class C ....... 759,803 -- 759,803
Class D ....... 1,562,497 64,846 1,595,682
26
<PAGE>
If only Equity Income Fund participates in a Reorganization:
Growth
and Equity
Income Income Pro Forma
Fund Fund Combined
------------ ----------- -----------
Net Assets
Class A ....... $180,816,735 $58,224,548 $239,041,283
Class B1/ ..... $239,383,165 $1,612,995 $239,383,165
Class C ....... $14,543,879 $3,547,267 $18,091,146
Class D ....... $29,927,874 -- $31,540,869
NAV Per Share
Class A ....... $19.15 $19.57 $19.15
Class B1/ ..... $19.10 $19.45 $19.10
Class C ....... $19.14 $19.56 $19.14
Class D ....... $19.15 $ -- $19.15
Shares Outstanding
Class A ....... 9,441,600 2,975,547 12,482,407
Class B1/ ..... 12,533,576 82,939 12,533,576
Class C ....... 759,803 181,359 945,142
Class D ....... 1,562,497 -- 1,646,735
------------
1/ Class B shares of Equity Income Fund will be exchanged for Class D shares
of Growth and Income Fund.
27
<PAGE>
If both Acquired Funds participate in the Reorganizations:
Growth
and Equity Global
Income Income Energy Pro Forma
Fund Fund Fund Combined
------------ ----------- ----------- ------------
Net Assets
Class A ....... $180,816,735 $58,224,548 $8,951,715 $247,992,998
Class B1/ ..... $239,383,165 $1,612,995 $12,442,509 $251,825,674
Class C ....... $14,543,879 $3,547,267 -- $18,091,146
Class D ....... $29,927,874 -- $635,332 $32,176,201
NAV Per Share
Class A ....... $19.15 $19.57 $9.92 $19.15
Class B ....... $19.10 $19.45 $9.92 $19.10
Class C ....... $19.14 $19.56 -- $19.14
Class D ....... $19.15 -- $9.80 $19.15
Shares Outstanding
Class A ....... 9,441,600 2,975,547 902,281 12,949,803
Class B ....... 12,533,576 82,939 1,254,095 13,184,917
Class C ....... 759,803 181,359 -- 945,142
Class D ....... 1,562,497 -- 64,846 1,679,920
------------
1/ Class B shares of Equity Income Fund will be exchanged for Class D
shares of Growth and Income Fund.
28
<PAGE>
ADDITIONAL INFORMATION ABOUT GROWTH AND INCOME FUND
Financial Highlights
The table below provides selected per share data and ratios for one Class
A share, one Class B share, one Class C share and one Class D share of Growth
and Income Fund for each of the periods shown. This information is
supplemented by the financial statements and accompanying notes appearing in
Growth and Income Fund's Annual Report to Shareholders for the fiscal year
ended August 31, 1994, which are incorporated by reference into its Statement
of Additional Information. The financial statements and notes, as well as the
information in the table appearing below insofar as it relates to the five
years in the period ended August 31, 1994, have been audited by Ernst & Young
LLP, independent auditors, whose report thereon is included in the Annual
Report to Shareholders. Further information about the performance of Growth
and Income Fund is also included in the Annual Report to Shareholders, which
accompanies this prospectus/proxy. The information appearing below for periods
prior to the year ended August 31, 1990 also has been audited by Ernst & Young
LLP, whose reports thereon were unqualified. The financial statements and
notes and the financial information in the table below insofar as they relate
to the six months ended February 28, 1995 have been taken from the records of
the Fund without examination by the Fund's independent auditors, who do not
express an opinion thereon.
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------
For the Six
Months Ended
February 28, For the Years Ended
1995
(unaudited) 1994 1993 1992 1991 1990
------------ -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .... $20.43 $20.86 $20.48 $19.26 $15.87 $16.50
-------- -------- -------- -------- -------- -------
Income (loss) from
investment operations:
Net investment income .. 0.10 0.28 0.28 0.24 0.19 0.51
Net realized and
unrealized gains
(losses) from investment
transactions ........... (0.05) (0.41) 0.37 1.25 3.50 (0.61)
-------- -------- -------- -------- -------- -------
Total income (loss) from
investment operations .. 0.05 (0.13) 0.65 1.49 3.69 (0.10)
-------- -------- -------- -------- -------- -------
Less dividends and
distributions from:
Net investment income .. (0.12) (0.27) (0.27) (0.27) (0.30) (0.53)
Net realized gains on
investments ............ (1.21) (0.03) -- -- -- --
-------- -------- -------- -------- -------- -------
Total dividends and
distributions .......... (1.33) (0.30) (0.27) (0.27) (0.30) (0.53)
-------- -------- -------- -------- -------- -------
Net asset value, end of
period ................. $19.15 $20.43 $20.86 $20.48 $19.26 $15.87
======== ======== ======== ======== ======== =======
Total return(1) ........ 0.65% (0.58)% 3.15% 7.78% 23.62% (0.72)%
======== ======== ======== ======== ======== =======
Ratios/Supplemental
Data:
Net assets, end of
period (000's) ......... $180,817 $222,432 $359,073 $358,643 $232,555 $58,649
Net investment income to
average net assets ..... 1.21%* 1.20% 1.13% 1.22% 1.42% 1.41%
Net investment income to
average net assets ..... 0.97%* 1.29% 1.33% 1.26% 1.79% 3.11%
Portfolio turnover ..... 65.25% 94.32% 36.52% 15.57% 52.00% 32.10%
<CAPTION>
Class B
---------------------------------------------------------------
For the
For the Six Period
Months Ended For the Years Ended July 1,
February 28, August 31, 1991+ to
1995 ---------------------------------- August 31,
(unaudited) 1994 1993 1992 1991
------------ -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .... $20.37 $20.78 $20.41 $19.23 $18.04
-------- -------- -------- -------- --------
Income (loss) from
investment operations:
Net investment income .. 0.02 0.10 0.12 0.13 0.02
Net realized and
unrealized gains
(losses) from investment
transactions ........... (0.05) (0.37) 0.36 1.20 1.17
-------- -------- -------- -------- --------
Total income (loss) from
investment operations .. (0.03) (0.27) 0.48 1.33 1.19
-------- -------- -------- -------- --------
Less dividends and
distributions from:
Net investment income .. (0.03) (0.11) (0.11) (0.15) --
Net realized gains on
investments ............ (1.21) (0.03) -- -- --
-------- -------- -------- -------- --------
Total dividends and
distributions .......... (1.24) (0.14) (0.11) (0.15) --
-------- -------- -------- -------- --------
Net asset value, end of
period ................. $19.10 $20.37 $20.78 $20.41 $19.23
======== ======== ======== ======== ========
Total return(1) ........ 0.22% (1.31)% 2.34% 6.99% 6.60%
======== ======== ======== ======== ========
Ratios/Supplemental
Data:
Net assets, end of
period (000's) ......... $239,383 $289,290 $461,389 $386,275 $57,539
Net investment income to
average net assets ..... 1.99%* 1.97% 1.90% 1.97% 2.10%*
Net investment income to
average net assets ..... 0.19%* 0.51% 0.57% 4.90% 1.18%*
Portfolio turnover ..... 65.25% 94.32% 36.52% 15.57% 52.00%
</TABLE>
30
<PAGE>
Class C
--------------------------------------------------
For the
For the Six Period
Months Ended For the Years February 12,
February 28, Ended 1992+ to
1995 August 31, August 31,
(unaudited) 1994 1993 1992
------------ ------- ------- ------------
Net asset value,
beginning of period ... $ 20.42 $ 20.86 $ 20.48 $ 20.95
------- ------- ------- -------
Income (loss) from
investment operations:
Net investment income . 0.13 0.33 0.33 0.16
Net realized and
unrealized gains
(losses) from
investment transactions (0.05) (0.40) 0.37 (0.49)
------- ------- ------- -------
Total income (loss)
from investment
operations ............ 0.08 (0.07) 0.70 (0.33)
------- ------- ------- -------
Less dividends and
distributions from:
Net investment income . (0.15) (0.34) (0.32) (0.14)
Net realized gains on
investments ........... (1.21) (0.03) -- --
------- ------- ------- -------
Total dividends and
distributions ......... (1.36) (0.37) (0.32) (0.14)
------- ------- ------- -------
Net asset value, end of
period ................ $ 19.14 $ 20.42 $ 20.86 $ 20.48
======= ======= ======= =======
Total return(1) ....... 0.81% (0.31)% 3.44% (1.15)%
======= ======= ======= =======
Ratios/Supplemental
Data:
Net assets, end of
period (000's) ........ $14,544 $14,690 $17,005 $10,560
Net investment income
to average net assets . 0.90%* 0.90% 0.86% 0.93%*
Net investment income
to average net assets . 1.29%* 1.60% 1.62% 1.56%*
Portfolio turnover .... 65.25% 94.32% 36.52% 15.57%
31
<PAGE>
Class D
-------------------------------------------------
For the
For the Six Period
Months Ended For the Years Ended July 2,
February 28, August 31, 1992+ to
1995 -------------------- August 31,
(unaudited) 1994 1993 1992
------------ ------- ------- ----------
Net asset value, beginning
of period ................. $ 20.42 $ 20.83 $ 20.47 $ 20.95
------- ------- ------- -------
Income (loss) from
investment operations:
Net investment income ..... 0.02 0.11 0.11 0.02
Net realized and unrealized
gains
(losses) from investment
transactions .............. (0.05) (0.38) 0.37 (0.44)
------- ------- ------- -------
Total income (loss) from
investment operations ..... (0.03) (0.27) 0.48 (0.42)
------- ------- ------- -------
Less dividends and
distributions from:
Net investment income ..... (0.03) (0.11) (0.12) (0.06)
Net realized gains on
investments ............... (1.21) (0.03) -- --
------- ------- ------- -------
Total dividends and
distributions ............. (1.24) (0.14) (1.12) (0.06)
------- ------- ------- -------
Net asset value, end of
period .................... $ 19.15 $ 20.42 $ 20.83 $ 20.47
======= ======= ======= =======
Total return(1) ........... 0.26% (1.29%) 2.35% 2.85%
======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period
(000's) ................... $29,928 $37,267 $61,869 $13,019
Net investment income to
average net
assets .................... 2.00%* 1.94% 1.87% 1.73%
Net investment income to
average net assets ........ 0.18%* 0.54% 0.61% 0.94%
Portfolio turnover ........ 62.25% 94.32% 36.52% 15.57%
------------
* Annualized.
+ Commencement of offering of shares.
(1) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends and capital gain
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for Class A and Class B shares would be lower
if sales charges were included. Total return information for periods less
than one year is not annualized.
32
<PAGE>
MISCELLANEOUS
Available Information
Investment Series, Equity Income Fund and America Fund are each subject to
the informational requirements of the Securities Exchange Act of 1934 and the
1940 Act and in accordance therewith file reports, proxy material and other
information with the SEC. Such reports, proxy material and other information can
be inspected and copied at the Public Reference Room maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can also
be obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C. 20549
at prescribed rates.
Legal Matters
Certain legal matters in connection with the issuance of Growth and Income
Fund shares will be passed upon by Kirkpatrick & Lockhart LLP, counsel to
America Fund.
Experts
The audited financial statements of Growth and Income Fund, Global Energy
Fund and Equity Income Fund, incorporated by reference herein and in each Fund's
respective Statements of Additional Information, have been audited by Ernst &
Young LLP, independent auditors, Price Waterhouse LLP, independent accountants,
and Deloitte & Touche LLP, independent auditors, respectively, whose reports
thereon are included in the Funds' Annual Reports to Shareholders for the fiscal
years ended August 31, 1994, October 31, 1994 and January 31, 1995,
respectively. In addition, there are unaudited financial statements of Growth
and Income Fund and Global Energy Fund in their semi-annual reports to
shareholders for the six-month period ended February 28, 1995 and April 30,
1995, respectively. The financial statements audited by Ernst & Young LLP, Price
Waterhouse LLP and Deloitte & Touche LLP have been incorporated herein by
reference in reliance on their reports given on their authority as experts in
auditing and accounting.
33
<PAGE>
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION AND
TERMINATION ("Agreement") is made as of July 25, 1995, between PaineWebber
America Fund, a Massachusetts business trust ("America Trust"), on behalf of
PaineWebber Growth and Income Fund, a segregated portfolio of assets ("series")
thereof ("Acquiring Fund"), and PaineWebber Investment Series, a Massachusetts
business trust ("Investment Series"), on behalf of its PaineWebber Global Energy
Fund series ("Target"). (Acquiring Fund and Target are sometimes referred to
herein individually as a "Fund" and collectively as the "Funds," and America
Trust and Investment Series are sometimes referred to herein collectively as the
"Investment Companies.")
RECITAL
The parties entered into an Agreement and Plan of Reorganization and
Liquidation dated as of May 30, 1995 ("Original Agreement"), which provided,
inter alia, for Target shareholders to receive Acquiring Fund shares pursuant to
the transactions contemplated thereby. The parties now desire to amend and
restate the Original Agreement to reflect a change in the class of Acquiring
Fund shares to be distributed to holders of Class C Target Shares (as defined
below). Therefore, the Original Agreement is hereby amended and restated to read
in its entirety as follows:
AMENDED AND RESTATED PROVISIONS
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization will involve the transfer to
Acquiring Fund of Target's assets solely in exchange for voting shares of
beneficial interest in Acquiring Fund ("Acquiring Fund Shares") and the
assumption by Acquiring Fund of Target's liabilities, followed by the
constructive distribution of the Acquiring Fund Shares to the holders of shares
of beneficial interest in Target ("Target Shares") in exchange therefor, all
upon the terms and conditions set forth herein. The foregoing transactions are
referred to herein as the "Reorganization." All agreements, representations,
actions, and obligations described herein made or to be taken or undertaken by
either Fund are made and shall be taken or undertaken by America Trust on behalf
of Acquiring Fund and by Investment Series on behalf of Target.
Acquiring Fund's shares are divided into four classes, designated Class A,
Class B, Class C, and Class D shares ("Class A Acquiring Fund Shares," "Class B
Acquiring Fund Shares," "Class C Acquiring Fund Shares," and "Class D Acquiring
Fund Shares," respectively). Except as noted in the following sentence, these
classes differ only with respect to the sales charges imposed on the purchase of
shares and the fees ("12b-1 fees") payable by each class pursuant to plans
adopted under Rule 12b-1 promulgated under the Investment Company Act of 1940
("1940 Act"), as follows: (1) Class A Acquiring Fund Shares are offered at net
asset value ("NAV") plus a sales charge, if applicable, and are subject to a
12b-1 service fee at the annual rate of 0.25% of the average daily net assets
attributable to the class ("class assets"); (2) Class B Acquiring Fund Shares
are offered at NAV without imposition of any sales charge and are subject to a
contingent deferred sales charge and 12b-1 service and distribution fees at the
respective annual rates of 0.25% and 0.75% of class assets; (3) Class C
Acquiring Fund Shares are offered, currently only to the trustee of the
PaineWebber Savings Investment Plan on behalf of that plan, at NAV without
imposition of any sales charge and are not subject to any 12b-1 fee; and (4)
Class D Acquiring Fund Shares are offered at NAV without imposition of any sales
charge and are subject to 12b-1 service and distribution fees at the respective
annual rates of 0.25% and 0.50% of class assets. These classes also may differ
from one another with
A - 1
<PAGE>
respect to the allocation of certain class-specific expenses other than
12b-1 fees. Only Classes A, B, and D Acquiring Fund Shares are involved in the
Reorganization.
Target's shares are divided into three classes, designated Class A, Class
B, and Class D shares ("Class A Target Shares," "Class B Target Shares," and
"Class D Target Shares," respectively). These classes are identical to the
correspondingly lettered classes of Acquiring Fund Shares, except that the Class
A Target Shares are subject to a 12b-1 service fee at the annual rate of 0.25%,
rather than 0.23%, of class assets.
In consideration of the mutual promises herein, the parties covenant and
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION OF TARGET
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor --
(a) to issue and deliver to Target the number of full and fractional
(i) Class A Acquiring Fund Shares determined by dividing the net value of
Target (computed as set forth in paragraph 2.1) ("Target Value")
attributable to the Class A Target Shares by the NAV (computed as set forth
in paragraph 2.2) of a Class A Acquiring Fund Share, (ii) Class B Acquiring
Fund Shares determined by dividing the Target Value attributable to the
Class B Target Shares by the NAV (as so computed) of a Class B Acquiring
Fund Share, and (iii) Class D Acquiring Fund Shares determined by dividing
the Target Value attributable to the Class D Target Shares by the NAV (as
so computed) of a Class D Acquiring Fund Share; and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in
paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement,
including without limitation Target's share of the expenses described in
paragraph 7.2. Notwithstanding the foregoing, Target agrees to use its best
efforts to discharge all of its known Liabilities prior to the Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and realized net capital gain, if any, for
the current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiring Fund Shares
received by it pursuant to paragraph 1.1 to Target's shareholders of record,
determined as of the Effective Time (collectively "Shareholders" and
individually a "Shareholder"), in exchange for their Target Shares. Such
distribution shall be accomplished by the Funds' transfer agent ("Transfer
Agent") opening accounts on Acquiring Fund's share transfer books in the
Shareholders' names and transferring such Acquiring Fund Shares thereto. Each
Shareholder's account shall be credited with the respective pro rata number
A - 2
<PAGE>
of full and fractional (rounded to the third decimal place) Acquiring Fund
Shares due that Shareholder, by class (i.e., the account for a Shareholder of
Class A Target Shares shall be credited with the respective pro rata number of
Class A Acquiring Fund Shares due that Shareholder, the account for a
Shareholder of Class B Target Shares shall be credited with the respective pro
rata number of Class B Acquiring Fund Shares due that Shareholder, and the
account for a Shareholder of Class D Target Shares shall be credited with the
respective pro rata number of Class D Acquiring Fund Shares due that
Shareholder). All outstanding Target Shares, including any represented by
certificates, shall simultaneously be canceled on Target's share transfer
records. Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, Target shall be terminated as a series of
Investment Series and any further actions shall be taken in connection therewith
as required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange, Inc. ("NYSE") on the date of the Closing ("Valuation Time"),
using the valuation procedures set forth in Target's then-current prospectus
and statement of additional information less (b) the amount of the Liabilities
as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of a Class A Acquiring Fund
Share, a Class B Acquiring Fund Share, and a Class D Acquiring Fund Share shall
be computed as of the Valuation Time, using the valuation procedures set forth
in Acquiring Fund's then-current prospectus and statement of additional
information.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of Mitchell Hutchins Asset Management Inc.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on October 13,
1995, or at such other place and/or on such other date as the parties may
agree. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the date thereof or at such other
time as the parties may agree ("Effective Time"). If, immediately before the
Valuation Time, (a) the NYSE is closed to trading or trading thereon is
restricted or (b) trading or the reporting of trading on the NYSE or elsewhere
is disrupted, so that accurate appraisal of the net value of Target and the NAV
per Acquiring Fund Share is impracticable, the Effective Time shall be postponed
until the first business day after the day when such trading shall have been
fully resumed and such reporting shall have been restored.
3.2. Investment Series shall deliver to America Trust at the Closing a
schedule of the Assets as of the Effective Time, which shall set forth for all
portfolio securities included therein their adjusted tax basis and holding
period by lot. Target's custodian shall deliver at the Closing a certificate of
an authorized officer stating that (a) the
A - 3
<PAGE>
Assets held by the custodian will be transferred to Acquiring Fund at the
Effective Time and (b) all necessary taxes in conjunction with the delivery of
the Assets, including all applicable federal and state stock transfer stamps, if
any, have been paid or provision for payment has been made.
3.3. Investment Series shall deliver to America Trust at the Closing a list
of the names and addresses of the Shareholders and the number (by class) of
outstanding Target Shares owned by each Shareholder, all as of the Effective
Time, certified by the Secretary or Assistant Secretary of Target. The Transfer
Agent shall deliver at the Closing a certificate as to the opening on Acquiring
Fund's share transfer books of accounts in the Shareholders' names. America
Trust shall issue and deliver a confirmation to Investment Series evidencing the
Acquiring Fund Shares (by class) to be credited to Target at the Effective Time
or provide evidence satisfactory to Investment Series that such Acquiring Fund
Shares have been credited to Target's account on Acquiring Fund's books. At the
Closing, each party shall deliver to the other such bills of sale, checks,
assignments, stock certificates, receipts, or other documents as the other
party or its counsel may reasonably request.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. Investment Series is an unincorporated voluntary association
with transferable shares organized as a business trust under a written
instrument ("Business Trust"); it is duly organized, validly existing, and
in good standing under the laws of the Commonwealth of Massachusetts; and a
copy of its Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts;
4.1.2. Investment Series is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.1.3. Target is a duly established and designated series of
Investment Series;
4.1.4. At the Closing, Target will have good and marketable title to
the Assets and full right, power, and authority to sell, assign, transfer,
and deliver the Assets free of any liens or other encumbrances; and upon
delivery and payment for the Assets, Acquiring Fund will acquire good and
marketable title thereto;
4.1.5. Target's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the Securities Act of 1933 ("1933 Act") and the 1940 Act and the rules
and regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.1.6. Target is not in violation of, and the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby
will not conflict with or violate, Massachusetts law or any provision of
Investment Series' Declaration of Trust or By-Laws or of any agreement,
instrument, lease, or other undertaking to which Target is a party or by
which it is bound or result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which Target is a party or by which it is bound, except as previously
disclosed in writing to and accepted by America Trust;
A - 4
<PAGE>
4.1.7. Except as disclosed in writing to and accepted by America
Trust, all material contracts and other commitments of or applicable to
Target (other than this Agreement and investment contracts, including
options, futures, and forward contracts) will be terminated, or provision
for discharge of any liabilities of Target thereunder will be made, at or
prior to the Effective Time, without either Fund's incurring any liability
or penalty with respect thereto and without diminishing or releasing any
rights Target may have had with respect to actions taken or omitted to be
taken by any other party thereto prior to the Closing;
4.1.8. Except as otherwise disclosed in writing to and accepted by
America Trust, no litigation, administrative proceeding, or investigation
of or before any court or governmental body is presently pending or (to
Target's knowledge) threatened against Investment Series with respect to
Target or any of its properties or assets that, if adversely determined,
would materially and adversely affect Target's financial condition or the
conduct of its business; Target knows of no facts that might form the basis
for the institution of any such litigation, proceeding, or investigation
and is not a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially or adversely
affects its business or its ability to consummate the transactions
contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action on the
part of Investment Series' board of trustees, which has made the
determinations required by Rule 17a-8(a) under the 1940 Act; and, subject
to approval by Target's shareholders and receipt of any necessary exemptive
relief or no-action assurances requested from the Securities and Exchange
Commission ("SEC") or its staff with respect to sections 17(a) and 17(d) of
the 1940 Act, this Agreement will constitute a valid and legally binding
obligation of Target, enforceable in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
4.1.11. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934 ("1934 Act"), or the 1940 Act for the execution or performance of
this Agreement by Investment Series, except for (a) the filing with the
SEC of a registration statement by America Trust on Form N-14 relating to
the Acquiring Fund Shares issuable hereunder, and any supplement or
amendment thereto ("Registration Statement"), including therein a
prospectus/proxy statement ("Proxy Statement"), (b) receipt of the
exemptive relief referenced in subparagraph 4.1.9, and (c) such consents,
approvals, authorizations, and filings as have been made or received or
as may be required subsequent to the Effective Time;
4.1.12. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by America Trust for use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary course
of its business;
4.1.14. Target is a "fund" as defined in section 851(h)(2) of the
Code; it qualified for treatment as a regulated investment company ("RIC")
under Subchapter M of the Code for each past taxable year since it
commenced operations and will continue to meet all the requirements for
such qualification for its current tax-
A - 5
<PAGE>
able year; and it has no earnings and profits accumulated in any taxable
year in which the provisions of Subchapter M did not apply to it. The
Assets shall be invested at all times through the Effective Time in a
manner that ensures compliance with the foregoing;
4.1.15. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of section 368(a)(3)(A) of the Code;
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock or securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock or securities of five or
fewer issuers; and
4.1.17. Target will be terminated as soon as reasonably practicable
after the Reorganization, but in all events within six months after the
Effective Time.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. America Trust is a Business Trust; it is duly organized,
validly existing, and in good standing under the laws of the Commonwealth
of Massachusetts; and a copy of its Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts;
4.2.2. America Trust is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
America Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued
and outstanding shares of Acquiring Fund, fully paid and non-assessable,
except to the extent that under Massachusetts law shareholders of a
Business Trust may, under certain circumstances, be held personally liable
for its obligations. Except as contemplated by this Agreement, Acquiring
Fund does not have outstanding any options, warrants, or other rights to
subscribe for or purchase any of its shares, nor is there outstanding any
security convertible into any of its shares;
4.2.6. Acquiring Fund's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations thereunder
and do not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Massachusetts law or
any provision of America Trust's Declaration of Trust or By-Laws or of any
provision of any agreement, instrument, lease, or other undertaking to
which Acquiring Fund is a party or by which it is bound or result in the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree to which Acquiring Fund is a party or by
which it is bound, except as previously disclosed in writing to and
accepted by Investment Series;
4.2.8. Except as otherwise disclosed in writing to and accepted by
Investment Series, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently
pending
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or (to Acquiring Fund's knowledge) threatened against America Trust with
respect to Acquiring Fund or any of its properties or assets that, if
adversely determined, would materially and adversely affect Acquiring
Fund's financial condition or the conduct of its business; Acquiring Fund
knows of no facts that might form the basis for the institution of any such
litigation, proceeding, or investigation and is not a party to or subject
to the provisions of any order, decree, or judgment of any court or
governmental body that materially or adversely affects its business or its
ability to consummate the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action on the
part of America Trust's board of trustees, which has made the
determinations required by Rule 17a-8(a) under the 1940 Act; and, subject
to receipt of any necessary exemptive relief or no-action assurances
requested from the SEC or its staff with respect to sections 17(a) and
17(d) of the 1940 Act, this Agreement will constitute a valid and legally
binding obligation of Acquiring Fund, enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws relating
to or affecting creditors' rights and by general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by America Trust, except for
(a) the filing with the SEC of the Registration Statement, (b) receipt of
the exemptive relief referenced in subparagraph 4.2.9, and (c) such
consents, approvals, authorizations, and filings as have been made or
received or as may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by Investment Series for use therein;
4.2.12. Acquiring Fund is a "fund" as defined in section 851(h)(2) of
the Code; it qualified for treatment as a RIC under Subchapter M of the
Code for each past taxable year since it commenced operations and will
continue to meet all the requirements for such qualification for its
current taxable year; Acquiring Fund intends to continue to meet all such
requirements for the next taxable year; and it has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M did
not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund have any plan or intention to
redeem or otherwise reacquire any Acquiring Fund Shares issued to the
Shareholders pursuant to the Reorganization, other than through redemptions
arising in the ordinary course of that business;
4.2.14. Acquiring Fund (a) will actively continue Target's business in
substantially the same manner that Target conducted that business
immediately before the Reorganization, (b) has no plan or intention to
sell or otherwise dispose of any of the Assets, except for dispositions
made in the ordinary course of that business and dispositions necessary to
maintain its status as a RIC under Subchapter M of the Code, and (c)
expects to retain substantially all the Assets in the same form as it
receives them in the Reorganization, unless and until subsequent investment
circumstances suggest the desirability of change or it becomes necessary to
make dispositions thereof to maintain such status;
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4.2.15. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or business trust or any
"fund" thereof (within the meaning of section 851(h)(2) of the Code)
following the Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock or securities of
any one issuer and (b) not more than 50% of the value of such assets will
be invested in the stock or securities of five or fewer issuers; and
4.2.17. Acquiring fund does not own, directly or indirectly, nor at
the Effective Time will it own, directly or indirectly, nor has it owned,
directly or indirectly, at any time during the past five years, any shares
of Target.
4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares, when
received by the Shareholders, will be approximately equal to the fair
market value of their Target Shares constructively surrendered in exchange
therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem or otherwise dispose of any portion of the Acquiring
Fund Shares to be received by them in the Reorganization and (b) does not
anticipate dispositions of those Acquiring Fund Shares at the time of or
soon after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Target as a series of an open-end investment
company. Consequently, its management expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of or
at the time of the Reorganization will be de minimis. Nor does its
management anticipate that there will be extraordinary redemptions of
Acquiring Fund Shares immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto, plus any liabilities and expenses of the
parties incurred in connection with the Reorganization;
4.3.5. The fair market value on a going concern basis of the Assets
will equal or exceed the Liabilities to be assumed by Acquiring Fund and
those to which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds that
was issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair
market value of the net assets, and at least 70% of the fair market value
of the gross assets, held by Target immediately before the Reorganization.
For the purposes of this representation, any amounts used by Target to pay
its Reorganization expenses and redemptions and distributions made by it
immediately before the Reorganization (except for (a) distributions made to
conform to its policy of distributing all or substantially all of its
income and gains to avoid the obligation to pay federal income tax and/or
the excise tax under section 4982 of the Code and (b) redemptions not made
as part of the Reorganization) will be included as assets thereof held
immediately before the Reorganization;
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4.3.8. None of the compensation received by any Shareholder who is an
employee of Target will be separate consideration for, or allocable to, any
of the Target Shares held by such Shareholder-employee; none of the
Acquiring Fund Shares received by any such Shareholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
the consideration paid to any such Shareholder-employee will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services; and
4.3.9. Immediately after the Reorganization, the Shareholders will not
own shares constituting "control" of Acquiring Fund within the meaning of
section 304(c) of the Code.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that (a)
such ordinary course will include declaring and paying customary dividends and
other distributions and such changes in operations as are contemplated by each
Fund's normal business activities and (b) each Fund will retain exclusive
control of the composition of its portfolio until the Closing; provided that
Target shall not dispose of more than an insignificant portion of its historic
business assets during such period without Acquiring Fund's prior consent.
5.2. Target covenants to call a shareholders' meeting to consider and act
upon this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist America Trust in obtaining such
information as America Trust reasonably requests concerning the beneficial
ownership of Target Shares.
5.5. Target covenants that Target's books and records (including all books
and records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to America Trust at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or cause to
be taken such further action, as the other Fund may deem necessary or desirable
in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession
of all the Assets, and (b) Target, title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.
5.8. America Trust covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and such
state securities laws it may deem appropriate in order to continue its
operations after the Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
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6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all the obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by Investment Series' board of trustees and shall
have been approved by Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either Fund may for
itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. Investment Series shall have received an opinion of Kirkpatrick &
Lockhart LLP, counsel to America Trust, substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of America Trust, a
Business Trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts with power under its Declaration of Trust to
own all of its properties and assets and, to the knowledge of such counsel,
to carry on its business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by America Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by Investment
Series on behalf of Target, is a valid and legally binding obligation of
America Trust with respect to Acquiring Fund, enforceable in accordance
with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and similar
laws relating to or affecting creditors' rights and by general principles
of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly issued
and outstanding and fully paid and non-assessable, except to the extent
that under Massachusetts law shareholders of a Business Trust may, under
certain circumstances, be held personally liable for its obligations, and
no shareholder of Acquiring Fund has any preemptive right to subscribe for
or purchase such shares;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate America Trust's Declaration of Trust or By-Laws or any provision of
any agreement (known to such counsel, without any independent inquiry or
investigation) to which
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America Trust (with respect to Acquiring Fund) is a party or by which
it is bound or (to the knowledge of such counsel, without any independent
inquiry or investigation) result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, judgment, or decree to
which America Trust (with respect to Acquiring Fund) is a party or by
which it is bound, except as set forth in such opinion or as previously
disclosed in writing to and accepted by Investment Series;
6.4.5. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order of
any court or governmental authority is required for the consummation by
America Trust on behalf of Acquiring Fund of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act,
and the 1940 Act and such as may be required under state securities laws;
6.4.6. America Trust is registered with the SEC as an investment
company, and to the knowledge of such counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to America Trust (with respect to Acquiring Fund) or any of
its properties or assets attributable or allocable to Acquiring Fund and
(b) America Trust (with respect to Acquiring Fund) is not a party to or
subject to the provisions of any order, decree, or judgment of any court or
governmental body that materially and adversely affects Acquiring Fund's
business, except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by Investment Series.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel, (ii) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (iii) limit such opinion to applicable federal
and state law, and (iv) define the word "knowledge" and related terms to mean
the knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization.
6.5. America Trust shall have received an opinion of Kirkpatrick & Lockhart
LLP, counsel to Investment Series, substantially to the effect that:
6.5.1. Target is a duly established series of Investment Series, a
Business Trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts with power under its Declaration of Trust to
own all of its properties and assets and, to the knowledge of such counsel,
to carry on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Investment Series on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by America Trust
on behalf of Acquiring Fund, is a valid and legally binding obligation of
Investment Series with respect to Target, enforceable in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws relating
to or affecting creditors' rights and by general principles of equity;
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Investment Series' Declaration of Trust or By-Laws or any provision
of any agreement (known to such counsel, without any independent inquiry or
investigation) to which Investment Series (with respect to Target) is a
party or by which it is bound or (to the knowledge of such counsel, without
any independent inquiry or investigation) result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which Investment Series (with respect
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to Target) is a party or by which it is bound, except as set forth in
such opinion or as previously disclosed in writing to and accepted by
America Trust;
6.5.4. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order of
any court or governmental authority is required for the consummation by
Investment Series on behalf of Target of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act,
and the 1940 Act and such as may be required under state securities laws;
6.5.5. Investment Series is registered with the SEC as an investment
company, and to the knowledge of such counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Investment Series (with respect to Target) or any of its
properties or assets attributable or allocable to Target and (b)
Investment Series (with respect to Target) is not a party to or subject to
the provisions of any order, decree, or judgment of any court or
governmental body that materially and adversely affects its business,
except as set forth in such opinion or as otherwise disclosed in writing to
and accepted by America Trust.
In rendering such opinion, such counsel may (i) rely, as to matters goverened
by the laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel, (ii) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (iii) limit such opinion to applicable
federal and state law, and (iv) define the word "knowledge" and related terms to
mean the knowledge of attorneys then with such firm who have devoted
substantive attention to matters directly related to this Agreement and the
Reorganization.
6.6. Each Investment Company shall have received an opinion of Kirkpatrick
& Lockhart LLP, its counsel, addressed to and in form and substance satisfactory
to it, as to the federal income tax consequences mentioned below ("Tax
Opinion"). In rendering the Tax Opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations made in this Agreement (or in separate letters addressed to such
counsel) and the certificates delivered pursuant to paragraph 3.4. The Tax
Opinion shall be substantially to the effect that, based on the facts and
assumptions stated therein, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares to the
Shareholders constructively in exchange for the Shareholders' Target
Shares, will constitute a reorganization within the meaning of section
368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
6.6.2. No gain or loss will be recognized to Target on the transfer to
Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. No gain or loss will be recognized to Acquiring Fund on its
receipt of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same as the
basis thereof in Target's hands immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
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6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's basis for the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the basis for its
Target Shares to be constructively surrendered in exchange for those
Acquiring Fund Shares, and its holding period for those Acquiring Fund
Shares will include its holding period for those Target Shares, provided
they are held as capital assets by the Shareholder at the Effective Time.
Notwithstanding paragraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or
any Shareholder with respect to any asset (including certain options, futures,
and forward contracts included in the Assets) as to which any unrealized gain or
loss is required to be recognized for federal income tax purposes at the end of
a taxable year (or on the termination or transfer thereof) under a
mark-to-market system of accounting.
At any time before the Closing, (a) Acquiring Fund may waive any of the
foregoing conditions if, in the judgment of America Trust's board of trustees,
such waiver will not have a material adverse effect on its shareholders'
interests, and (b) Target may waive any of the foregoing conditions if, in the
judgment of Investment Series' board of trustees, such waiver will not have a
material adverse effect on the Shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
7.2. Except as otherwise provided herein, all expenses incurred in
connection with the transactions contemplated by this Agreement (whether or not
they are consummated) will be borne by the Funds proportionately, as follows:
each such expense will be borne by the Funds in proportion to their respective
net assets as of the close of business on the last business day of the month in
which such expense was incurred. Such expenses include: (a) expenses incurred
in connection with entering into and carrying out the provisions of this
Agreement; (b) expenses associated with the preparation and filing of the
Registration Statement; (c) registration or qualification fees and expenses of
preparing and filing such forms as are necessary under applicable state
securities laws to qualify the Acquiring Fund Shares to be issued in connection
herewith in each state in which Target's shareholders are resident as of the
date of the mailing of the Proxy Statement to such shareholders; (d) printing
and postage expenses; (e) legal and accounting fees; and (f) solicitation costs.
8. ENTIRE AGREEMENT; SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall survive
the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
prior to the Effective Time, (b) if a condition to its obligations has
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not been met and it reasonably appears that such condition will not or cannot
be met, or (c) if the Closing has not occurred on or before December 31, 1995;
or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be
no liability for damages on the part of either Fund, or the trustees or officers
of either Investment Company, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Massachusetts; provided that, in the
case of any conflict between such laws and the federal securities laws, the
latter shall govern.
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3. The parties acknowledge that each Investment Company is a Business
Trust. Notice is hereby given that this instrument is executed on behalf of each
Investment Company's trustees solely in their capacity as trustees, and not
individually, and that each Investment Company's obligations under this
instrument are not binding on or enforceable against any of its trustees,
officers, or shareholders, but are only binding on and enforceable against the
respective Funds' assets and property. Each Fund agrees that, in asserting any
rights or claims under this Agreement, it shall look only to the other Fund's
assets and property in settlement of such rights or claims and not to such
trustees or shareholders.
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its duly authorized officer.
ATTEST: PAINEWEBBER AMERICA FUND,
on behalf of its series,
PAINEWEBBER GROWTH AND INCOME FUND
By: \s\ Ilene Shore \s\ Dianne E. O'Donnell
Assistant Secretary Vice President
ATTEST: PAINEWEBBER INVESTMENT SERIES,
on behalf of its series,
PAINEWEBBER GLOBAL ENERGY FUND
By: \s\ Ilene Shore \s\ Dianne E. O'Donnell
Assistant Secretary Vice President
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APPENDIX B
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION AND
LIQUIDATION ("Agreement") is made as of July 25, 1995, between PaineWebber
America Fund, a Massachusetts business trust ("PW Trust"), on behalf of
PaineWebber Growth and Income Fund, a segregated portfolio of assets ("series")
thereof ("Acquiring Fund"), and Mitchell Hutchins/Kidder, Peabody Equity Income
Fund, Inc., a Maryland corporation ("Target"). (Acquiring Fund and Target are
sometimes referred to herein individually as a "Fund" and collectively as the
"Funds," and PW Trust and Target are sometimes referred to herein collectively
as the "Investment Companies.")
RECITAL
The parties entered into an Agreement and Plan of Reorganization and
Liquidation dated as of May 30, 1995 ("Original Agreement"), which provided,
inter alia, for Target shareholders to receive Acquiring Fund shares pursuant to
the transactions contemplated thereby. The parties now desire to amend and
restate the Original Agreement to reflect a change in the class of Acquiring
Fund shares to be distributed to holders of Class C Target Shares (as defined
below). Therefore, the Original Agreement is hereby amended and restated to read
in its entirety as follows:
AMENDED AND RESTATED PROVISIONS
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization will involve the transfer to
Acquiring Fund of Target's assets solely in exchange for voting shares of
beneficial interest in Acquiring Fund ("Acquiring Fund Shares") and the
assumption by Acquiring Fund of Target's liabilities, followed by the
constructive distribution of the Acquiring Fund Shares to the holders of shares
of common stock in Target ("Target Shares") in exchange therefor, all upon the
terms and conditions set forth herein. The foregoing transactions are referred
to herein as the "Reorganization." All agreements, representations, actions,
and obligations described herein made or to be taken or undertaken by Acquiring
Fund are made and shall be taken or undertaken by PW Trust on its behalf.
Acquiring Fund's shares are divided into four classes, designated Class A,
Class B, Class C, and Class D shares ("Class A Acquiring Fund Shares," "Class B
Acquiring Fund Shares," "Class C Acquiring Fund Shares," and "Class D Acquiring
Fund Shares," respectively). Except as noted in the following sentence, these
classes differ only with respect to the sales charges imposed on the purchase of
shares and the fees ("12b-1 fees") payable by each class pursuant to plans
adopted under Rule 12b-1 promulgated under the Investment Company Act of 1940
("1940 Act"), as follows: (1) Class A Acquiring Fund Shares are offered at net
asset value ("NAV") plus a sales charge, if applicable, and are subject to a
12b-1 service fee at the annual rate of 0.23% of the average daily net assets
attributable to the class ("class assets"); (2) Class B Acquiring Fund Shares
are offered at NAV without imposition of any sales charge and are subject to a
contingent deferred sales charge and 12b-1 service and distribution fees at the
respective annual rates of 0.25% and 0.75% of class assets; (3) Class C
Acquiring Fund Shares are offered, currently only to the trustee of the
PaineWebber Savings Investment Plan on behalf of that plan, at NAV without
imposition of any sales charge and are not subject to any 12b-1 fee; and (4)
Class D Acquiring Fund Shares are offered at NAV without imposition of any sales
charge and are subject to 12b-1 service and distribution fees at the respective
annual rates of 0.25% and 0.75% of class assets. These classes also may differ
from one another with
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respect to the allocation of certain class-specific expenses other than
12b-1 fees. Only Classes A, C and D Acquiring Fund Shares are involved in the
Reorganization.
Target's shares are divided into three classes, designated Class A, Class
B, and Class C shares ("Class A Target Shares," "Class B Target Shares," and
"Class C Target Shares," respectively). Apart from differences in certain
ancillary class-specific expenses, these classes differ only with respect to the
sales charges imposed on the purchase of shares and the 12b-1 fees, as follows:
(1) Class A Target Shares are offered at NAV plus a sales charge, if applicable,
and are subject to 12b-1 service and distribution fees at the annual rate for
each of 0.25% of class assets; (2) Class B Target Shares are offered at NAV
without imposition of any sales charge and are subject to 12b-1 service and
distribution fees at the respective annual rates of 0.25% and 0.75% of class
assets; and (3) Class C Target Shares are offered, currently to a limited group
of investors (consisting of former employees of Kidder, Peabody & Co.
Incorporated ("Kidder") and their associated accounts, directors and trustees of
mutual funds formerly distributed by Kidder (now known as Mitchell Hutchins/
Kidder, Peabody Funds and PaineWebber/Kidder, Peabody Funds), Kidder's employee
benefit plans, and participants in a certain portfolio asset allocation
program), at NAV without imposition of any sales charge and are not subject to
any 12b-1 fee.
In consideration of the mutual promises herein, the parties covenant and
agree as follows:
1. PLAN OF REORGANIZATION AND LIQUIDATION OF TARGET
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor --
(a) to issue and deliver to Target the number of full and fractional
(i) Class A Acquiring Fund Shares determined by dividing the net value of
Target (computed as set forth in paragraph 2.1) ("Target Value")
attributable to the Class A Target Shares by the NAV (computed as set forth
in paragraph 2.2) of a Class A Acquiring Fund Share, (ii) Class D Acquiring
Fund Shares determined by dividing the Target Value attributable to the
Class B Target Shares by the NAV (as so computed) of a Class D Acquiring
Fund Share, and (iii) Class C Acquiring Fund Shares determined by dividing
the Target Value attributable to the Class C Target Shares by the NAV (as
so computed) of a Class C Acquiring Fund Share; and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement,
including without limitation Target's share of the expenses described in
paragraph 7.2. Notwithstanding the foregoing, Target agrees to use its best
efforts to discharge all of its known Liabilities prior to the Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and realized net capital gain, if any, for
the current taxable year through the Effective Time.
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1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiring Fund Shares
received by it pursuant to paragraph 1.1 to Target's shareholders of record,
determined as of the Effective Time (collectively "Shareholders" and
individually a "Shareholder"), in exchange for their Target Shares. Such
distribution shall be accomplished by the Funds' transfer agent ("Transfer
Agent") opening accounts on Acquiring Fund's share transfer books in the
Shareholders' names and transferring such Acquiring Fund Shares thereto. Each
Shareholder's account shall be credited with the respective pro rata number of
full and fractional (rounded to the third decimal place) Acquiring Fund Shares
due that Shareholder, by class (i.e., the account for a Shareholder of Class A
Target Shares shall be credited with the respective pro rata number of Class A
Acquiring Fund Shares due that Shareholder, the account for a Shareholder of
Class B Target Shares shall be credited with the respective pro rata number of
Class D Acquiring Fund Shares due that Shareholder, and the account for a
Shareholder of Class C Target Shares shall be credited with the respective pro
rata number of Class C Acquiring Fund Shares due that Shareholder). All
outstanding Target Shares, including any represented by certificates, shall
simultaneously be canceled on Target's share transfer records. Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, Target shall be liquidated and any
further actions shall be taken in connection therewith as required by applicable
law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
liquidated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange, Inc. ("NYSE") on the date of the Closing ("Valuation Time"),
using the valuation procedures set forth in Target's then-current prospectus
and statement of additional information less (b) the amount of the Liabilities
as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of a Class A Acquiring Fund
Share, a Class C Acquiring Fund Share, and a Class D Acquiring Fund Share shall
be computed as of the Valuation Time, using the valuation procedures set forth
in Acquiring Fund's then-current prospectus and statement of additional
information.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of Mitchell Hutchins Asset Management Inc.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on October 13,
1995, or at such other place and/or on such other date as the parties may agree.
All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the date thereof or at such other
time as the parties may agree ("Effective Time"). If, immediately before the
Valuation Time, (a) the NYSE is closed to trading or trading thereon is
restricted or (b) trading or the reporting of trading on the NYSE or elsewhere
is disrupted, so that accurate appraisal of the net value of Target and the NAV
per Acquiring Fund Share is impracticable, the Effective Time shall be postponed
until the first
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business day after the day when such trading shall have been fully resumed
and such reporting shall have been restored.
3.2. Target shall deliver to PW Trust at the Closing a schedule of the
Assets as of the Effective Time, which shall set forth for all portfolio
securities included therein their adjusted tax basis and holding period by lot.
Target's custodian shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets held by the custodian will be transferred to
Acquiring Fund at the Effective Time and (b) all necessary taxes in conjunction
with the delivery of the Assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has been
made.
3.3. Target shall deliver to PW Trust at the Closing a list of the names
and addresses of the Shareholders and the number (by class) of outstanding
Target Shares owned by each Shareholder, all as of the Effective Time, certified
by the Secretary or Assistant Secretary of Target. The Transfer Agent shall
deliver at the Closing a certificate as to the opening on Acquiring Fund's share
transfer books of accounts in the Shareholders' names. PW Trust shall issue and
deliver a confirmation to Target evidencing the Acquiring Fund Shares (by class)
to be credited to Target at the Effective Time or provide evidence satisfactory
to Target that such Acquiring Fund Shares have been credited to Target's account
on Acquiring Fund's books. At the Closing, each party shall deliver to the other
such bills of sale, checks, assignments, stock certificates, receipts, or other
documents as the other party or its counsel may reasonably request.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.7. Target is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and a copy of its
Articles of Incorporation is on file with the Department of Assessments and
Taxation of Maryland;
4.1.8. Target is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full force and
effect at the Effective Time;
4.1.9. At the Closing, Target will have good and marketable title to
the Assets and full right, power, and authority to sell, assign, transfer,
and deliver the Assets free of any liens or other encumbrances; and upon
delivery and payment for the Assets, Acquiring Fund will acquire good and
marketable title thereto;
4.1.10. Target's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the Securities Act of 1933 ("1933 Act") and the 1940 Act and the rules
and regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.1.11. Target is not in violation of, and the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby
will not conflict with or violate, Maryland law or any provision of
Target's Articles of Incorporation or By-Laws or of any agreement,
instrument, lease, or other undertaking to which Target is a party or by
which it is bound or result in the acceleration of any obligation, or the
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imposition of any penalty, under any agreement, judgment, or decree to
which Target is a party or by which it is bound, except as previously
disclosed in writing to and accepted by PW Trust;
4.1.12. Except as disclosed in writing to and accepted by PW Trust,
all material contracts and other commitments of or applicable to Target
(other than this Agreement and investment contracts, including options,
futures, and forward contracts) will be terminated, or provision for
discharge of any liabilities of Target thereunder will be made, at or
prior to the Effective Time, without either Fund's incurring any liability
or penalty with respect thereto and without diminishing or releasing any
rights Target may have had with respect to actions taken or omitted to be
taken by any other party thereto prior to the Closing;
4.1.13. Except as otherwise disclosed in writing to and accepted by PW
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Target's
knowledge) threatened against Target or any of its properties or assets
that, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business; Target knows of no
facts that might form the basis for the institution of any such
litigation, proceeding, or investigation and is not a party to or subject
to the provisions of any order, decree, or judgment of any court or
governmental body that materially or adversely affects its business or its
ability to consummate the transactions contemplated hereby;
4.1.14. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action on the
part of Target's board of directors, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders and receipt of any necessary exemptive relief or
no-action assurances requested from the Securities and Exchange Commission
("SEC") or its staff with respect to sections 17(a) and 17(d) of the 1940
Act, this Agreement will constitute a valid and legally binding obligation
of Target, enforceable in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights and
by general principles of equity;
4.1.15. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
4.1.16. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934 ("1934 Act"), or the 1940 Act for the execution or performance of
this Agreement by Target, except for (a) the filing with the SEC of a
registration statement by PW Trust on Form N-14 relating to the Acquiring
Fund Shares issuable hereunder, and any supplement or amendment thereto
("Registration Statement"), including therein a prospectus/proxy statement
("Proxy Statement"), (b) receipt of the exemptive relief referenced in
subparagraph 4.1.8, and (c) such consents, approvals, authorizations, and
filings as have been made or received or as may be required subsequent to
the Effective Time;
4.1.17. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by PW Trust for use therein;
4.1.18. The Liabilities were incurred by Target in the ordinary course
of its business;
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4.1.19. Target qualified for treatment as a regulated investment
company ("RIC") under Subchapter M of the Code for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; and it
has no earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M did not apply to it. The Assets shall be
invested at all times through the Effective Time in a manner that ensures
compliance with the foregoing;
4.1.20. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case
within the meaning of section 368(a)(3)(A) of the Code;
4.1.21. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock or securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock or securities of five or
fewer issuers; and
4.1.22. Target will be liquidated as soon as reasonably practicable
after the Reorganization, but in all events within six months after the
Effective Time.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. PW Trust is an unincorporated voluntary association with
transferable shares organized as a business trust under a written
instrument ("Business Trust"); it is duly organized, validly existing, and
in good standing under the laws of the Commonwealth of Massachusetts; and a
copy of its Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts;
4.2.2. PW Trust is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
PW Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued
and outstanding shares of Acquiring Fund, fully paid and non-assessable,
except to the extent that under Massachusetts law shareholders of a
Business Trust may, under certain circumstances, be held personally liable
for its obligations. Except as contemplated by this Agreement, Acquiring
Fund does not have outstanding any options, warrants, or other rights to
subscribe for or purchase any of its shares, nor is there outstanding any
security convertible into any of its shares;
4.2.6. Acquiring Fund's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations thereunder
and do not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Massachusetts law or
any provision of PW Trust's Declaration of Trust or By-Laws or of any
provision of any agreement, instrument, lease, or other undertaking to
which Acquiring Fund is a party or by which it is bound or result in the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree to which Acquiring Fund is a party or by
which it is bound, except as previously disclosed in writing to and
accepted by Target;
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4.2.8. Except as otherwise disclosed in writing to and accepted by
Target, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Acquiring
Fund's knowledge) threatened against PW Trust with respect to Acquiring
Fund or any of its properties or assets that, if adversely determined,
would materially and adversely affect Acquiring Fund's financial condition
or the conduct of its business; Acquiring Fund knows of no facts that might
form the basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially or adversely affects its business or its ability to consummate
the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action on the
part of PW Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to receipt of
any necessary exemptive relief or no-action assurances requested from the
SEC or its staff with respect to sections 17(a) and 17(d) of the 1940 Act,
this Agreement will constitute a valid and legally binding obligation of
Acquiring Fund, enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by PW Trust, except for (a)
the filing with the SEC of the Registration Statement, (b) the filing with
the SEC of a post-effective amendment to the registration statement of PW
Trust ("PEA"), (c) receipt of the exemptive relief referenced in
subparagraph 4.2.9, and (d) such consents, approvals, authorizations, and
filings as have been made or received or as may be required subsequent to
the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by Target for use therein;
4.2.12. Acquiring Fund is a "fund" as defined in section 851(h)(2) of
the Code; it qualified for treatment as a RIC under Subchapter M of the
Code for each past taxable year since it commenced operations and will
continue to meet all the requirements for such qualification for its
current taxable year; Acquiring Fund intends to continue to meet all such
requirements for the next taxable year; and it has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M did
not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund have any plan or intention to
redeem or otherwise reacquire any Acquiring Fund Shares issued to the
Shareholders pursuant to the Reorganization, other than through redemptions
arising in the ordinary course of that business;
4.2.14. Acquiring Fund (a) will actively continue Target's business in
substantially the same manner that Target conducted that business
immediately before the Reorganization, (b) has no plan or intention to
sell or otherwise dispose of any of the Assets, except for dispositions
made in the ordinary course of that business and dispositions necessary to
maintain its status as a RIC under Subchapter M of the Code, and (c)
expects to retain substantially all the Assets in the same form as it
receives them in the Reorganization, unless and until
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subsequent investment circumstances suggest the desirability of change
or it becomes necessary to make dispositions thereof to maintain such
status;
4.2.15. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or business trust or any
"fund" thereof (within the meaning of section 851(h)(2) of the Code)
following the Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock or securities of
any one issuer and (b) not more than 50% of the value of such assets will
be invested in the stock or securities of five or fewer issuers; and
4.2.17. Acquiring fund does not own, directly or indirectly, nor at
the Effective Time will it own, directly or indirectly, nor has it owned,
directly or indirectly, at any time during the past five years, any shares
of Target.
4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares, when
received by the Shareholders, will be approximately equal to the fair
market value of their Target Shares constructively surrendered in exchange
therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem or otherwise dispose of any portion of the Acquiring
Fund Shares to be received by them in the Reorganization and (b) does not
anticipate dispositions of those Acquiring Fund Shares at the time of or
soon after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Target as an open-end investment company.
Consequently, its management expects that the percentage of Shareholder
interests, if any, that will be disposed of as a result of or at the time
of the Reorganization will be de minimis. Nor does its management
anticipate that there will be extraordinary redemptions of Acquiring Fund
Shares immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto, plus any liabilities and expenses of the
parties incurred in connection with the Reorganization;
4.3.5. The fair market value on a going concern basis of the Assets
will equal or exceed the Liabilities to be assumed by Acquiring Fund and
those to which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds that
was issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair
market value of the net assets, and at least 70% of the fair market value
of the gross assets, held by Target immediately before the Reorganization.
For the purposes of this representation, any amounts used by Target to pay
its Reorganization expenses and redemptions and distributions made by it
immediately before the Reorganization (except for (a) distributions made to
conform to its policy of distributing all or substantially all of its
income and gains to avoid the obligation to pay federal in-
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come tax and/or the excise tax under section 4982 of the Code and (b)
redemptions not made as part of the Reorganization) will be included as
assets thereof held immediately before the Reorganization;
4.3.8. None of the compensation received by any Shareholder who is an
employee of Target will be separate consideration for, or allocable to, any
of the Target Shares held by such Shareholder-employee; none of the
Acquiring Fund Shares received by any such Shareholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
the consideration paid to any such Shareholder-employee will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services; and
4.3.9. Immediately after the Reorganization, the Shareholders will not
own shares constituting "control" of Acquiring Fund within the meaning of
section 304(c) of the Code.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that (a)
such ordinary course will include declaring and paying customary dividends and
other distributions and such changes in operations as are contemplated by each
Fund's normal business activities and (b) each Fund will retain exclusive
control of the composition of its portfolio until the Closing; provided that
Target shall not dispose of more than an insignificant portion of its historic
business assets during such period without Acquiring Fund's prior consent.
5.2. Target covenants to call a shareholders' meeting to consider and act
upon this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist PW Trust in obtaining such
information as PW Trust reasonably requests concerning the beneficial ownership
of Target Shares.
5.5. Target covenants that Target's books and records (including all books
and records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to PW Trust at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or cause to
be taken such further action, as the other Fund may deem necessary or desirable
in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession
of all the Assets, and (b) Target, title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.
5.8. PW Trust covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and such
state securities laws it may deem appropriate in order to continue its
operations after the Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
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6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all the obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by Target's board of directors and shall have
been approved by Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement and the PEA shall
have become effective under the 1933 Act, no stop orders suspending the
effectiveness thereof shall have been issued, and the SEC shall not have issued
an unfavorable report with respect to the Reorganization under section 25(b) of
the 1940 Act nor instituted any proceedings seeking to enjoin consummation of
the transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either Fund may for
itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. Target shall have received an opinion of Kirkpatrick & Lockhart LLP,
counsel to PW Trust, substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of PW Trust, a
Business Trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts with power under its Declaration of Trust to
own all of its properties and assets and, to the knowledge of such counsel,
to carry on its business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by PW Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by Target, is a
valid and legally binding obligation of PW Trust with respect to Acquiring
Fund, enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights and
by general principles of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly issued
and outstanding and fully paid and non-assessable, except to the extent
that under Massachusetts law shareholders of a Business Trust may, under
certain circumstances, be held personally liable for its obligations, and
no shareholder of Acquiring Fund has any preemptive right to subscribe for
or purchase such shares;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate PW Trust's Declaration of Trust or By-Laws or any provision of any
agreement (known to such counsel, without any independent inquiry or
investigation) to which PW
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Trust (with respect to Acquiring Fund) is a party or by which it is
bound or (to the knowledge of such counsel, without any independent inquiry
or investigation) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which PW Trust (with respect to Acquiring Fund) is a party or by which it
is bound, except as set forth in such opinion or as previously disclosed in
writing to and accepted by Target;
6.4.5. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order of
any court or governmental authority is required for the consummation by PW
Trust on behalf of Acquiring Fund of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act, and the
1940 Act and such as may be required under state securities laws;
6.4.6. PW Trust is registered with the SEC as an investment company,
and to the knowledge of such counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to PW Trust (with respect to Acquiring Fund) or any of its
properties or assets attributable or allocable to Acquiring Fund and (b) PW
Trust (with respect to Acquiring Fund) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects Acquiring Fund's business,
except as set forth in such opinion or as otherwise disclosed in writing to
and accepted by Target.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel, (ii) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (iii) limit such opinion to applicable federal
and state law, and (iv) define the word "knowledge" and related terms to mean
the knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization.
6.5. PW Trust shall have received an opinion of Sullivan & Cromwell,
counsel to Target, substantially to the effect that:
6.5.1. Target is a corporation duly organized and validly existing
under the laws of the State of Maryland with power under its Articles of
Incorporation to own all of its properties and assets and, to the
knowledge of such counsel, to carry on its business as presently
conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Target and (b) assuming due authorization, execution, and
delivery of this Agreement by PW Trust on behalf of Acquiring Fund, is a
valid and legally binding obligation of Target, enforceable in accordance
with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and similar
laws relating to or affecting creditors' rights and by general principles
of equity;
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Target's Articles of Incorporation or By-Laws or any provision of
any agreement (known to such counsel, without any independent inquiry or
investigation) to which Target is a party or by which it is bound or (to
the knowledge of such counsel, without any independent inquiry or
investigation) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which Target is a party or by which it is bound, except as set forth in
such opinion or as previously disclosed in writing to and accepted by PW
Trust;
B - 11
<PAGE>
6.5.4. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order of
any court or governmental authority is required for the consummation by
Target of the transactions contemplated herein, except such as have been
obtained under the 1933 Act, the 1934 Act, and the 1940 Act and such as may
be required under state securities laws;
6.5.5. Target is registered with the SEC as an investment company, and
to the knowledge of such counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Target or any of its properties or assets and (b) Target
is not a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially and adversely
affects its business, except as set forth in such opinion or as otherwise
disclosed in writing to and accepted by PW Trust.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(ii) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and state law, and (iv) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.6. PW Trust shall have received an opinion of Kirkpatrick & Lockhart LLP,
its counsel, addressed to and in form and substance satisfactory to PW Trust,
and Target shall have received an opinion of Sullivan & Cromwell, its counsel,
addressed to and in form and substance satisfactory to Target, each as to the
federal income tax consequences mentioned below (each a "Tax Opinion"). In
rendering its Tax Opinion, each such counsel may rely as to factual matters,
exclusively and without independent verification, on the representations made
in this Agreement (or in separate letters addressed to such counsel) and the
certificates delivered pursuant to paragraph 3.4. Each Tax Opinion shall be
substantially to the effect that, based on the facts and assumptions stated
therein, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares to the
Shareholders constructively in exchange for the Shareholders' Target
Shares, will constitute a reorganization within the meaning of section
368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
6.6.2. No gain or loss will be recognized to Target on the transfer to
Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. No gain or loss will be recognized to Acquiring Fund on its
receipt of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same as the
basis thereof in Target's hands immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
B - 12
<PAGE>
6.6.6. A Shareholder's basis for the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the basis for its
Target Shares to be constructively surrendered in exchange for those
Acquiring Fund Shares, and its holding period for those Acquiring Fund
Shares will include its holding period for those Target Shares, provided
they are held as capital assets by the Shareholder at the Effective Time.
Notwithstanding paragraphs 6.6.2 and 6.6.4, each Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any asset (including certain options, futures, and
forward contracts included in the Assets) as to which any unrealized gain or
loss is required to be recognized for federal income tax purposes at the end of
a taxable year (or on the termination or transfer thereof) under a
mark-to-market system of accounting.
At any time before the Closing, (a) Acquiring Fund may waive any of the
foregoing conditions if, in the judgment of PW Trust's board of trustees, such
waiver will not have a material adverse effect on its shareholders' interests,
and (b) Target may waive any of the foregoing conditions if, in the judgment of
its board of directors, such waiver will not have a material adverse effect on
the Shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
7.2. Except as otherwise provided herein, all expenses incurred in
connection with the transactions contemplated by this Agreement (whether or not
they are consummated) will be borne by the Funds proportionately, as follows:
each such expense will be borne by the Funds in proportion to their respective
net assets as of the close of business on the last business day of the month in
which such expense was incurred. Such expenses include: (a) expenses incurred
in connection with entering into and carrying out the provisions of this
Agreement; (b) expenses associated with the preparation and filing of the
Registration Statement; (c) registration or qualification fees and expenses of
preparing and filing such forms as are necessary under applicable state
securities laws to qualify the Acquiring Fund Shares to be issued in connection
herewith in each state in which Target's shareholders are resident as of the
date of the mailing of the Proxy Statement to such shareholders; (d) printing
and postage expenses; (e) legal and accounting fees; and (f) solicitation costs.
8. ENTIRE AGREEMENT; SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall survive
the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
prior to the Effective Time, (b) if a condition to its obligations has not been
met and it reasonably appears that such condition will not or cannot be met, or
(c) if the Closing has not occurred on or before December 31, 1995; or
9.2. By the parties' mutual agreement.
B - 13
<PAGE>
In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the trustees, directors,
or officers of either Investment Company, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Massachusetts; provided that, in the
case of any conflict between such laws and the federal securities laws, the
latter shall govern.
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3. The parties acknowledge that PW Trust is a Business Trust. Notice is
hereby given that this instrument is executed on behalf of PW Trust's trustees
solely in their capacity as trustees, and not individually, and that PW Trust's
obligations under this instrument are not binding on or enforceable against any
of its trustees, officers, or shareholders, but are only binding on and
enforceable against Acquiring Fund's assets and property. Target agrees that, in
asserting any rights or claims under this Agreement, it shall look only to
Acquiring Fund's assets and property in settlement of such rights or claims and
not to such trustees or shareholders.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its duly authorized officer.
ATTEST: PAINEWEBBER AMERICA FUND,
on behalf of its series,
PAINEWEBBER GROWTH AND INCOME FUND
By: \s\ Ilene Shore \s\ Dianne E. O'Donnell
Assistant Secretary Vice President
ATTEST: MITCHELL HUTCHINS/KIDDER, PEABODY EQUITY
INCOME FUND, INC.
By: \s\ Stephanie Hemphill Johnson \s\ Scott Griff
Assistant Secretary Vice President
B - 14
PROXY
-----
MITCHELL HUTCHINS/KIDDER PEABODY EQUITY INCOME FUND, INC.
SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 6, 1995
The undersigned hereby appoints as proxies Dianne E. O'Donnell and Jennifer
Farrell and each of them (with power of substitution) to vote for the
undersigned all shares of beneficial interest of the undersigned at the
aforesaid meeting and any adjournment thereof with all the power the undersigned
would have if personally present. The shares represented by this proxy will be
voted as instructed. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE
DEEMED TO GRANT AUTHORITY TO VOTE "FOR" ALL PROPOSALS. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS OF MITCHELL HUTCHINS/KIDDER PEABODY EQUITY
INCOME FUND, INC.
YOUR VOTE IS IMPORTANT
Please date and sign this proxy on the reverse side and return it in the
enclosed envelope to Alamo Direct Mail Services, Inc., 10 Lucon Drive, Deer
Park, NY 11729.
PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
FOR AGAINST ABSTAIN
1. Approval of an Amended and
Restated Agreement and Plan of
Reorganization and Liquidation
between PaineWebber Growth and
Income Fund and Mitchell Hutchins/
Kidder Peabody Equity Income
Fund, Inc. / / / / / /
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
This proxy will not be voted unless it is dated and signed
exactly as instructed below.
If shares are held jointly, each Shareholder named should sign. If only one
signs, his or her signature will be binding. If the Shareholder is a
corporation, the President or a Vice President should sign in his or her own
name, indicating title. If the Shareholder is a partnership, a partner should
sign in his or her own name, indicating that he or she is a "Partner."
Sign exactly as name appears hereon.
______________________________(L.S.)
______________________________(L.S.)
Date ________________________, 1995
PROXY
PAINEWEBBER INVESTMENT SERIES -- PAINEWEBBER GLOBAL ENERGY FUND
SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 6, 1995
The undersigned hereby appoints as proxies Dianne E. O'Donnell and Jennifer
Farrell and each of them (with power of substitution) to vote for the
undersigned shares of beneficial interest of the undersigned at the aforesaid
meeting and any adjournment thereof with all the power the undersigned would
have if personally present. The shares represented by this proxy will be voted
as instructed. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO
GRANT AUTHORITY TO VOTE "FOR" ALL PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF TRUSTEES OF PAINEWEBBER INVESTMENT SERIES.
YOUR VOTE IS IMPORTANT
Please date and sign this proxy on the reverse side and return it in the
enclosed envelope to Alamo Direct Mail Services, Inc., 10 Lucon Drive, Deer
Park, NY 11729.
PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW. THE BOARD OF
TRUSTEES RECOMMENDS A VOTE "FOR"
FOR AGAINST ABSTAIN
1. Approval of an Amended and Restated
Agreement and Plan of Reorganization
and Termination between PaineWebber
Growth and Income Fund and
PaineWebber Global Energy Fund ("Fund"). / / / / / /
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
This proxy will not be voted unless it is dated and signed exactly as instructed
below
If shares are held jointly, each Shareholder named should sign. If only one
signs, his or her signature will be binding. If the Shareholder is a
corporation, the President or a Vice President should sign in his or her own
name, indicating title. If the Shareholder is a partnership, a partner should
sign in his or her own name indicating that he or she is a "Partner".
Sign exactly as name appears hereon.
______________________________(L.S.)
______________________________(L.S.)
Date ________________________, 1995
