SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST II
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST III
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------
<PAGE>
PAINEWEBBER FUNDS
1285 Avenue of the Americas
New York, New York 10019
February , 1996
Dear Shareholder:
Enclosed is a proxy statement asking you to vote in favor of several
proposals relating to the management and operation of your Fund.
As I wrote to you in my letter of January 22, after we acquired the Kidder,
Peabody mutual funds last February, our enlarged menu of funds was
confusing--too many had overlapping objectives or were too narrowly focused. We
consolidated 33 long-term, open-end funds into 21 by focusing on those types of
funds most investors want. This consolidation allowed us to lower expense ratios
(in most cases) and to clarify fund names. These votes are the final phase of
that fund consolidation.
Special meetings of your Fund and of other Funds within the PaineWebber fund
complex are being held on April 10, 1996 to consider these proposals and to
transact any other business that may properly come before the meetings. In the
past, when we have solicited proxies for your Fund, we usually have enclosed a
proxy statement directed solely to the shareholders of your Fund. This time,
however, shareholders of several Funds are being asked to approve the same
proposals, so most of the information that must be included in a proxy statement
for your Fund needs to be included in a proxy statement for the other Funds as
well. Therefore, in order to save money, one proxy statement has been prepared
for the Funds. This proxy statement contains detailed information about each of
the proposals relating to your Fund, and we recommend that you read it
carefully. However, we have also attached some Questions and Answers that we
hope will assist you in evaluating the proposals that apply to all of the Funds.
We have retained an outside firm that specializes in proxy solicitation to
assist us with any necessary follow-up. If we have not received your vote as the
meeting date approaches, you may receive a telephone call from Shareholder
Communications Corporation to ask for your vote. We hope that their telephone
call does not inconvenience you.
Thank you for your attention to this matter and for your continuing
investment in the Funds.
Very truly yours,
Margo N. Alexander
President
Proxy cards for each of your Funds are enclosed along with the proxy
statement. Please vote your shares today by signing and returning each
enclosed proxy card in the postage prepaid envelope provided. The Board of
your Fund recommends that you vote "FOR" each proposal.
<PAGE>
QUESTIONS AND ANSWERS
<TABLE>
<S> <C>
Q: WHAT IS THE PURPOSE OF THIS PROXY SOLICITATION?
A: The purpose of this proxy is to ask you to vote on several primary issues:
. to elect eleven Board members,
. to approve changes to your Fund's fundamental investment restrictions, and
. for PaineWebber High Income Fund, to approve a change to its investment objective.
In addition, you are being asked to ratify the selection of your Fund's independent
auditors.
Q: WHY AM I RECEIVING PROXY INFORMATION ON FUNDS THAT I DO NOT OWN?
A: In the past, when we have solicited proxies for your Fund, we have usually enclosed a
proxy statement directed solely to the shareholders of one Fund. This time, however,
shareholders of several Funds are being asked to approve the same proposals, so most
of the information that must be included in a proxy statement for your Fund needs to
be included in a proxy statement for the other Funds as well. Therefore, in order to
save money, one proxy statement has been prepared for all the Funds.
Q: WHY ARE YOU RECOMMENDING A UNIFIED BOARD FOR THE FUNDS?
A: A Corporate Governance Task Force, comprised of a number of the Funds' existing Board
Members, assisted by Mitchell Hutchins representatives, recommended to the Fund
Boards, and they agreed, that PaineWebber funds should be governed by larger Boards
composed of the same members. The Task Force concluded that this "unified" Board
structure benefits the Funds by creating a diverse, experienced group of Board
Members who understand the operations of the PaineWebber funds and are exposed to the
wide variety of issues that arise from overseeing different types of funds.
Q: WHY HAS THE BOARD BEEN EXPANDED TO ELEVEN MEMBERS?
A: At the recommendation of the Corporate Governance Task Force, each Fund's Board has
been expanded to include eleven members, eight of whom would be independent. The Task
Force considered issues relating to the management and long-term welfare of the
Funds. It recommended, and the Boards agreed to adopt, an expanded Board as part of
an overall plan to coordinate and enhance the efficiency of the governance of the
Funds. Expanding the size of the Boards is intended to facilitate the increased use
of Board committees for different purposes, including the periodic review of the
Funds' contractual and audit arrangements. The Fund Boards approved the Task Force
recommendations and nominated eleven individuals drawn primarily from the existing
Boards.
Q: WILL THE PROPOSED CHANGES RESULT IN HIGHER ADVISORY FEES?
A: No. The advisory and administrative fees charged to each Fund will remain the same.
Q: WHAT ARE "FUNDAMENTAL" INVESTMENT RESTRICTIONS, AND WHY ARE THEY BEING CHANGED?
A: A Fund's "fundamental" investment restrictions are limitations placed on a Fund's
investment policies that can be changed only by a shareholder vote--even if the
changes are minor. The law requires certain investment policies to be designated as
fundamental. Each Fund adopted a number of fundamental investment restrictions when
the Fund was created, and many of those fundamental restrictions reflect regulatory,
business or industry conditions, practices or requirements that are no longer in
effect. Others reflect regulatory requirements that, while still in effect, do not
need to be classified as fundamental restrictions.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
The Funds' Boards believe that fundamental investment restrictions that are not
legally required should be eliminated and that the remaining fundamental restrictions
should be modernized and made more uniform. The Boards believe that the proposed
changes to the Funds' fundamental investment restrictions will provide greater
flexibility. The proposed changes also will eliminate minor differences in wording
that may give rise to unintended differences in effect or interpretation.
Q: DO THE PROPOSED CHANGES TO FUNDAMENTAL INVESTMENT RESTRICTIONS MEAN THAT MY FUND'S
INVESTMENT OBJECTIVE IS BEING CHANGED?
A: No. PaineWebber High Income Fund is the only Fund for which a change in an investment
objective is being proposed.
Q: WHAT WILL BE THE EFFECT OF THE PROPOSED CHANGES TO MY FUND'S FUNDAMENTAL
RESTRICTIONS?
A: The Boards do not believe that the proposed changes to fundamental investment
restrictions will result at this time in a material change in the level of investment
risk for any Fund. However, the changes will allow each Fund greater flexibility to
respond to future investment opportunities by making changes in non-fundamental
investment policies that, at a future time, its Board considers desirable. A
shareholder vote will not be necessary for future changes to non-fundamental
investment policies or restrictions.
Q: WHY ARE SHAREHOLDERS BEING ASKED TO RATIFY THE SELECTION OF THEIR FUND'S INDEPENDENT
AUDITORS?
A: The law requires that shareholders be asked to ratify the selection of their Fund's
independent auditors at the meetings at which Board Members are elected. The Funds do
not hold regular annual meetings and, therefore, are asking for your ratification at
this time. Each year, a Fund's independent auditors audit the Fund's financial
statements and prepare the Fund's federal and state income tax returns.
Q: WHAT ARE MY BOARD'S RECOMMENDATIONS?
A: The Board of each Fund has recommended that you vote "FOR" the nominees for Board
Member and "FOR" each Proposal that applies to your Fund.
</TABLE>
THE ATTACHED PROXY STATEMENT CONTAINS MORE DETAILED INFORMATION ABOUT EACH
OF THE PROPOSALS RELATING TO YOUR FUND. PLEASE READ IT CAREFULLY.
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST II
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST III
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
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NOTICE OF
SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD ON
APRIL 10, 1996
-------------------
TO THE SHAREHOLDERS:
Special meetings of the holders of shares of beneficial interest or common
stock of each of the above-listed investment companies ("Companies") will be
held at 1285 Avenue of the Americas, 38th Floor, New York, New York, on April
10, 1996, at 2:00 p.m., Eastern time, for the purpose of considering the
following proposals with respect to the Companies or with respect to one or more
of their respective series or portfolios ("Funds"):
(1) For each Company, to elect eleven members of its Board of Trustees
or Directors to serve indefinite terms until their successors are duly
elected and qualified;
(2) For each Fund, to ratify the selection of independent auditors for
its current fiscal year;
(3) For each Fund, to approve certain changes to its fundamental
investment restrictions;
(4) For PaineWebber High Income Fund (a series of PaineWebber Managed
Investments Trust), to approve a change to its investment objective;
(5) For each Fund, to transact such other business as may properly come
before the meetings and any adjournments thereof.
You are entitled to vote at the meetings, and at any adjournments thereof,
of each Company in which you owned shares at the close of business on February
9, 1996. If you attend the meetings, you may vote your shares in person. IF YOU
DO NOT EXPECT TO ATTEND THE MEETINGS, PLEASE COMPLETE, DATE, SIGN AND RETURN
EACH ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the Boards,
DIANNE E. O'DONNELL
Secretary
February , 1996
1285 Avenue of the Americas
New York, New York 10019
<PAGE>
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
ENCLOSED YOU WILL FIND ONE OR MORE PROXY CARDS RELATING TO EACH OF THE
FUNDS FOR WHICH YOU ARE ENTITLED TO VOTE. PLEASE INDICATE YOUR VOTING
INSTRUCTIONS ON EACH OF THE ENCLOSED PROXY CARDS, DATE AND SIGN THEM, AND
RETURN THEM IN THE ENVELOPE PROVIDED. IF YOU SIGN, DATE AND RETURN A PROXY
CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE
NOMINEES FOR TRUSTEE OR DIRECTOR NAMED IN THE ATTACHED PROXY STATEMENT AND
"FOR" ALL OTHER PROPOSALS INDICATED ON THE CARDS. IN ORDER TO AVOID THE
ADDITIONAL EXPENSE TO THE FUNDS OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING IN YOUR PROXY CARDS PROMPTLY. UNLESS PROXY CARDS ARE
SIGNED BY THE APPROPRIATE PERSONS AS INDICATED IN THE INSTRUCTIONS BELOW, THEY
WILL NOT BE VOTED.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Fund involved in validating your vote
if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on the
proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration.
For example:
<TABLE><CAPTION>
REGISTRATION VALID SIGNATURE
- ------------------------------------------------------------ -------------------------------
<S> <C>
Corporate Accounts
(1) ABC Corp........................................ ABC Corp.
John Doe, Treasurer
(2) ABC Corp........................................ John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer............... John Doe
(4) ABC Corp. Profit Sharing Plan................... John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership............................. Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership............ Jane B. Smith, General Partner
Trust Accounts
(1) ABC Trust Account............................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78............. Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGMA/UTMA................................................... John B. Smith
(2) Estate of John B. Smith......................... John B. Smith, Jr.
Executor
</TABLE>
<PAGE>
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST II
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT TRUST III
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
1285 Avenue of the Americas
New York, New York 10019
-------------------
PROXY STATEMENT
SPECIAL MEETINGS OF SHAREHOLDERS TO BE HELD ON APRIL 10, 1996
-------------------
This proxy statement is being furnished to holders of Shares of each of the
above-listed investment companies ("Companies") in connection with the
solicitation by their respective Boards of proxies to be used at special
meetings ("Meetings") of Shareholders to be held on April 10, 1996, or any
adjournment or adjournments thereof. This proxy statement is being first mailed
to Shareholders on or about February , 1996.
Each Company (other than PaineWebber Financial Services Growth Fund Inc.) is
composed of one or more separate series or portfolios, each of which is referred
to herein as a "Fund." When the context makes it appropriate, each Company that
does not have separate series or portfolios is also referred to herein as a
"Fund." Each Company is a registered, management investment company under the
Investment Company Act of 1940, as amended ("1940 Act") and is organized either
as a Massachusetts business trust or as a Maryland corporation as described on
Exhibit A. The terminology used by the Companies varies, but for simplicity and
clarity each Company's shares of beneficial interest or common stock are
referred to as "Shares" and the holders of the Shares are "Shareholders"; each
Company's board of trustees or directors is referred to as a "Board" and the
trustees and directors are "Board Members"; and each Company's declaration of
trust or articles of incorporation is referred to as its "Charter." A listing of
the formal name for each Fund, and of the shorthand name for each Company and
Fund that is used in this proxy statement, is set forth below. The names of
Funds that are series or portfolios of a Company are indented under the name of
the relevant Company.
<TABLE><CAPTION>
NAME PROPOSALS
AS USED IN THIS PROXY APPLICABLE TO
COMPANY/FUND NAME STATEMENT COMPANY OR FUND
- ---------------------------------------------- --------------------------- ---------------
<S> <C> <C>
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT
TRUST......................................... Investment Trust
PaineWebber Tactical Allocation Fund........ Tactical Fund 1, 2 and 3
PaineWebber Global Equity Fund.............. Global Equity Fund 1, 2 and 3
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT
TRUST II...................................... Investment Trust II
PaineWebber Emerging Markets Equity Fund.... Emerging Markets Fund 1, 2 and 3
MITCHELL HUTCHINS/KIDDER, PEABODY INVESTMENT
TRUST III..................................... Investment Trust III
PaineWebber Small Cap Growth Fund........... Small Cap Growth Fund 1, 2 and 3
</TABLE>
<PAGE>
<TABLE><CAPTION>
NAME PROPOSALS
AS USED IN THIS PROXY APPLICABLE TO
COMPANY/FUND NAME STATEMENT COMPANY OR FUND
- ---------------------------------------------- --------------------------- ---------------
<S> <C> <C>
PAINEWEBBER AMERICA FUND...................... America Fund
PaineWebber Growth and Income Fund.......... Growth and Income Fund 1, 2 and 3
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND
INC........................................... Financial Services Fund 1, 2 and 3
PAINEWEBBER INVESTMENT SERIES................. Investment Series
PaineWebber Global Income Fund.............. Global Income Fund 1, 2 and 3
PAINEWEBBER MANAGED ASSETS TRUST.............. Managed Assets Trust
PaineWebber Capital Appreciation Fund....... Capital Appreciation Fund 1, 2 and 3
PAINEWEBBER MANAGED INVESTMENTS TRUST......... Managed Investments Trust
PaineWebber High Income Fund................ High Income Fund 1, 2, 3 and 4
PaineWebber Investment Grade Income Fund.... Investment Grade Fund 1, 2 and 3
PaineWebber Low Duration U.S. Government
Income Fund................................... Low Duration Fund 1, 2 and 3
PaineWebber U.S. Government Income Fund..... U.S. Government Fund 1, 2 and 3
PaineWebber Utility Income Fund............. Utility Fund 1, 2 and 3
PAINEWEBBER MASTER SERIES, INC................ Master Series
PaineWebber Balanced Fund................... Balanced Fund 1, 2 and 3
PaineWebber Money Market Fund............... PW Money Market Fund 1, 2 and 3
PAINEWEBBER MUNICIPAL SERIES.................. Municipal Series
PaineWebber Municipal High Income Fund...... Municipal High Income Fund 1, 2 and 3
PaineWebber New York Tax-Free Income Fund... New York Tax-Free Fund 1, 2 and 3
PAINEWEBBER MUTUAL FUND TRUST................. Mutual Fund Trust
PaineWebber California Tax-Free Income
Fund.......................................... California Tax-Free Fund 1, 2 and 3
PaineWebber National Tax-Free Income Fund... National Tax-Free Fund 1, 2 and 3
PAINEWEBBER OLYMPUS FUND...................... Olympus Fund
PaineWebber Growth Fund..................... Growth Fund 1, 2 and 3
PAINEWEBBER SECURITIES TRUST.................. Securities Trust
PaineWebber Small Cap Value Fund............ Small Cap Value Fund 1, 2 and 3
PaineWebber Strategic Income Fund........... Strategic Income Fund 1, 2 and 3
</TABLE>
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") is the
investment adviser and administrator for each Fund. Certain Funds have
sub-advisers other than Mitchell Hutchins. A listing of the investment advisers
and sub-advisers for each Fund is set forth in Exhibit A hereto. Mitchell
Hutchins is a wholly owned subsidiary of PaineWebber Incorporated
("PaineWebber"), which, in turn, is a wholly owned subsidiary of Paine Webber
Group Inc. ("PW Group"), a publicly held financial services holding company.
Mitchell Hutchins also is the principal distributor of each Fund's Shares. The
principal business address of each of Mitchell Hutchins, PaineWebber and PW
Group is 1285 Avenue of the Americas, New York, New York 10019.
VOTING INFORMATION
For each Company, other than those specified in the last two sentences of
this paragraph, the presence, in person or by proxy, of a majority of the Shares
of the Company outstanding and entitled to vote will constitute a quorum for the
transaction of business at the Meetings. For Investment Trust, Investment Trust
II and Investment Trust III, the presence of 30% of the Shares outstanding
constitutes a quorum. For Financial Services Fund, the presence of 33 1/3% of
the Shares outstanding constitutes a quorum.
2
<PAGE>
In the event that a quorum is not present at a Meeting, or if a quorum is
present at that Meeting but sufficient votes to approve any of the proposals are
not received, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies. Any adjournment will
require the affirmative vote of a majority of those Shares represented at the
Meeting in person or by proxy. The persons named as proxies will vote those
proxies which they are entitled to vote FOR any proposal in favor of the
adjournment and will vote those proxies required to be voted AGAINST any
proposal against the 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.
The solicitation of proxies, the cost of which will be borne by the Funds
(and by the other funds within the PaineWebber fund complex that currently are
soliciting proxies on substantially the same matters), will be made primarily by
mail but also may include telephone or oral communications by regular employees
of Mitchell Hutchins or PaineWebber, who will not receive any compensation
therefor from the participating funds, or by Shareholder Communications
Corporation, professional proxy solicitors retained by the participating funds,
who will be paid aggregate fees and expenses of approximately $ for
soliciting services.
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 will have no effect on Proposals 1 and 2, for which the
required vote is a plurality or majority of the votes cast, but effectively will
be a vote against adjournment and against Proposals 3 and 4, for which the
required vote is a percentage of the Shares present or outstanding.
The individuals named as proxies on the enclosed proxy cards will vote in
accordance with your direction as indicated thereon, if your proxy card is
received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you give no voting instructions, your Shares will be voted
FOR the nominees named herein for the Board of the Company to which the proxy
card relates and FOR the remaining proposals described in this proxy statement
and relating to your Fund. If any nominee for the Boards should withdraw or
otherwise become unavailable for election, your Shares will be voted in favor of
such other nominee or nominees as management may recommend. You may revoke any
proxy card by giving another proxy or by letter or telegram revoking the initial
proxy. To be effective, your revocation must be received by the Company prior to
the related Meeting and must indicate your name and account number. In addition,
if you attend a Meeting in person you may, if you wish, vote by ballot at that
Meeting, thereby canceling any proxy previously given.
Information as to the number of outstanding Shares of each Fund as of the
record date, February 9, 1996 ("Record Date"), is set forth in Exhibit A. A
listing of the owners of more than 5% of the Shares of any Fund as of January
31, 1996 is set forth in Exhibit B.
COPIES OF EACH FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS, INCLUDING
FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS OF ANY FUND MAY REQUEST COPIES OF THAT FUND'S ANNUAL AND
SEMI-ANNUAL REPORTS BY WRITING THE COMPANY AT 1285 AVENUE OF THE AMERICAS, NEW
YORK, NEW YORK 10019, OR BY CALLING 1-800-647-1568.
Each full Share of each Fund outstanding is entitled to one vote and each
fractional Share of each Fund outstanding is entitled to a proportionate share
of one vote with respect to each matter to be voted upon by the Shareholders of
that Fund. Information about the vote necessary with respect to each proposal is
discussed below in connection with the proposal.
3
<PAGE>
-------------------
PROPOSAL 1--ELECTION OF BOARD MEMBERS
RELEVANT COMPANIES. All Companies.
DISCUSSION. The Board of each Company has acted to expand its membership to
eleven members, and the nominating committee of each Board has nominated the
eleven individuals identified below for election to the related Company's Board
at its Meeting. Under Proposal 1, Shareholders of each Company are being asked
to vote on those nominees. Pertinent information about each nominee is set forth
in the listing below and in Exhibits C through G hereto. Each nominee has
indicated a willingness to serve if elected. If elected, each nominee will hold
office for an indefinite term until his or her successor is duly elected and
qualified, or until he or she resigns or is otherwise removed.
The increase in the size of the Boards and the nomination of a single group
of nominees to serve as the Board Members for each Fund reflect an overall plan
to coordinate and enhance the efficiency of the governance of the Funds and of
certain other investment companies that are part of the PaineWebber fund
complex. This plan was developed by a Corporate Governance Task Force comprised
of a number of current Board Members who are not "interested persons" of the
Funds, as defined in the 1940 Act ("independent" Board Members) with the advice
of their counsel, and assisted by representatives of Mitchell Hutchins and Fund
counsel. The Corporate Governance Task Force considered various matters related
to the management and long-term welfare of the Funds and made recommendations to
the Boards, including proposals concerning the size and composition of the
Boards, committee structures, fees and related matters. These proposals, the
substance of which is summarized below, were adopted by the Boards at meetings
in November and December, 1995. For those Funds having nominating committees,
the nominees for independent Board memberships were selected by the nominating
committee of each Fund and then by the full Board of each Fund. For each other
Fund, the full Board selected the nominees. With the exception of the
nominations for Board membership, which are the subject of Proposal 1, no
Shareholder action is required with respect to the Corporate Governance Task
Force recommendations.
Consistent with the recommendations of the Corporate Governance Task Force,
and concurrently with this proxy solicitation, shareholders of other funds
within the PaineWebber fund complex are also being asked to elect the
below-listed nominees to the boards of their funds. However, the election of the
nominees for the Board of any Company is not conditioned upon their election to
the Board of any other Company or of any other fund within the PaineWebber fund
complex.
The Boards believe that coordinated governance through a unified group of
Board Members will benefit each of the Funds. Despite some recent
consolidations, the PaineWebber fund complex has grown substantially in size in
the years since the current Board structures were created. This growth has been
due to the creation of new Funds intended to serve a wide variety of investment
needs and the recent acquisition of the asset management business of Kidder,
Peabody Asset Management Inc. ("KPAM"). The PaineWebber fund complex currently
includes [66] portfolios of open-end and closed-end funds having a wide variety
of investment objectives and policies. These include money market funds; bond
funds that invest in corporate and other bonds with varying maturities and risk
characteristics; municipal bond funds; balanced funds that invest in
combinations of debt and equity securities; growth funds that invest in a wide
variety of domestic equity securities; and global funds that invest in debt or
equity securities from around the world. The Boards believe that the Funds will
benefit from the experience that each nominee will gain by serving on the Boards
of such a diverse group of funds. Coordinated governance within the PaineWebber
fund complex also will reduce the possibility that the separate Boards of the
Companies might arrive at conflicting decisions regarding the operations and
management of the Funds and any resulting costs.
4
<PAGE>
The Boards also believe that the Funds will benefit from the diversity and
experience of the nominees that would comprise the expanded Boards. These
nominees have had distinguished careers in government, finance, law, marketing
and other areas and will bring a wide range of expertise to the Boards. Eight of
the eleven nominees have no affiliation or business connection with PaineWebber
or Mitchell Hutchins and would be independent Board Members. Independent Board
Members are charged with special responsibilities to provide an independent
check on management and to approve advisory, distribution and similar agreements
between the Funds and management. They also constitute the members of the
Boards' audit and nominating committees. In the course of their duties, Board
Members must review and understand large amounts of financial and technical
material and must be willing to devote substantial amounts of time. Due to the
demands of service on the Boards, independent nominees may need to reject other
attractive opportunities. With the exception of [ ], each of the
independent nominees already serves as an independent Board Member for one or
more funds within the PaineWebber fund complex and understands the operations of
the complex.
The proposed unified Board structure will require a greater expenditure of
time by each Board Member. Election of the eleven nominees will permit the
Boards to enhance their supervision of the Funds by increased use of a committee
structure. Under the Board structure envisioned by the Corporate Governance Task
Force and adopted by the Boards, each Board's audit committee is being divided
into two sub-committees, each comprised of four of the independent Board
Members. Each sub-committee will function as an audit and contract review
committee that periodically will review the contractual and audit arrangements
for Funds having similar characteristics and will report and make
recommendations to the full Boards. The sub-committee structure will enable
Board members both to develop expertise about particular Funds, while still
benefiting from the experience and knowledge of the full Boards. Other
committees may be used in the future. It is anticipated that the full Boards
will have five regularly scheduled meetings per year.
As recommended by the Corporate Governance Task Force, the compensation paid
to independent Board Members will change. Under the new structure, each
independent Board Member will be paid annual fees of between $1,000 and $1,500
per Fund, depending on the Fund, and will receive an attendance fee of $150 for
each Board meeting and for each committee meeting (other than committee meetings
on the same date as a Board meeting). The chairman of the audit committee and
the chairman of the audit and contract review subcommittee of which the chairman
of the audit committee is not a member will receive additional annual
compensation from the PaineWebber funds of $15,000. Interested Board Members
will continue to receive no compensation from any Fund. Board Members will
continue to be reimbursed for any expenses incurred in attending meetings. A
table setting forth information relating to the compensation paid to Board
Members during the past fiscal and calendar years is attached as Exhibit D.
Pursuant to the recommendations of the Corporate Governance Task Force, each
Board Member will be subject to mandatory retirement at the end of the year in
which he or she becomes 72 years old.
The nominees for election as Board Members, their ages, and a description of
their principal occupations are listed in the table below. A table indicating
the stock ownership of each nominee as of January 31, 1996, is attached as
Exhibit E.
<TABLE><CAPTION>
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER
NOMINEE; AGE DIRECTORSHIPS
- ------------------------------------ -----------------------------------------------------
<S> <C>
Margo N. Alexander;* 48............. Mrs. Alexander is president, chief executive officer
and a director of Mitchell Hutchins (since January,
1995). Mrs. Alexander is an executive vice president
and director of PaineWebber. Mrs. Alexander also is a
director or trustee of 3 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
5
<PAGE>
<TABLE><CAPTION>
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER
NOMINEE; AGE DIRECTORSHIPS
- ------------------------------------ -----------------------------------------------------
<S> <C>
Richard Q. Armstrong; 60............ Mr. Armstrong is chairman and principal of RQA
Enterprises (management consulting firm) (since April
1991 and principal occupation since March 1995). Mr.
Armstrong is also a director of Hi Lo Automotive,
Inc. He was chairman of the board, chief executive
officer and co-owner of Adirondack Beverages
(producer and distributor of soft drinks and
sparkling/still waters) (October 1993-March 1995). He
was a partner of the New England Consulting Group
(management consulting firm) (December 1992-September
1993). He was managing director of LVMH U.S.
Corporation (U.S. subsidiary of the French luxury
goods conglomerate, Louis Vuitton Moet Hennessey
Corporation) (1987-1991) and chairman of its wine and
spirits subsidiary, Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong also is a director or
trustee of 6 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
E. Garrett Bewkes, Jr.; 69*......... Mr. Bewkes is a director of, and a consultant to, PW
Group. Prior to 1988, he was chairman of the board,
president and chief executive officer of American
Bakeries Company. Mr. Bewkes is also a director of
Interstate Bakeries Corporation and NaPro Bio-
Therapeutics, Inc. Mr. Bewkes also is a director or
trustee of 24 investment companies for which Mitchell
Hutchins or PaineWebber serves as investment adviser.
Richard Burt; 47.................... Mr. Burt is chairman of International Equity Partners
(international investments and consulting firm)
(since March 1994) and a partner of McKinsey &
Company (management consulting firm) (since 1991). He
is also a director of American Publishing Company. He
was the chief negotiator in the Strategic Arms
Reduction Talks with the former Soviet Union
(1989-1991) and the U.S. Ambassador to the Federal
Republic of Germany (1985-1989). Mr. Burt also is a
director or trustee of 7 investment companies for
which Mitchell Hutchins or PaineWebber serves as
investment adviser.
Mary C. Farrell;* 46................ Ms. Farrell is a managing director, senior investment
strategist, and member of the Investment Policy
Committee of PaineWebber. Ms. Farrell joined
PaineWebber in 1982. She is a member of the Financial
Women's Association and Women's Economic Roundtable
and is employed as a regular panelist on Wall $treet
Week with Louis Rukeyser. She serves on the Board of
Overseers of New York University's Stern School of
Business.
Meyer Feldberg; 53.................. Mr. Feldberg is Dean and Professor of Management of
the Graduate School of Business, Columbia University.
Prior to 1989, he was president of the Illinois
Institute of Technology. Dean Feldberg is also a
director of AMSCO International Inc., Federated
Department Stores, Inc. and New World Communications
Group Incorporated. Mr. Feldberg also is a director
or trustee of 19 investment companies for which
Mitchell Hutchins or PaineWebber serves as investment
adviser.
</TABLE>
6
<PAGE>
<TABLE><CAPTION>
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER
NOMINEE; AGE DIRECTORSHIPS
- ------------------------------------ -----------------------------------------------------
<S> <C>
George W. Gowen; 66................. Mr. Gowen is a partner in the law firm of Dunnington,
Bartholow & Miller. Prior to May 1994, he was partner
in the law firm of Fryer, Ross & Gowen. Mr. Gowen is
also a director of Columbia Real Estate Investments,
Inc. Mr. Gowen also is a director or trustee of 17
investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Frederic V. Malek; 59............... Mr. Malek is chairman of Thayer Capital Partners
(investment bank) and a co-chairman and director of
CB Commercial Group Inc. (real estate). From January
1992 to November 1992, he was campaign manager of
Bush-Quayle '92. From 1990 to 1992, he was vice
chairman and, from 1989 to 1990, he was president of
Northwest Airlines Inc., NWA Inc. (holding company of
Northwest Airlines Inc.) and Wings Holdings Inc.
(holding company of NWA Inc.). Prior to 1989, he was
employed by the Marriott Corporation (hotels,
restaurants, airline catering and contract feeding),
where he most recently was an executive vice
president and president of Marriott Hotels and
Resorts. Mr. Malek is also a director of American
Management Systems, Inc., Automatic Data Processing,
Inc., Avis, Inc., FPL Group, Inc., National Education
Corporation and Northwest Airlines Inc. Mr. Malek
also is a director or trustee of 17 investment
companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
Carl W. Schafer; 60................. Mr. Schafer is president of the Atlantic Foundation
(charitable foundation supporting mainly
oceanographic exploration and research). He also is a
director of Roadway Express, Inc. (trucking), The
Guardian Group of Mutual Funds, Evans Systems, Inc.
(a motor fuels, convenience store and diversified
company), Hidden Lake Gold Mines Ltd. (gold mining),
Electronic Clearing House, Inc. (financial
transactions processing), Wainoco Oil Corporation and
Nutraceutix Inc. (biotechnology). Prior to January
1993, Mr. Schafer was chairman of the Investment
Advisory Committee of the Howard Hughes Medical
Institute. Mr. Schafer also is a director or trustee
of 7 investment companies for which Mitchell Hutchins
or PaineWebber serves as investment adviser.
[NAME, AGE AND BIOGRAPHY OF THE
ELEVENTH NOMINEE TO BE INSERTED]
John R. Torell III; 56.............. Mr. Torell is chairman of Torell Management, Inc.
(financial advisory firm), partner of Zilkha &
Company (merchant banking and private investment
company) and chairman of Telesphere Corporation
(electronic provider of financial information). He is
the former chairman and chief executive officer of
Fortune Bancorp (1990-1991 and 1990-1994,
respectively). He is the former chairman, president
and chief executive officer of CalFed, Inc. (savings
association) (1988 to 1989) and former president of
Manufacturers Hanover Corp. (bank) (prior to 1988).
Mr. Torell is also a director of American Home
Products Corp., Volt Information Sciences Inc., and
New Colt Inc. (armament manufacturer). Mr. Torell
also is a director or trustee of 7 investment
companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>
7
<PAGE>
- ------------
* Indicates an "interested person" of the Funds, as defined by the 1940 Act, by
reason of his or her position with Mitchell Hutchins, PaineWebber or PW Group,
and share ownership in PW Group or General Electric Company (the parent
company of the sub-adviser to one of the Funds).
During its most recently completed fiscal year, each Board met the number of
times set forth in Exhibit F. Each Board has an audit committee consisting of
independent Board Members. Each of the Boards, with the exception of Investment
Trust, Investment Trust II and Investment Trust III, also has a nominating
committee consisting of its independent Board Members. Tables indicating the
membership of the audit and nominating committees for each Company, the number
of times such committees met with respect to each Company's last fiscal year,
attendance of Board Members at Board and committee meetings, and providing
additional information about the Boards and their committees are attached as
Exhibits F and G. The duties of the audit committee are (a) to review reports
prepared by the Company's independent auditors, including reports on the
Company's internal accounting control procedures; (b) to review and recommend
approval or disapproval of audit and non-audit services and the fees charged for
such services; (c) to evaluate the independence of the independent auditors and
to recommend whether to retain such independent auditors for the next fiscal
year; and (d) to report to the Board and make such recommendations as it deems
necessary. Except as indicated in Exhibit F, each Board Member attended 75% or
more of Board meetings and committee meetings during each Company's most
recently completed fiscal year. Information about the officers of each Fund is
set forth in Exhibit H.
Each nominating committee selects and nominates individuals to serve as
independent Board Members. It is not expected that the nominating committees
ordinarily will consider nominees recommended by Shareholders. The Boards do not
have standing compensation committees.
REQUIRED VOTE. For each Company, the candidates receiving the affirmative
vote of a plurality of the votes cast for the election of Board Members at the
Meeting will be elected, provided a quorum is present. Shares of all Funds of
each Company vote together as a single class for the Members of the Company's
Board.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" EACH OF THE NOMINEES UNDER PROPOSAL 1.
-------------------
8
<PAGE>
PROPOSAL 2--RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS OF THE FUNDS
RELEVANT FUNDS. All Funds.
DISCUSSION. Under Proposal 2, Shareholders of each Fund are asked to ratify
their Board's selection of independent auditors ("Auditors") for their Fund. The
Auditors for each Fund audit the Fund's financial statements for each year and
prepare the Fund's federal and state annual income tax returns.
During the last fiscal year, Ernst & Young LLP, Price Waterhouse LLP and
Deloitte & Touche LLP served as Auditors for one or more of the Funds. The
Boards of those Funds for which Deloitte & Touche LLP served as Auditors during
the last fiscal year (Investment Trust, Investment Trust II and Investment Trust
III), in each case acting upon the recommendation of its audit committee (which
is comprised of independent Board Members), selected Ernst & Young LLP as
Auditor to replace Deloitte & Touche LLP, effective July 20, 1995. Currently,
Price Waterhouse LLP serves as Auditors for Global Income Fund, Balanced Fund,
PW Money Market Fund, Small Cap Value Fund and Strategic Income Fund and has
been selected by the Boards of those Funds to continue to serve in that capacity
for the current fiscal year. Ernst & Young LLP currently serves as Auditors for
each of the other Funds and has been selected by the Boards of those Funds to
continue to serve in that capacity for the current fiscal year. The Boards'
selections for Auditors for the current fiscal year are subject to ratification
by Shareholders of each of the Funds at the Meetings.
The selection of Ernst & Young LLP to replace Deloitte & Touche LLP
reflected the relevant Boards' view that using an independent auditing firm that
was already familiar with the PaineWebber fund complex would promote
efficiencies and cost savings for the relevant Funds and their Shareholders. The
reports of Deloitte & Touche LLP on the relevant Funds' financial statements for
their two most recent fiscal years prior to July 20, 1995 did not contain
adverse opinions, disclaimers, qualifications or modifications of opinion.
Deloitte & Touche LLP did not disagree during the two fiscal years and the
subsequent interim periods, prior to July 20, 1995, on any matter of accounting
principles or practices, financial statement disclosure, auditing scope or
procedure, which disagreements, if not resolved to its satisfaction, would have
caused it to make reference to the subject matter of the disagreements in
connection with its reports on those financial statements. The relevant Funds
are not aware of any "reportable events," as that term is used in the federal
securities laws, during their two most recent fiscal years or any subsequent
interim periods, prior to July 20, 1995.
Representatives of the Auditors are not expected to be present at the
Meetings but have been given the opportunity to make a statement if they so
desire, and will be available should any matters arise requiring their presence.
Ernst & Young LLP and Price Waterhouse LLP have informed the Funds for which
they will act as Auditors that they have no material direct or indirect
financial interest in those Funds.
The persons named in the accompanying proxy will vote FOR ratification of
the selection of each Fund's Auditors unless contrary instructions are given.
REQUIRED VOTE. For each Fund, approval of Proposal 2 requires a majority of
the votes cast with respect to Proposal 2 at the Meeting, provided a quorum is
present.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 2.
-------------------
9
<PAGE>
PROPOSAL 3--APPROVAL OF CHANGES TO FUNDAMENTAL INVESTMENT
RESTRICTIONS AND POLICIES OF EACH FUND
RELEVANT FUNDS. Changes are proposed for all Funds, but some of the proposed
changes apply only to certain Funds. See "Proposed Changes," below, for listings
of the Funds to which each specific change applies.
REASONS FOR THE PROPOSED CHANGES. Pursuant to the 1940 Act, each of the
Funds has adopted certain fundamental investment restrictions and policies
("fundamental restrictions"), which are set forth in the Fund's prospectus or
statement of additional information, and which may be changed only with
Shareholder approval. Restrictions and policies that a Fund has not specifically
designated as being fundamental are considered to be "non-fundamental" and may
be changed by the Fund's Board without Shareholder approval.
Certain of the fundamental restrictions that the Funds have adopted in the
past reflect regulatory, business or industry conditions, practices or
requirements that are no longer in effect. Other fundamental restrictions
reflect regulatory requirements which remain in effect but which are not
required to be stated as fundamental, or in some cases even as non-fundamental,
restrictions. Also, as new Funds have been created over a period of years,
substantially similar fundamental restrictions often have been phrased in
slightly different ways, sometimes resulting in minor but unintended differences
in effect or potentially giving rise to unintended differences in
interpretation.
Accordingly, the Boards have approved revisions to their respective Funds'
fundamental restrictions in order to simplify, modernize and make more uniform
those investment restrictions that are required to be fundamental, and to
eliminate those fundamental restrictions that are not legally required. In most
instances, existing fundamental restrictions that are eliminated because they
are not required to be fundamental would be re-classified as non-fundamental
restrictions.
The Boards believe that eliminating the disparities among the Funds'
fundamental restrictions will enhance management's ability efficiently and
effectively to manage the Funds' assets in changing regulatory and investment
environments. In addition, by reducing to a minimum those policies that can be
changed only by Shareholder vote, each Fund will more often be able to avoid the
costs and delays associated with a Shareholder meeting when making changes to
its investment policies that, at a future time, its Board considers desirable.
Although the proposed changes in fundamental restrictions will allow the Funds
greater investment flexibility to respond to future investment opportunities,
the Boards do not anticipate that the changes, individually or in the aggregate,
will result at this time in a material change in the level of investment risk
associated with an investment in any Fund.
The text and a summary description of each proposed change to the Funds'
fundamental restrictions are set forth below. Shareholders should refer to
Exhibit FR to this proxy statement for the text of the Funds' existing
fundamental restrictions. Shareholders should note, however, that for some Funds
certain of the fundamental restrictions that are treated separately below
currently are combined within a single existing fundamental restriction.
The text below also describes those non-fundamental restrictions that would
be adopted by the Boards in conjunction with the elimination of fundamental
restrictions under Proposal 3. Any non-fundamental restriction may be modified
or eliminated by the appropriate Board at any future date without any further
approval of Shareholders.
If the proposed changes are approved by Shareholders of the respective Funds
at the Meeting, the Funds' prospectuses and statements of additional information
will be revised, as appropriate, to reflect those changes. This will occur as
soon as practicable following the Meetings.
If approved by the Shareholders, these revisions must be filed with the
Securities and Exchange Commission ("SEC") and with various state regulators and
are subject to a comment and review
10
<PAGE>
process. To the extent necessary to comply with regulatory comments or to
conform with the definitions and other terminology used in a Fund's prospectus
or statement of additional information, the language of these provisions may be
subject to further modification. However, any material change would require
Shareholder approval.
PROPOSED CHANGES. The following is the text and a summary description of the
proposed changes to the Funds' fundamental restrictions, together with the text
of those non-fundamental restrictions that would be adopted in connection with
the elimination of certain of the Funds' current fundamental restrictions. With
respect to each Fund and each proposed fundamental restriction, if a percentage
restriction is adhered to at the time of an investment or transaction, a later
increase or decrease in percentage resulting from a change in the values of the
Fund's portfolio securities or the amount of its total assets will not be
considered a violation of the fundamental restriction.
1.A. MODIFICATION OF FUNDAMENTAL RESTRICTION ON PORTFOLIO DIVERSIFICATION
FOR DIVERSIFIED FUNDS.
Funds to Which This Change Applies: All Funds other than Global Income
Fund, Municipal High Income Fund, New York Tax-Free Fund, and Strategic Income
Fund.
Proposed Text of Fundamental Restriction:
"The Fund will not purchase securities of any one issuer if, as a
result, more than 5% of the Fund's total assets would be invested in
securities of that issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to 25% of the
Fund's total assets may be invested without regard to this limitation, and
except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities or to
securities issued by other investment companies."
With respect to Funds that may invest in municipal obligations, the
following interpretation applies to, but is not a part of, this fundamental
restriction: "Each state (including the District of Columbia and Puerto Rico),
territory and possession of the United States, each political subdivision,
agency, instrumentality and authority thereof, and each multi-state agency of
which a state is a member is a separate "issuer." When the assets and revenues
of an agency, authority, instrumentality or other political subdivision are
separate from the government creating the subdivision and the security is backed
only by the assets and revenues of the subdivision, such subdivision would be
deemed to be the sole issuer. Similarly, in the case of an Industrial
Development Bond or Private Activity Bond, if that bond is backed only by the
assets and revenues of the non-governmental user, then that non-governmental
user would be deemed to be the sole issuer. However, if the creating government
or another entity guarantees a security, then to the extent that the value of
all securities issued or guaranteed by that government or entity and owned by
the Fund exceeds 10% of the Fund's total assets, the guarantee would be
considered a separate security and would be treated as issued by that government
or entity."
Similarly, with respect to Funds that may invest in mortgage- and
asset-backed securities, the following interpretation applies to, but is not a
part of, this fundamental restriction: "Mortgage- and asset-backed securities
will not be considered to have been issued by the same issuer by reason of the
securities having the same sponsor, and mortgage- and asset-backed securities
issued by a finance or other special purpose subsidiary that are not guaranteed
by the parent company will be considered to be issued by a separate issuer from
the parent company."
Discussion: All of the above referenced Funds are "diversified" funds
under the 1940 Act and, accordingly, must have fundamental restrictions or
policies establishing the percentage limitations with respect to investments in
individual issuers that they will follow in order to qualify as "diversified"
for that purpose. These Funds have stated their diversification restrictions in
several different ways, and in many instances their current restrictions are
somewhat more limiting than is necessary in order to qualify as "diversified"
funds. For example, some Funds' restrictions do not reflect exceptions to the
11
<PAGE>
legally required restriction for investments in securities of government
agencies or of other investment companies. Other Funds state restrictions the
substance of which is imposed by regulation but which are not required to be
part of the fundamental restrictions for diversification purposes.
1.B. ELIMINATION OF FUNDAMENTAL RESTRICTION ON PORTFOLIO DIVERSIFICATION
FOR NON-DIVERSIFIED FUNDS.
Funds to Which This Change Applies: Global Income Fund.
Discussion: For the above-referenced Fund, the fundamental restriction
on diversification would be eliminated. This Fund is "non-diversified" for
purposes of the 1940 Act and, accordingly, is not required to establish any
fundamental investment restriction with respect to diversification. Unlike other
non-diversified funds in the PaineWebber fund complex, however, this Fund
currently has a fundamental restriction that, in substance, sets forth the
separate diversification requirements that even non-diversified Funds must
satisfy in order to qualify for advantageous treatment as a regulated investment
company under the federal tax laws. While this Fund intends to continue to
qualify for this tax treatment, there is no legal necessity for the Fund to have
a fundamental restriction that effectively restates the legal requirements for
doing so. Elimination of the fundamental restriction will provide flexibility in
the event that the applicable federal tax rules change in the future.
2. MODIFICATION OF FUNDAMENTAL RESTRICTION ON CONCENTRATION.
Funds to Which This Change Applies: All Funds.
Proposed Text of Fundamental Restriction:
Except as specified below, the following text will apply to all Funds:
"The Fund will not purchase any security if, as a result of that
purchase, 25% or more of the Fund's total assets would be invested in
securities of issuers having their principal business activities in the same
industry, except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities or to
municipal securities."
With respect to Utility Fund, the following exception will be added at the
end of the foregoing fundamental restriction to conform with the Fund's existing
concentration policy:
"and except that the Fund, under normal circumstances, will invest 25% or
more of its total assets in the utility industries as a group. For this
purpose, utility industries consist of companies primarily engaged in the
ownership or operation of facilities used in the generation, transmission
or distribution of electricity, telecommunications, gas, or water."
With respect to Financial Services Fund, the following exception will be
added at the end of the foregoing fundamental restriction to conform with the
Fund's existing concentration policy:
"and except that the Fund, under normal circumstances, will invest 25% or
more of its total assets in the related group of industries consisting of
the financial services industries."
With respect to Low Duration Fund and U.S. Government Fund, the following
exception will be added at the end of the foregoing fundamental restriction to
conform with the Fund's existing concentration policy:
"and except that the Fund, under normal circumstances, will invest 25% or
more of its total assets in mortgage- and asset-backed securities, which
(whether or not issued or guaranteed by an agency or instrumentality of
the U.S. government) shall be considered a single industry for purposes
of this limitation."
12
<PAGE>
Additionally, with respect to the PW Money Market Fund, the following
interpretation applies to, but is not a part of, the fundamental restriction on
concentration under proposal 3:
"With respect to this limitation, domestic and foreign banking will be
considered to be different industries."
Discussion: The proposed changes to the Funds' fundamental concentration
policy would clarify that the limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities or to
municipal securities and would eliminate minor inconsistencies in the
phraseology of the Funds' existing restrictions. With respect to the PW Money
Market Fund, Proposal 3 reflects a change in the Fund's interpretation as to the
separateness of certain industry groups.
In the case of Balanced Fund, the effect of this change is to adopt, as a
fundamental restriction, an explicit statement of the Fund's current policy with
respect to concentration.
In the case of Financial Services Fund, Proposal 3 would effect a change to
the Fund's fundamental concentration policy by reducing the minimum percentage
of the Fund's total assets that normally must be invested in the financial
services industries from 65% to 25%. This change conforms the Fund's fundamental
restriction to industry norms by specifying a minimum percentage that is equal
to the level that is considered to constitute "concentration" under SEC
policies. However, no change is being made in the Fund's non-fundamental
operating policy, which continues to require that the Fund normally invest at
least 65% of its total assets in the financial services industries.
3. MODIFICATION OF FUNDAMENTAL RESTRICTION ON SENIOR SECURITIES AND
BORROWING.
Funds to Which This Change Applies: All Funds.
Proposed Text of Fundamental Restriction:
"The Fund will not issue senior securities or borrow money, except as
permitted under the 1940 Act and then not in excess of 33 1/3% of the Fund's
total assets (including the amount of the senior securities issued but
reduced by any liabilities not constituting senior securities) at the time
of the issuance or borrowing, except that the Fund may borrow up to an
additional 5% of its total assets (not including the amount borrowed) for
temporary or emergency purposes."
Discussion: The 1940 Act establishes limits on the ability of the Funds
to engage in leverage through borrowings or the issuance of other "senior
securities," a term that is defined, generally, to refer to Fund obligations
that have a priority over the Fund's Shares with respect to the distribution of
Fund assets or the payment of dividends. Currently, the fundamental restrictions
for most of the Funds are significantly more limiting than the restrictions
imposed by the 1940 Act. Many of the current fundamental restrictions provide
that a Fund's borrowings are limited to those that are for temporary or
emergency purposes, and even then borrowings are often limited to 10% of the
Fund's assets. Many of the Funds' fundamental borrowing restrictions also
provide that the Funds may not purchase additional portfolio securities at a
time when borrowings exceed 5% of total assets. Shareholders should refer to
Exhibit FR for a statement of their Fund's current fundamental borrowing
restriction.
The proposed changes would relax these fundamental restrictions to make them
no more limiting than the limitations that are imposed under the 1940 Act. The
Boards believe that changing the Funds' fundamental restrictions in this manner
will provide flexibility for future contingencies. However, the Boards are not
at this time making any change to the Funds' operating policies with respect to
borrowings. Accordingly, each Fund that currently has a fundamental restriction
that establishes a limit on borrowings or senior securities that is less than
the limit that would be established under Proposal 3 or that imposes a limit on
the Fund's ability to purchase portfolio securities when borrowings exceed 5% of
total assets, will continue to be subject to those limitations as a matter of
non-fundamental, operating policy. These non-fundamental operating policies for
any Fund may be changed by its Board without further Shareholder approval.
13
<PAGE>
4. MODIFICATION OF FUNDAMENTAL RESTRICTION ON MAKING LOANS.
Funds to Which This Change Applies: All Funds.
Proposed Text of Fundamental Restriction:
"The Fund will not make loans, except through loans of portfolio
securities or through repurchase agreements, provided that for purposes of
this restriction, the acquisition of bonds, debentures or other debt
securities and investments in government obligations, commercial paper,
certificates of deposit, bankers' acceptances or similar instruments will
not be considered the making of a loan."
Discussion: The proposed change to this fundamental restriction would
eliminate minor differences in the wording of the Funds' current restrictions
for greater uniformity and to avoid unintended limitations. For example, while
the Funds' current restrictions generally contain an exception for investments
in debt securities, some of the restrictions refer only to investments in
"publicly distributed" debt instruments. The Boards of these Funds wish to
clarify that investments in privately placed debt securities also do not
constitute the making of a loan.
The proposed change also clarifies that loans of portfolio securities will
be excluded from the general fundamental restriction on making loans. The Funds'
current fundamental restrictions already permit securities lending, but for most
Funds Proposal 3 would eliminate a possible interpretation of those restrictions
that would limit the Fund to lending securities only up to 10% of the Fund's
assets. The Boards believe that the Funds should not be subject to a fundamental
restriction on securities lending and that each Board should be able to govern
the extent of securities lending through a non-fundamental policy.
Subject, where necessary, to approval of Proposal 3 by the Shareholders, the
Boards have authorized the adoption of non-fundamental policies that would allow
each Fund to lend portfolio securities in an amount up to 33 1/3% of its total
assets, which is the maximum level permitted under the 1940 Act. None of the
Funds currently lends any portfolio securities, and the Funds will not do so
unless and until specific securities lending programs are considered and
approved by their respective Boards. Mitchell Hutchins currently is considering
proposals for securities lending programs for the Funds, and it anticipates
presenting a recommendation for such a program to the Boards in the near future.
Lending securities would enable a Fund to earn additional income but could
result in a loss or delay in recovering the securities. Under any securities
lending program that may be approved by the Boards, a Fund would lend portfolio
securities to broker-dealers or institutional investors that Mitchell Hutchins
(or, where applicable, a Fund's sub-adviser) deems qualified, but only when the
borrower maintains acceptable collateral with the Fund's custodian in an amount
at least equal to the market value of the securities loaned, plus accrued
interest and dividends. The Fund would pay reasonable administrative and
custodial fees in connection with any loan and might pay a negotiated portion of
the interest earned on the cash or instruments held as collateral to the
borrower or to the placing broker. The Fund would retain the authority to
terminate any loans at any time. A Fund would regain record ownership of loaned
securities to exercise beneficial rights, such as voting rights, when doing so
is considered to be in the Fund's interest.
14
<PAGE>
5. MODIFICATION OF FUNDAMENTAL RESTRICTION ON UNDERWRITING SECURITIES.
Funds to Which This Change Applies: All Funds.
Proposed Text of Fundamental Restriction:
"The Fund will not engage in the business of underwriting securities of
other issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities."
Discussion: The proposed changes to this fundamental restriction clarify
that the prohibition applies only to engaging in "the business of" underwriting
securities and eliminate minor inconsistencies in the wording of the Funds'
current restrictions for greater uniformity.
6. MODIFICATION OF FUNDAMENTAL RESTRICTION ON REAL ESTATE INVESTMENTS.
Funds to Which This Change Applies: All Funds.
Proposed Text of Fundamental Restriction:
"The Fund will not purchase or sell real estate, except that investments
in securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner."
Discussion: The proposed changes to this investment restriction
eliminate minor inconsistencies in the wording of the Funds' current
restrictions for greater uniformity and more completely describe the types of
real estate related securities that are permissible.
7. MODIFICATION OF FUNDAMENTAL RESTRICTION ON INVESTING IN COMMODITIES.
Funds to Which This Change Applies: All Funds.
Proposed Text of Fundamental Restriction:
"The Fund will not purchase or sell physical commodities unless acquired
as a result of owning securities or other instruments, but the Fund may
purchase, sell or enter into financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments."
Discussion: The proposed changes to this investment restriction are
intended to ensure that each Fund will have the maximum flexibility to enter
into hedging or other transactions utilizing financial contracts and derivative
products when doing so is permitted by operating policies established for the
Fund by its Board. The Boards believe that this flexibility is necessary for the
Funds to respond to the rapid and continuing development of derivative products.
The proposed changes also allow flexibility in the event of changes in
regulatory standards or limitations.
The existing fundamental restrictions for most of the Funds already permit
the Boards to establish investment policies using most or all of these types of
financial contracts. This is not the case, however, for Balanced Fund.
Accordingly, the proposed changes to this fundamental restriction would have the
effect of enabling Balanced Fund's Board to permit the use of options, futures
and similar strategies.
The Balanced Fund Board intends to authorize such transactions subject to
regulatory and other limitations substantially similar to those currently in
effect for the other Funds. The use of options,
15
<PAGE>
futures and similar strategies involves special risks. These include: (1) the
fact that skills needed to use these instruments are different from those needed
to select the Fund's 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 the 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 the 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 the transactions and the possible inability of the
Fund to close out or to liquidate a hedged position. If Mitchell Hutchins
incorrectly forecasts interest rates, market values or other economic factors in
utilizing one of these strategies, Balanced Fund might be in a better position
if it had not entered into a hedging or other transaction involving these
financial contracts.
8. ELIMINATION OF FUNDAMENTAL RESTRICTION ON MARGIN TRANSACTIONS.
Funds to Which This Change Applies: All Funds.
Proposed Change; Text of Related Non-Fundamental Restriction:
Upon the approval of Proposal 3, the existing fundamental restrictions on
engaging in margin transactions would be eliminated, and the Funds would become
subject to the following non-fundamental restriction:
"The Fund will not purchase securities on margin, except for short-term
credit necessary for clearance of portfolio transactions and except that the
Fund may make margin deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments."
Discussion: The Funds are not required to have a fundamental restriction
on a Fund's ability to engage in margin transactions. However, certain state
securities rules or policies require that Funds whose Shares are distributed in
those states provide at least a non-fundamental restriction on this subject. In
order to maximize the Funds' flexibility in the event of future changes in state
securities rules or policies, the Boards believe that the Funds' restrictions on
margin transactions should be made non-fundamental.
The non-fundamental restriction eliminates minor differences in wording
among existing fundamental restrictions and contains an exception for margin
deposits in connection with financial contracts or derivative instruments. The
language of that exception conforms with the exception contained in the proposed
change to the Funds' fundamental restriction on investing in commodities.
9. ELIMINATION OF FUNDAMENTAL RESTRICTION ON SHORT SALES.
Funds to Which This Change Applies: All Funds.
Proposed Change; Text of Related Non-Fundamental Restriction:
Upon the approval of Proposal 3, the existing fundamental restrictions on
engaging in short sales would be eliminated, and the Funds would become subject
to the following non-fundamental restriction:
"The Fund will not engage in short sales of securities or maintain a
short position, except that the Fund may (a) sell short "against the box"
and (b) maintain short positions in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments."
16
<PAGE>
Discussion: Under the 1940 Act, the SEC is authorized to limit the
ability of the Funds to engage in short sales, except in connection with an
underwriting in which the Fund is a participant. One type of short sale
transaction that is permitted under SEC policies is a short sale "against the
box," in which a Fund engages in a short sale of a security that it already owns
or has the right to own. These transactions generally are entered into in order
to defer realization of gains or losses for tax or other purposes.
Although the Funds may be limited in their ability to engage in short sales,
the Funds are not required to establish a fundamental restriction on short
sales. Consistent with the Boards' determination to promote flexibility and
efficiency in the event of future changes in the law, the Boards believe that
the Funds' fundamental restriction on this subject should be removed and
replaced by a non-fundamental restriction. That non-fundamental restriction will
eliminate minor differences in wording among existing fundamental restrictions
and will contain an exception for short positions in connection with financial
contracts or derivative instruments. The language of that exception conforms
with the exception contained in the proposed change to the Funds' fundamental
restriction on investing in commodities. Each non-fundamental restriction will
clarify that a Fund may engage in short sales "against the box."
10. ELIMINATION OF FUNDAMENTAL RESTRICTION ON INVESTMENTS IN OIL, GAS AND
MINERAL LEASES AND PROGRAMS.
Funds to Which This Change Applies: All Funds other than Tactical Fund
and Small Cap Growth Fund.
Proposed Change; Text of Related Non-Fundamental Restriction:
Upon the approval of Proposal 3, the existing fundamental restrictions on
investments in oil, gas or minerals would be eliminated, and those Funds that
currently have them would become subject to the following non-fundamental
restriction:
"The Fund will not invest in oil, gas or mineral exploration or
development programs or leases, except that investments in securities of
issuers that invest in such programs or leases and investments in
asset-backed securities supported by receivables generated from such
programs or leases are not subject to this prohibition."
Discussion: The Funds are not required to have a fundamental restriction
with respect to oil, gas or mineral investments, but certain state securities
rules require that Funds establish at least a non-fundamental restriction on
this subject. In order to maximize the Funds' flexibility in the event of future
changes in state securities rules or policies, the Boards believe that the
Funds' restrictions on oil, gas and mineral investments should be made
non-fundamental.
The non-fundamental restriction adopted by the Boards will eliminate minor
differences in wording among existing fundamental restrictions and will
establish uniform exceptions that serve to clarify the limited scope of the
restriction. Also, since the applicable state requirements relate only to oil,
gas and mineral leases and development programs, the non-fundamental restriction
applies only to them and not to other investments relating to oil, gas or
minerals.
11. ELIMINATION OF FUNDAMENTAL RESTRICTION ON INVESTMENTS IN OTHER
INVESTMENT COMPANIES.
Funds to Which This Change Applies: All Funds other than Strategic
Income Fund, Utility Income, Tactical Fund, Emerging Markets Fund and Small Cap
Growth Fund.
17
<PAGE>
Proposed Change; Text of Related Non-Fundamental Restriction:
Upon the approval of Proposal 3, the existing fundamental restrictions on
investments in other investment companies would be eliminated, and those Funds
that currently have them would become subject to the following non-fundamental
restriction:
"The Fund will not purchase securities of other investment companies,
except to the extent permitted by the 1940 Act and except that this
limitation does not apply to securities received or acquired as dividends,
through offers of exchange, or as a result of reorganization, consolidation,
or merger."
Discussion: The ability of the Funds to invest in other investment
companies is limited under the 1940 Act, but the Funds are not required to have
a fundamental restriction on this subject. In order to maximize the Funds'
flexibility in the event of future changes in federal and state securities rules
or policies, the Boards believe that the Funds' restrictions on investments in
other investment companies should be made non-fundamental.
The non-fundamental restriction adopted by the Boards will allow investments
in other investment companies to the full extent permitted under the 1940 Act.
The fundamental restrictions for most of the Funds that have restrictions on
this subject are more limiting in that they generally prohibit any investments
in investment companies except for shares acquired in reorganizations,
consolidations, or mergers. The Boards believe that investments in other
investment companies may be desirable under certain circumstances. For example,
temporary investments of cash reserves in money market funds or other pooled
investment vehicles may provide a combination of diversification and return that
otherwise would not be available. Also, for Funds that invest outside the United
States, certain equity securities are available to foreign investors only
through investments in local investment companies. The non-fundamental
restriction also will eliminate minor differences in wording among existing
fundamental restrictions.
12. ELIMINATION OF FUNDAMENTAL RESTRICTION ON INVESTING FOR THE PURPOSE
OF CONTROL.
Fund to Which This Change Applies: Global Equity Fund.
Proposed Change; Text of Related Non-Fundamental Restriction:
Upon the approval of Proposal 3, the existing fundamental restrictions on
investing for the purpose of control would be eliminated, and Global Equity Fund
would become subject to the following non-fundamental restriction:
"The Fund will not invest in companies for the purpose of exercising
control or management."
Discussion: There is no legal requirement that a Fund have a fundamental
restriction on this subject, and the Board believes that it should be made
non-fundamental. Converting this fundamental restriction to non-fundamental
restrictions will enable its Board to change this policy in the future if it
concludes that doing so would be in the interest of the Fund and its
Shareholders.
13. ELIMINATION OF FUNDAMENTAL RESTRICTION RELATING TO PURCHASES OF
SECURITIES NOT PERMITTED UNDER INVESTMENT OBJECTIVE.
Funds to Which This Change Applies: Balanced Fund and Growth and Income
Fund.
18
<PAGE>
Proposed Change:
Upon the approval of Proposal 3, the existing fundamental restrictions on
purchases of securities that are not permitted under a Fund's investment
objective or policies would be eliminated; the fundamental restriction would not
be replaced by a non-fundamental restriction.
Discussion: The above-referenced Funds have fundamental restrictions
that in substance prevent the Fund from investing in securities that are
inconsistent with its investment objective or, in some cases, with its
investment policies. The need for a Fund to limit its investments in that manner
may be implicit in the objectives and policies themselves, but there is no legal
requirement that a Fund have a fundamental restriction on the subject. Moreover,
while the Funds' investment objectives are fundamental policies, their other
investment policies generally are not fundamental and may be modified by the
Boards without shareholder action. The Boards for these Funds wish to eliminate
any implication that policies that are not specifically identified as
fundamental are made fundamental by the language of these fundamental
restrictions.
Accordingly, the Boards have determined that this restriction should be
eliminated, both as a fundamental and as a non-fundamental restriction.
14. ELIMINATION OF FUNDAMENTAL RESTRICTION ON JOINT PARTICIPATION IN
SECURITIES TRADING ACCOUNTS.
Fund to Which This Change Applies: Global Equity Fund.
Proposed Change:
Upon the approval of Proposal 3, the existing fundamental restriction on
joint participation in securities trading accounts would be eliminated; the
fundamental restriction would not be replaced by a non-fundamental restriction.
Discussion: Global Equity Fund currently has a fundamental restriction
against participation on a joint or joint and several basis in any securities
trading account. Joint activities by an investment company are subject to
regulation under the 1940 Act, and there is no legal requirement for a Fund to
have a fundamental restriction on this subject. In certain circumstances,
participation in joint trading accounts may be beneficial to the Fund. Moreover,
the Funds currently have, and may from time to time seek to obtain, the benefit
of exemptive relief from the SEC with respect to certain joint activities.
Accordingly, the Board for Global Equity Fund wishes to ensure that the Fund
will not be more limited with respect to such transactions than is required by
law.
Accordingly, the Board has determined that this restriction should be
eliminated both as a fundamental and as a non-fundamental restriction.
REQUIRED VOTE. Approval of Proposal 3 with respect to a Fund requires the
affirmative vote of a "majority of the outstanding voting securities" of that
Fund, which for this purpose means the affirmative vote of the lesser of (1)
more than 50% of the outstanding Shares of the Fund or (2) 67% or more of the
Shares of the Fund present at the Meeting if more than 50% of the outstanding
Shares of the Fund are represented at the Meeting in person or by proxy.
IF PROPOSAL 3 IS NOT APPROVED BY SHAREHOLDERS OF A FUND, THE EXISTING
FUNDAMENTAL RESTRICTIONS OF THE FUND WILL CONTINUE IN EFFECT FOR THAT FUND, BUT
DISAPPROVAL OF PROPOSAL 3 BY THE SHAREHOLDERS OF ONE FUND WILL NOT AFFECT ANY
APPROVALS OF PROPOSAL 3 THAT ARE OBTAINED WITH RESPECT TO ANY OTHER FUND.
EACH BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 3.
-------------------
19
<PAGE>
PROPOSAL 4--APPROVAL OF CHANGE TO INVESTMENT OBJECTIVE OF
HIGH INCOME FUND
RELEVANT FUND. High Income Fund.
REASON FOR PROPOSED CHANGE. Proposal 4 is to approve the recommendation of
Mitchell Hutchins and of the High Income Fund Board to change the Fund's
investment objective from "to provide the highest level of current income
available without undue risk" to "to provide high income." This proposal is
intended to simplify High Income Fund's investment objective, making it more
comparable to those of other mutual funds with similar investment strategies.
The proposed change to the Fund's investment objective does not reflect any
current or contemplated change in the investment policies of the Fund, and it is
not intended to reflect any change in the level of risk associated with an
investment in the Fund.
Under the Fund's existing investment policy, at least 65% of its total
assets normally are invested in high risk, high yielding, income producing
corporate debt securities that at the time of purchase are rated B or better by
Standard & Poor's, a division of The McGraw-Hill Companies Inc. ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), are comparably rated by another nationally
recognized statistical rating organization, or are unrated but are determined to
be of comparable quality by Mitchell Hutchins. This policy, which would not be
changed under Proposal 4, means that the Fund invests primarily in what are
commonly referred to as "junk bonds," which are considered by S&P and Moody's to
be predominantly speculative and to involve major risk exposure to adverse
conditions.
The current investment objective reflects the fact that, in managing the
Fund's portfolio, Mitchell Hutchins seeks to minimize the speculative risks
associated with investments in junk bonds through diversification, credit
analysis and attention to current trends in interest rates and other factors.
Moreover, while the Fund invests primarily in junk bonds, at least 65% of its
assets must be at least B-rated or be of comparable quality. Thus, Mitchell
Hutchins seeks to balance the investment risks undertaken by the Fund against
the higher current yields that generally are available on junk bonds, in order
to achieve the best results for Shareholders. Mitchell Hutchins will continue to
seek this balance in its management of the Fund under the revised investment
objective.
Nevertheless, all junk bonds, even those rated B or better, carry higher
investment risk than investment grade bonds. The proposed revision to the Fund's
investment objective seeks to ensure that investors will not infer from the
Fund's investment objective that the Fund would not incur the risks attendant to
higher yielding bonds.
Junk bonds are especially subject to adverse changes in general economic
conditions and in the industries in which their issuers are engaged, to changes
in the financial condition of their issuers and to price fluctuation in response
to changes in interest rates. Moreover, the risk of loss due to default by these
issuers is significantly greater than for issuers of investment grade securities
because junk bonds are frequently unsecured and subordinated to the prior
payment of senior securities.
Under its existing policies, which also would not be changed under Proposal
4, High Income Fund may invest up to 35% of its assets in debt securities rated
lower than B, which include securities that are in default or that face the risk
of default with respect to the payment of principal or interest. To the extent
that High Income Fund is required to seek recovery upon a default in the payment
of principal or interest on its portfolio holdings, the Fund may incur
additional expenses and may have limited legal recourse in the event of a
default.
Concurrent Change in Investment Policy. Concurrently with the proposed
change in High Income Fund's investment objective, the Fund intends to change
its investment policy to reflect that the Fund may invest up to 25% of its total
assets in securities that are not currently providing income but that have the
potential for capital appreciation. This policy will reflect Mitchell Hutchins'
belief that the Fund should be able to take advantage of opportunities for
capital appreciation that become
20
<PAGE>
available in the market from time to time. Mitchell Hutchins believes that the
Fund can make limited investments in non-income producing securities that
present these opportunities while still achieving its overall goal of providing
high income to Shareholders. This new policy will not be part of the Fund's
investment objective but will be a non-fundamental policy that may be changed by
the Fund's Board. The securities in which the Fund would be able to invest under
this policy include debt securities that are not currently paying income and
equity securities such as common stocks, warrants, rights and preferred stocks
that are not paying current income.
TEXT OF PROPOSED CHANGES TO INVESTMENT OBJECTIVE. The revised investment
objective for High Income Fund under Proposal 4 is:
"To provide high income."
REQUIRED VOTE. Approval of Proposal 4 requires the affirmative vote of a
"majority of the outstanding voting securities" of High Income Fund, which for
this purpose means the affirmative vote of the lesser of (1) more than 50% of
the outstanding Shares of the Fund or (2) 67% or more of the Shares of the Fund
present at the Meeting if more than 50% of the outstanding Shares of the Fund
are represented at the Meeting in person or by proxy. If Proposal 4 is not
approved by Shareholders of High Income Fund, the Fund's existing investment
objective will continue in effect.
THE HIGH INCOME FUND BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 4.
-------------------
ADDITIONAL INFORMATION
In January and February, 1995, PW Group acquired the asset management
business of KPAM. For each of the investment companies formerly advised by KPAM,
advisory or administration services were provided on an interim basis until
April 13, 1995 by either Mitchell Hutchins or PaineWebber. On April 13, 1995,
shareholders of each of those Companies approved the selection of Mitchell
Hutchins or PaineWebber as investment adviser pursuant to an Investment Advisory
and Administration Contract. The Companies formerly advised by KPAM are:
Investment Trust, Investment Trust II and Investment Trust III. A change in
investment adviser is deemed a presumed change of control under the 1940 Act.
In December, 1995, a complaint purporting to assert derivative claims on
behalf of Investment Series was filed in the Supreme Court of the State of New
York for the County of New York against Mitchell Hutchins, PaineWebber and
certain of the present and former Board Members and officers of Investment
Series in connection with Global Income Fund. The complaint alleges that
defendants mismanaged Global Income Fund and breached their fiduciary duties to
Investment Series and to the Shareholders of Global Income Fund, and that
Mitchell Hutchins negligently and in breach of its investment advisory contract
allowed Global Income Fund to suffer investment losses, by failing to take
appropriate steps to "insulate the value" of Global Income Fund against
"anticipated changing global interest rates and against the failing dollar" and
by charging excessive fees, and that Mitchell Hutchins commingled Global Income
Fund's assets with those of other funds. Based on these allegations, the
complaint seeks disgorgement of any unjustified compensation, damages in an
unspecified amount and other relief. As of the date of this proxy statement, no
pleadings have been filed in the litigation subsequent to the complaint.
Mitchell Hutchins believes that the claims are without merit and intends to
vigorously defend against the action.
21
<PAGE>
SHAREHOLDER PROPOSALS
As a general matter, the Companies do not hold regular annual or other
meetings of Shareholders. Any Shareholder who wishes to submit proposals to be
considered at a special meeting of any Company's Shareholders should send the
proposals to that Company at 1285 Avenue of the Americas, New York, New York
10019, so as to be received a reasonable time before the proxy solicitation for
that meeting is made. Shareholder proposals that are submitted in a timely
manner will not necessarily be included in the Company's proxy materials.
Inclusion of such proposals is subject to limitations under the federal
securities laws.
OTHER BUSINESS
Management knows of no business to be presented at the Meetings other than
the matters set forth in this proxy statement, but should any other matter
requiring a vote of Shareholders arise, the proxies will vote thereon according
to their best judgment in the interest of the Companies and the Funds.
By order of the Boards,
DIANNE E. O'DONNELL
Secretary
February , 1996
IT IS IMPORTANT THAT YOU EXECUTE AND RETURN ALL OF YOUR PROXIES PROMPTLY.
22
<PAGE>
INDEX TO EXHIBITS TO PROXY STATEMENT
<TABLE><CAPTION>
<S> <C>
Exhibit A--General Information....................................................... A-1
Exhibit B--Beneficial Ownership of Greater Than 5% of Fund Shares.................... B-1
Exhibit C--Year in Which Each Nominee or Board Member Standing for Reelection Became
a Member of the Board................................................................ C-1
Exhibit D-- Board Member Aggregate Compensation From Companies During Their Most
Recent Fiscal Year........................................................ D-1
Exhibit E--Stock Ownership of Nominees and Current Board Members..................... E-1
Exhibit F--Board and Committee Information........................................... F-1
Exhibit G-- Membership of Board Audit or Nominating Committees ...................... G-1
Exhibit H--Officer Information....................................................... G-1
Exhibit FR--Existing Fundamental Restrictions........................................ FR-1
</TABLE>
23
<PAGE>
EXHIBIT A
GENERAL INFORMATION
<TABLE><CAPTION>
SHARES
STATE OF INVESTMENT SUB-ADVISER OUTSTANDING AS OF
COMPANY/FUND ORGANIZATION ADVISER AND ITS ADDRESS RECORD DATE
- --------------------------------- ------------ ------------------ --------------------- -----------------
<S> <C> <C> <C> <C>
AMERICA FUND..................... MA
Growth and Income Fund.......... -- Mitchell Hutchins --
FINANCIAL SERVICES FUND.......... MD Mitchell Hutchins --
INVESTMENT SERIES................ MA
Global Income Fund.............. -- Mitchell Hutchins --
MANAGED ASSETS TRUST............. MA
Capital Appreciation Fund....... Mitchell Hutchins Denver Investment
Advisors LLC
1225 17th Street
26th Floor
P.O. Box 17487
Denver, Colorado
80217
MANAGED INVESTMENTS TRUST........ MA
High Income Fund................ -- Mitchell Hutchins --
Investment Grade Fund........... -- Mitchell Hutchins --
Low Duration Fund............... -- Mitchell Hutchins Pacific Investment
Management Company
840 Newport Center
Drive
Suite 360
Newport Beach,
California 92260
U.S. Government Fund............ -- Mitchell Hutchins --
Utility Fund.................... -- Mitchell Hutchins --
MASTER SERIES.................... MD
Balanced Fund................... -- Mitchell Hutchins --
PW Money Market Fund............ -- Mitchell Hutchins --
MUNICIPAL SERIES................. MA
Municipal High Income Fund...... -- Mitchell Hutchins --
New York Tax-Free Fund.......... -- Mitchell Hutchins --
MUTUAL FUND TRUST................ MA
California Tax-Free Fund........ -- Mitchell Hutchins --
National Tax-Free Fund.......... -- Mitchell Hutchins --
OLYMPUS FUND..................... MA
Growth Fund..................... -- Mitchell Hutchins --
SECURITIES TRUST................. MA
Small Cap Value Fund............ -- Mitchell Hutchins Quest Advisory Corp.*
1414 Avenue of the
Americas
New York, New York
10019
Strategic Income Fund........... -- Mitchell Hutchins --
INVESTMENT TRUST................. MA
Tactical Fund................... -- Mitchell Hutchins --
Global Equity Fund.............. -- Mitchell Hutchins GE Investment
Management
Incorporated
3003 Summer Street
Stamford, Connecticut
06904
INVESTMENT TRUST II.............. MA
Emerging Markets Fund........... -- Mitchell Hutchins Emerging Markets
Management
1001 Nineteenth
Street North
Arlington, Virginia
22209-1722
INVESTMENT TRUST III............. MA
Small Cap Growth Fund........... -- Mitchell Hutchins George D. Bjurman &
Associates*
10100 Santa Monica
Boulevard
Suite 1200
Los Angeles,
California 90067
</TABLE>
- ------------
* The sub-advisory contract is being terminated as of April 1, 1996. Mitchell
Hutchins will assume day-to-day portfolio management as of that date.
A-1
<PAGE>
EXHIBIT B
BENEFICIAL OWNERSHIP OF GREATER THAN 5% OF FUND SHARES
<TABLE><CAPTION>
NUMBER AND
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
AS OF
NAME AND ADDRESS* NAME OF FUND JANUARY 31, 1996
- ---------------------------------------------- -------------------------- --------------------
<S> <C> <C>
</TABLE>
- ------------
* Each of the Shareholders listed in this Exhibit may be contacted c/o Mitchell
Hutchins Asset Management Inc., 1285 Avenue of the Americas, New York, NY
10019.
B-1
<PAGE>
EXHIBIT C
<TABLE><CAPTION>
YEAR IN WHICH EACH NOMINEE OR CURRENT BOARD MEMBER BECAME A MEMBER OF THE BOARD*
-------------------------------------------------------------------------------------------
E. GARRETT FREDERIC JOHN R.
MARGO N. RICHARD Q. BEWKES, MEYER GEORGE W. V. RICHARD CARL W. TORELL
COMPANY/FUND NAME ALEXANDER ARMSTRONG JR.** FELDBERG GOWEN MALEK BURT SCHAFER III
- ------------------------------- --------- ---------- ---------- -------- --------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
America Fund................... -- -- 1990 1987 -- -- --
Financial Services Fund........ -- -- 1986 1990 1986 1987 -- -- --
Investment Series.............. -- -- [ ] 1990 1987 1988 -- -- --
Managed Assets Trust........... -- -- [ ] 1992 1992 [1992] -- -- --
Managed Investments Trust...... -- -- [ ] 1990 [1983/4] [ ] -- -- --
Managed Municipal Trust........ -- -- [ ] 1991 1987 1987 -- -- --
Master Series.................. -- -- [ ] 1990 [1985/6] 1987 -- -- --
Municipal Series............... -- -- 1990 1990 [1987] [ ] -- -- --
Mutual Fund Trust.............. -- -- [ ] 1990 [1985] [ ] -- -- --
Olympus Fund................... -- -- [ ] 1990 [1985] 1987 -- -- --
Securities Trust............... -- 1995 1993 -- -- -- 1995 -- 1993
Investment Trust............... -- -- -- -- -- -- -- 1991 --
Investment Trust II............ -- -- -- -- -- -- -- 1992 --
Investment Trust III........... -- -- -- -- -- -- -- 1993 --
</TABLE>
- ------------
* Mary C. Farrell, and , each of whom is a nominee
for Board Member, are not listed in a column because she is not presently
a Board Member for any PaineWebber-sponsored fund; Margo N. Alexander,
though not a Board Member of the Companies listed, presently serves as a
Board Member of other PaineWebber-sponsored funds.
** Mr. Bewkes resigned from [each] Board and was reappointed during 1993. He
resigned from the Boards of America Fund, Financial Services Fund, Master
Series, Managed Municipal Trust and [Olympus Fund] in 1986 and was
reelected to each in 1990, except for the Board of Managed Municipal
Trust, to which he was reelected in 1991.
C-1
<PAGE>
EXHIBIT D
COMPENSATION TABLE
COMPENSATION PAID TO BOARD MEMBERS DURING EACH COMPANY'S MOST RECENT FISCAL YEAR
AND TOTAL COMPENSATION PAID BY THE FUND COMPLEX DURING 1995
<TABLE><CAPTION>
FINANCIAL INVESTMENT INVESTMENT INVESTMENT
INDEPENDENT BOARD MEMBER(1) AMERICA FUND SERVICES FUND TRUST TRUST II TRUST III
- ----------------------------------------------------------- ------------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Richard Q. Armstrong....................................... -- -- -- -- --
David J. Beaubien*.........................................
Richard Burt............................................... -- -- -- -- --
Meyer Feldberg............................................. $3,750 $ 3,625 -- -- --
George W. Gowen............................................ $3,750 $ 3,375 -- -- --
William W. Hewitt, Jr.*....................................
Frederic V. Malek.......................................... $3,750 $ 3,625 -- -- --
Judith Davidson Moyers*.................................... $3,750 $ 3,125 -- -- --
Carl W. Schafer............................................ -- -- $ 33,375 $ 12,250 $5,375
John R. Torell............................................. -- -- -- -- --
William D. White*..........................................
<CAPTION>
MANAGED
INVESTMENT MANAGED INVESTMENTS
INDEPENDENT BOARD MEMBER(1) SERIES ASSETS TRUST TRUST
- ----------------------------------------------------------- ---------- ------------ -----------
<S> <C> <C> <C>
Richard Q. Armstrong....................................... -- -- --
David J. Beaubien*.........................................
Richard Burt............................................... -- -- --
Meyer Feldberg............................................. $7,000 $4,875 $ 7,250
George W. Gowen............................................ $7,000 $4,625 $ 7,250
William W. Hewitt, Jr.*....................................
Frederic V. Malek.......................................... $7,000 $4,875 $ 7,250
Judith Davidson Moyers*.................................... $7,000 $4,375 $ 7,250
Carl W. Schafer............................................ -- -- --
John R. Torell............................................. -- -- --
William D. White*..........................................
</TABLE>
- ------------
* Current Board Members not standing for re-election.
(1) Board Members who were not independent did not receive compensation from the
Companies.
(2) No Company or Fund has a bonus, pension, profit sharing or retirement plan.
<TABLE><CAPTION>
TOTAL COMPENSATION
SECURITIES FROM COMPANY AND
TRUST FUND COMPLEX
------------------- PAID TO BOARD
SMALL MEMBERS DURING THE
CAP STRATEGIC YEAR ENDED
MUNICIPAL MUTUAL FUND OLYMPUS VALUE INCOME DECEMBER 31, 1995
MASTER SERIES SERIES TRUST FUND FUND FUND (2)
------------- --------- ----------- ------- ------ --------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard Q. Armstrong........... -- -- -- -- $ 563 $ 1,563 $ 9,000
David J. Beaubien*............. -- --
Richard Burt................... -- -- -- -- $ 250 $ 750 $ 7,750
Meyer Feldberg................. $ 4,750 $ 3,750 $ 2,750 $4,250 -- -- $106,375
George W. Gowen................ $ 4,500 $ 3,500 $ 2,500 $4,250 -- -- $ 99,750
William W. Hewitt, Jr.*........ -- --
Frederic V. Malek.............. $ 4,750 $ 3,750 $ 2,750 $4,250 -- -- $ 99,750
Judith Davidson Moyers*........ $ 4,250 $ 3,250 $ 2,500 $4,250 -- -- $ 98,500
Carl W. Schafer................ -- -- -- -- -- -- $118,175
John R. Torell................. -- -- -- -- $2,812 $ 2,563 $ 28,125
William D. White*.............. $2,812 $ 2,563 $ 33,125
</TABLE>
D-1
<PAGE>
EXHIBIT E
STOCK OWNERSHIP OF NOMINEES AND CURRENT BOARD MEMBERS
<TABLE><CAPTION>
NOMINEE OR BOARD MEMBER NO. OF SHARES HELD AS OF
STANDING FOR REELECTION FUND JANUARY 31, 1996
- ------------------------------------------------------------ ---- ------------------------
<S> <C> <C>
Margo N. Alexander..........................................
Richard Q. Armstrong........................................
E. Garrett Bewkes, Jr. .....................................
Richard Burt................................................
Mary C. Farrell.............................................
Meyer Feldberg..............................................
George W. Gowen.............................................
Frederic V. Malek...........................................
Carl W. Schafer.............................................
John R. Torell III..........................................
<CAPTION>
BOARD MEMBER NOT STANDING NO. OF SHARES HELD AS OF
FOR REELECTION FUND JANUARY 31, 1996
- ------------------------------------------------------------ ---- ------------------------
<S> <C> <C>
David J. Beaubien...........................................
William W. Hewitt, Jr.......................................
Judith Davidson Moyers......................................
William D. White............................................
</TABLE>
E-1
<PAGE>
EXHIBIT F
BOARD AND COMMITTEE INFORMATION
<TABLE><CAPTION>
FINANCIAL MANAGED MANAGED MUTUAL
AMERICA SERVICES INVESTMENT ASSETS INVESTMENTS MASTER MUNICIPAL FUND OLYMPUS
FUND FUND SERIES TRUST TRUST SERIES SERIES TRUST FUND
------- --------- ---------- ------- ----------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Fee (1)..... $1,500 $ 1,500 $3,000 $2,500 $ 5,000 $4,000 $ 3,000 $2,000 $2,000
Attendance Fee Per
Board Meeting(1)... $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250
Attendance Fee Per
Committee
Meeting(1)......... $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250
Number of Board
Meeting During
Last Fiscal
Year............... 8 6 7 6 7 7 6 6 8
Number of Audit
Committee Meetings
During Last Fiscal
Year............... 1 1 1 1 1 1 1 1 1
Number of
Nominating
Committee Meetings
During Last Fiscal
Year............... -- -- 1(3) -- 3(3) -- -- -- --
<CAPTION>
SECURITIES TRUST
----------------------
SMALL STRATEGIC
CAP INCOME INVESTMENT INVESTMENT INVESTMENT
VALUE FUND TRUST TRUST II TRUST III
------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Annual Fee (1)..... $ 1,500 $ 1,500 $1,000(2) $1,000(2) $1,000(2)
Attendance Fee Per
Board Meeting(1)... $ 250 $ 250 $ 375 $ 375 $ 375
Attendance Fee Per
Committee
Meeting(1)......... $ 250 $ 250 $ 375 $ 375 $ 375
Number of Board
Meeting During
Last Fiscal
Year............... 10 8 16 14 15
Number of Audit
Committee Meetings
During Last Fiscal
Year............... 1 1 2 0 1
Number of
Nominating
Committee Meetings
During Last Fiscal
Year............... 1 1 -- -- --
</TABLE>
- ------------
(1) Reflects compensation rates in effect prior to changes described in proxy
statements. Board Members who were not independent did not receive
compensation from the Companies.
(2) The Chairman of the audit committee of the following Companies received a
fee of $250 per meeting: Investment Trust, Investment Trust II and
Investment Trust III.
(3) Mr. Burt attended less than 75% of the meetings.
F-1
<PAGE>
EXHIBIT G
MEMBERSHIP OF BOARD AUDIT OR NOMINATING COMMITTEES
<TABLE><CAPTION>
CURRENT BOARD MEMBERS
NOT STANDING FOR
REELECTION
------------------------------
WILLIAM W. JUDITH
RICHARD Q. MEYER GEORGE W. FREDERIC V. RICHARD CARL W. JOHN R. DAVID J. HEWITT, DAVIDSON
COMPANY/FUND NAME ARMSTRONG FELDBERG GOWEN MALEK BURT SCHAFER TORELL III BEAUBIEN JR. MOYERS
- ----------------------- ---------- -------- --------- ----------- ------- ------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
America Fund........... A, N A, N A, N A, N
Financial Services
Fund................... A, N A, N A, N A, N
Investment Series...... A, N A, N A, N A, N
Managed Assets Trust... A, N A, N A, N A, N
Managed Investments
Trust.................. A, N A, N A, N A, N
Master Series.......... A, N A, N A, N A, N
Municipal Series....... A, N A, N A, N A, N
Mutual Fund Trust...... A, N A, N A, N A, N
Olympus Fund........... A, N A, N A, N A, N
Securities Trust....... A A A
Investment Trust....... A
Investment Trust II.... A
Investment Trust III... A
<CAPTION>
WILLIAM D.
COMPANY/FUND NAME WHITE
- ----------------------- ----------
<S> <C>
America Fund...........
Financial Services
Fund...................
Investment Series......
Managed Assets Trust...
Managed Investments
Trust..................
Master Series..........
Municipal Series.......
Mutual Fund Trust......
Olympus Fund...........
Securities Trust....... A
Investment Trust.......
Investment Trust II....
Investment Trust III...
</TABLE>
- ------------
* Only independent Board Members serve on Board audit or nominating committees.
A = Member of audit committee
N = Member of nominating committee
G-1
<PAGE>
EXHIBIT H
<TABLE><CAPTION>
OFFICER INFORMATION
OFFICER SINCE
NO. OF -------------------------------------------------------------
INVESTMENT FINANCIAL
NAME; PRINCIPAL BUSINESS COMPANIES ON SERVICES MANAGED MANAGED
OCCUPATION FOR THE PAST WHICH SERVES AS AMERICA GROWTH INVESTMENT ASSETS INVESTMENTS MASTER
FIVE YEARS AGE OFFICE AN OFFICER1 FUND FUND SERIES TRUST TRUST SERIES
- ------------------------ ---- --------------- --------------- ------- --------- ----------- ------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Margo N. Alexander; Mrs. 48 President 30 5/95 5/95 5/95 5/95 5/95 5/95
Alexander is president,
chief executive officer
and a director of
Mitchell Hutchins.
She is an executive
vice president and
director of PaineWebber.
T. Kirkham Barneby; Mr. 49 Vice President 5 9/95
Barneby is a managing
director and chief
investment officer--
quantitative investment
of Mitchell Hutchins.
Prior to September
1994, he was a senior
vice president at
Vantage Global
Management. Prior to
June 1993, he was a
senior vice president
at Mitchell Hutchins
Institutional
Investors, Inc.
Owen T. Barry III; Mr. Senior Vice 1
Barry is a senior President and
executive vice CIO
president and director
of investments for
George D. Bjurman &
Associates.
Julieanna Berry; Ms. [32] Vice President 1 9/95
Berry is a vice
president and portfolio
manager of Mitchell
Hutchins.
Cynthia N. Bow; Ms. Bow 37 Vice President 2
is a vice president of
Mitchell Hutchins. Ms.
Bow has been with
Mitchell Hutchins since
1982.
Teresa M. Boyle; Ms. 37 Vice President 30 12/93 12/93 12/93 12/93 12/93 12/93
Boyle is a first vice
president and
manager--advisory
administration of
Mitchell Hutchins.
Prior to November 1993,
she was compliance
manager of Hyperion
Capital Management,
Inc., an investment
advisory firm. Prior to
April 1993, Ms. Boyle
was a vice president
and manager-- legal
administration of
Mitchell Hutchins.
<CAPTION>
NAME; PRINCIPAL BUSINESS MUTUAL
OCCUPATION FOR THE PAST MUNICIPAL FUND OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
FIVE YEARS SERIES TRUST FUND TRUST TRUST TRUST II TRUST III
- ------------------------ -------- ------ ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Margo N. Alexander; Mrs. 5/95 5/95 5/95 5/95 * * *
Alexander is president,
chief executive officer
and a director of
Mitchell Hutchins.
Prior to January 1995,
she was an executive
vice president of
PaineWebber.
T. Kirkham Barneby; Mr. *
Barneby is a managing
director and chief
investment officer--
quantitative investment
of Mitchell Hutchins.
Prior to September
1994, he was a senior
vice president at
Vantage Global
Management. Prior to
June 1993, he was a
senior vice president
at Mitchell Hutchins
Institutional
Investors, Inc.
Owen T. Barry III; Mr. *
Barry is a senior
executive vice
president and director
of investments for
George D. Bjurman &
Associates.
Julieanna Berry; Ms.
Berry is a vice
president and portfolio
manager of Mitchell
Hutchins.
Cynthia N. Bow; Ms. Bow 9/95 12/93 * * *
is a vice president of
Mitchell Hutchins. Ms.
Bow has been with
Mitchell Hutchins since
1982.
Teresa M. Boyle; Ms. 12/93 12/93 12/93 11/95 * * *
Boyle is a first vice
president and
manager--advisory
administration of
Mitchell Hutchins.
Prior to November 1993,
she was compliance
manager of Hyperion
Capital Management,
Inc., an investment
advisory firm. Prior to
April 1993, Ms. Boyle
was a vice president
and manager-- legal
administration of
Mitchell Hutchins.
</TABLE>
H-1
<PAGE>
<TABLE><CAPTION>
OFFICER INFORMATION
OFFICER SINCE
NO. OF -------------------------------------------------------------
INVESTMENT FINANCIAL
NAME; PRINCIPAL BUSINESS COMPANIES ON SERVICES MANAGED MANAGED
OCCUPATION FOR THE PAST WHICH SERVES AS AMERICA GROWTH INVESTMENT ASSETS INVESTMENTS MASTER
FIVE YEARS AGE OFFICE AN OFFICER1 FUND FUND SERIES TRUST TRUST SERIES
- ------------------------ ---- --------------- --------------- ------- --------- ----------- ------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gigi Capes; Ms. Capes is 31 Vice President 30 11/95 11/95 11/95 11/95 11/95 11/95
a vice president and and Assistant
the tax manager of the Treasurer
mutual fund finance
division of Mitchell
Hutchins. Prior to
1992, she was a tax
senior consultant with
KPMG Peat Marwick.
Joan L. Cohen; Ms. Cohen 31 Vice President [25] 2/94 2/94 2/94 2/94 2/94 2/94
is a vice president and and Assistant
attorney of Mitchell Secretary
Hutchins. Prior to
December 1993, she was
an associate at the law
firm of Seward &
Kissel.
Neil G. Cumming; Mr. Vice President 1
Cumming is a senior and Investment
vice president and Officer
portfolio
manager/senior research
analyst of George D.
Bjurman & Associates.
Karen L. Finkel; Mrs. 38 Vice President 2 9/92 9/95
Finkel is a first vice
president and portfolio
manager of Mitchell
Hutchins.
Scott H. Griff; Mr. [29] Vice President 5
Griff is a vice and Assistant
president and attorney Secretary
of Mitchell Hutchins.
Prior to January 1995,
he was an associate at
the law firm of Cleary,
Gottlieb, Steer &
Hamilton.
Ellen R. Harris; Ms. 49 Vice President 2 9/83
Harris is a managing predecessor
director of Mitchell corp.
Hutchins.
Mary B. King; Mrs. King 32 Vice President 2 9/92
is a first vice
president and a
portfolio manager of
Mitchell Hutchins.
<CAPTION>
NAME; PRINCIPAL BUSINESS MUTUAL
OCCUPATION FOR THE PAST MUNICIPAL FUND OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
FIVE YEARS SERIES TRUST FUND TRUST TRUST TRUST II TRUST III
- ------------------------ -------- ------ ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gigi Capes; Ms. Capes is 11/95 11/95 11/95 2/94 * * *
a vice president and
the tax manager of the
mutual fund finance
division of Mitchell
Hutchins. Prior to
1992, she was a tax
senior consultant with
KPMG Peat Marwick.
Joan L. Cohen; Ms. Cohen 2/94 2/94 2/94 *
is a vice president and
attorney of Mitchell
Hutchins. Prior to
December 1993, she was
an associate at the law
firm of Seward &
Kissel.
Neil G. Cumming; Mr.
Cumming is a senior
vice president and
portfolio
manager/senior research
analyst of George D.
Bjurman & Associates.
Karen L. Finkel; Mrs.
Finkel is a first vice
president and portfolio
manager of Mitchell
Hutchins.
Scott H. Griff; Mr. *
Griff is a vice
president and attorney
of Mitchell Hutchins.
Prior to January 1995,
he was an associate at
the law firm of Cleary,
Gottlieb, Steer &
Hamilton.
Ellen R. Harris; Ms. 1/85
Harris is a managing predecessor
director of Mitchell corp.
Hutchins.
Mary B. King; Mrs. King
is a first vice
president and a
portfolio manager of
Mitchell Hutchins.
</TABLE>
H-2
<PAGE>
<TABLE><CAPTION>
OFFICER INFORMATION
OFFICER SINCE
NO. OF -------------------------------------------------------------
INVESTMENT FINANCIAL
NAME; PRINCIPAL BUSINESS COMPANIES ON SERVICES MANAGED MANAGED
OCCUPATION FOR THE PAST WHICH SERVES AS AMERICA GROWTH INVESTMENT ASSETS INVESTMENTS MASTER
FIVE YEARS AGE OFFICE AN OFFICER1 FUND FUND SERIES TRUST TRUST SERIES
- ------------------------ ---- --------------- --------------- ------- --------- ----------- ------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ralph R. Layman; Mr. [40] Chief 1
Layman is an executive Investment
vice president of GE Officer
Investment Management
and General Electric
Investment Corporation,
a registered investment
adviser. From 1989 to
July 1991, he was an
executive vice
president, partner and
portfolio manager of
Northern Capital
Management Co.
Thomas J. Libassi; Mr. 37 Vice President 4 9/94
Libassi is a senior
vice president and
portfolio manager of
Mitchell Hutchins.
Prior to May 1994, he
was a vice president of
Keystone Custodian
Funds Inc. with
portfolio management
responsibility.
C. William Maher; Mr. 34 Vice President 30 6/95 6/95 6/95 6/95 6/95 6/95
Maher is a first vice and Assistant
president and a senior Treasurer
manager of the mutual
fund finance division
of Mitchell Hutchins.
Dennis McCauley; Mr. 49 Vice President 18 9/95 9/95 9/95
McCauley is a managing
director and Chief
Investment Officer--
Fixed Income of
Mitchell Hutchins.
Prior to December 1994,
he was Director of
Fixed Income
Investments of IBM
Corporation.
Susan P. Messina; Ms. 35 Vice President 5 9/95
Messina is a senior
vice president and
portfolio manager for
Mitchell Hutchins.
Ann E. Moran; Ms. Moran 38 Vice President 30 6/93 6/93 6/93 6/93 6/93 6/93
is a vice president of and Assistant
Mitchell Hutchins. Treasurer
Richard S. Murphy; Mr. [40] Vice President 1
Murphy is a senior vice
president of Mitchell
Hutchins. Prior to
March 1994, Mr. Murphy
was a vice president at
American International
Group.
<CAPTION>
NAME; PRINCIPAL BUSINESS MUTUAL
OCCUPATION FOR THE PAST MUNICIPAL FUND OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
FIVE YEARS SERIES TRUST FUND TRUST TRUST TRUST II TRUST III
- ------------------------ -------- ------ ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ralph R. Layman; Mr. *
Layman is an executive
vice president of GE
Investment Management
and General Electric
Investment Corporation,
a registered investment
adviser. From 1989 to
July 1991, he was an
executive vice
president, partner and
portfolio manager of
Northern Capital
Management Co.
Thomas J. Libassi; Mr. 5/94
Libassi is a senior
vice president and
portfolio manager of
Mitchell Hutchins.
Prior to May 1994, he
was a vice president of
Keystone Custodian
Funds Inc. with
portfolio management
responsibility.
C. William Maher; Mr. 6/95 6/95 6/95 6/95 * * *
Maher is a first vice
president and a senior
manager of the mutual
fund finance division
of Mitchell Hutchins.
Dennis McCauley; Mr. 9/95 9/95 9/95
McCauley is a managing
director and Chief
Investment Officer--
Fixed Income of
Mitchell Hutchins.
Prior to December 1994,
he was Director of
Fixed Income
Investments of IBM
Corporation.
Susan P. Messina; Ms.
Messina is a senior
vice president and
portfolio manager for
Mitchell Hutchins.
Ann E. Moran; Ms. Moran 6/93 6/93 6/93 6/93 * * *
is a vice president of
Mitchell Hutchins.
Richard S. Murphy; Mr. 9/95
Murphy is a senior vice
president of Mitchell
Hutchins. Prior to
March 1994, Mr. Murphy
was a vice president at
American International
Group.
</TABLE>
H-3
<PAGE>
<TABLE><CAPTION>
OFFICER INFORMATION
OFFICER SINCE
NO. OF -------------------------------------------------------------
INVESTMENT FINANCIAL
NAME; PRINCIPAL BUSINESS COMPANIES ON SERVICES MANAGED MANAGED
OCCUPATION FOR THE PAST WHICH SERVES AS AMERICA GROWTH INVESTMENT ASSETS INVESTMENTS MASTER
FIVE YEARS AGE OFFICE AN OFFICER1 FUND FUND SERIES TRUST TRUST SERIES
- ------------------------ ---- --------------- --------------- ------- --------- ----------- ------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dianne E. O'Donnell; Ms. 43 Vice President 30 10/86 8/86 12/86 8/91 11/86 8/86
O'Donnell is a senior and Secretary
vice president and
deputy general counsel
of Mitchell Hutchins.
Victoria E. Schonfeld; 45 Vice President 30 5/94 5/94 5/94 5/94 5/94 5/94
Ms. Schonfeld is a
managing director and
general counsel of
Mitchell Hutchins. From
April 1990 to May 1994,
she was a partner in
the law firm of Arnold
& Porter. Prior to
April 1990, she was a
partner in the law firm
of Shereff, Friedman,
Hoffman & Goodman.
Paul H. Schubert; Mr. 33 Vice President 30 9/94 9/94 9/94 9/94 9/94 9/94
Schubert is a first and Assistant
vice president and a Treasurer
senior manager of the
mutual fund finance
division of Mitchell
Hutchins. From August
1992 to August 1994, he
was a vice president at
BlackRock Financial
Management L.P. Prior
to August 1992, he was
an audit manager with
Ernst & Young LLP.
Nirmal Singh; Mr. Singh 39 Vice President 5 9/95 9/95
is a first vice
president of Mitchell
Hutchins. Prior to
September 1993, he was
a member of the
portfolio management
term at Merrill Lynch
Asset Management, Inc.
Julian F. Sluyters; Mr. 35 Vice President 30 2/92 2/92 2/92 2/92 2/92 2/92
Sluyters is a senior and Treasurer
vice president and the
director of the mutual
fund finance division
of Mitchell Hutchins.
Prior to 1991, he was
an audit senior manager
with Ernst & Young LLP.
Pamela J. Thomas; Ms. [31] Investment 1
Thomas is a vice Officer
president of Global
Equity and
International Equity
analyst for GEIC. Prior
to May 1992, graduate
student at the Wharton
School.
<CAPTION>
NAME; PRINCIPAL BUSINESS MUTUAL
OCCUPATION FOR THE PAST MUNICIPAL FUND OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
FIVE YEARS SERIES TRUST FUND TRUST TRUST TRUST II TRUST III
- ------------------------ -------- ------ ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Dianne E. O'Donnell; Ms. 1/87 11/86 10/86 12/92 * * *
O'Donnell is a senior
vice president and
deputy general counsel
of Mitchell Hutchins.
Victoria E. Schonfeld; 5/94 5/94 5/94 5/94 * * *
Ms. Schonfeld is a
managing director and
general counsel of
Mitchell Hutchins. From
April 1990 to May 1994,
she was a partner in
the law firm of Arnold
& Porter. Prior to
April 1990, she was a
partner in the law firm
of Shereff, Friedman,
Hoffman & Goodman.
Paul H. Schubert; Mr. 9/94 9/94 9/94 9/94 * * *
Schubert is a first
vice president and a
senior manager of the
mutual fund finance
division of Mitchell
Hutchins. From August
1992 to August 1994, he
was a vice president at
BlackRock Financial
Management L.P. Prior
to August 1992, he was
an audit manager with
Ernst & Young LLP.
Nirmal Singh; Mr. Singh 9/95
is a first vice
president of Mitchell
Hutchins. Prior to
September 1993, he was
a member of the
portfolio management
term at Merrill Lynch
Asset Management, Inc.
Julian F. Sluyters; Mr. 2/92 2/92 2/92 12/92 * * *
Sluyters is a senior
vice president and the
director of the mutual
fund finance division
of Mitchell Hutchins.
Prior to 1991, he was
an audit senior manager
with Ernst & Young LLP.
Pamela J. Thomas; Ms. *
Thomas is a vice
president of Global
Equity and
International Equity
analyst for GEIC. Prior
to May 1992, graduate
student at the Wharton
School.
</TABLE>
H-4
<PAGE>
<TABLE><CAPTION>
OFFICER INFORMATION
OFFICER SINCE
NO. OF -------------------------------------------------------------
INVESTMENT FINANCIAL
NAME; PRINCIPAL BUSINESS COMPANIES ON SERVICES MANAGED MANAGED
OCCUPATION FOR THE PAST WHICH SERVES AS AMERICA GROWTH INVESTMENT ASSETS INVESTMENTS MASTER
FIVE YEARS AGE OFFICE AN OFFICER1 FUND FUND SERIES TRUST TRUST SERIES
- ------------------------ ---- --------------- --------------- ------- --------- ----------- ------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mark A. Tincher; Mr. 40 Vice President 11 9/95 9/95 9/95 9/95 9/95
Tincher is a managing
director and chief
investment
officer--U.S. equity
investments of Mitchell
Hutchins. Prior to
March 1995, he was a
vice president and
directed the U.S. funds
management and equity
research areas of Chase
Manhattan Private Bank.
Gregory K. Todd; Mr. 39 Vice President 30 6/93 6/93 6/93 6/93 6/93 6/93
Todd is a first vice and Assistant
president and associate Secretary
general counsel of
Mitchell Hutchins.
Prior to 1993, he was a
partner in the law firm
of Shereff, Friedman,
Hoffman & Goodman.
Craig M. Varrelman; Mr. 37 Vice President 4 9/95 9/95 9/95
Varrelman is a first
vice president of
Mitchell Hutchins.
William W. Veronda; Mr. [49] Vice President 1
Veronda is a senior
vice president of
Mitchell Hutchins.
Prior to September
1995, he was a senior
vice president and
general manager at
Invesco Funds Group.
Stuart Waugh; Mr. Waugh 40 Vice President 5 12/93 9/92
is a managing director
and a portfolio manager
of Mitchell Hutchins
responsible for global
fixed income
investments and
currency trading.
Keith A. Weller; Mr. 34 Vice President [24] 9/95 9/95 9/95 9/95 9/95 9/95
Weller is a first vice and Assistant
president and associate Secretary
general counsel of
Mitchell Hutchins. From
September 1987 to May
1995, he was an
attorney in private
practice.
<CAPTION>
NAME; PRINCIPAL BUSINESS MUTUAL
OCCUPATION FOR THE PAST MUNICIPAL FUND OLYMPUS SECURITIES INVESTMENT INVESTMENT INVESTMENT
FIVE YEARS SERIES TRUST FUND TRUST TRUST TRUST II TRUST III
- ------------------------ -------- ------ ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark A. Tincher; Mr. 9/95 9/95
Tincher is a managing
director and chief
investment
officer--U.S. equity
investments of Mitchell
Hutchins. Prior to
March 1995, he was a
vice president and
directed the U.S. funds
management and equity
research areas of Chase
Manhattan Private Bank.
Gregory K. Todd; Mr. 6/93 6/93 6/93 6/93 * * *
Todd is a first vice
president and associate
general counsel of
Mitchell Hutchins.
Prior to 1993, he was a
partner in the law firm
of Shereff, Friedman,
Hoffman & Goodman.
Craig M. Varrelman; Mr. 9/95
Varrelman is a first
vice president of
Mitchell Hutchins.
William W. Veronda; Mr. 9/95
Veronda is a senior
vice president of
Mitchell Hutchins.
Prior to September
1995, he was a senior
vice president and
general manager at
Invesco Funds Group.
Stuart Waugh; Mr. Waugh 12/93
is a managing director
and a portfolio manager
of Mitchell Hutchins
responsible for global
fixed income
investments and
currency trading.
Keith A. Weller; Mr. 9/95 9/95 9/95 9/95 * * *
Weller is a first vice
president and associate
general counsel of
Mitchell Hutchins. From
September 1987 to May
1995, he was an
attorney in private
practice.
</TABLE>
- ------------
* includes the investment company on which the officer serves but additional
information needed on month/year officer was appointed.
1 includes only investment companies for which Mitchell Hutchins or PaineWebber
serves as investment adviser; each officer serves in the same capacity for
each separate investment company.
H-5
<PAGE>
EXHIBIT FR
EXISTING FUNDAMENTAL RESTRICTIONS
The existing fundamental restrictions of each Fund will be found on the
following pages of this exhibit.
TABLE OF CONTENTS:
AMERICA FUND
Growth and Income Fund........................................... FR-2
FINANCIAL SERVICES FUND............................................ FR-3
INVESTMENT SERIES
Global Income Fund............................................... FR-4
INVESTMENT TRUST
Tactical Fund.................................................... FR-5
Global Equity Fund............................................... FR-6
INVESTMENT TRUST II
Emerging Markets Fund............................................ FR-8
INVESTMENT TRUST III
Small Cap Growth Fund............................................ FR-9
MANAGED ASSETS TRUST
Capital Appreciation Fund........................................ FR-10
MANAGED INVESTMENTS TRUST
High Income Fund................................................. FR-11
Investments Grade Fund........................................... FR-12
Low Duration Fund................................................ FR-13
U.S. Government Fund............................................. FR-14
Utility Fund..................................................... FR-15
MASTER SERIES
Balanced Fund.................................................... FR-16
PW Money Market Fund............................................. FR-17
MUNICIPAL SERIES
Municipal High Income Fund....................................... FR-18
New York Tax-Free Fund........................................... FR-20
MUTUAL FUND TRUST
California Tax-Free Fund......................................... FR-22
National Tax-Free Fund........................................... FR-24
OLYMPUS FUND
Growth Fund...................................................... FR-26
SECURITIES TRUST
Small Cap Value Fund............................................. FR-27
Strategic Income Fund............................................ FR-28
FR-1
<PAGE>
AMERICA FUND
GROWTH AND INCOME FUND
The Fund may not:
(1) purchase any securities other than those its investment objective
permits it to purchase;
(2) purchase securities of any one issuer (except U.S. government
securities) if as a result more than 5% of the Fund's total assets would be
invested in such issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, provided, however, that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations;
(3) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may make margin
deposits in connection with its use of options, futures contracts and options on
futures contracts;
(4) underwrite securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under the federal securities laws;
(5) make short sales of securities or maintain a short position, except that
the Fund may (a) make short sales and may maintain short positions in connection
with its use of options, futures contracts and options on futures contracts and
(b) sell short "against the box";
(6) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell stock index futures, interest rate futures and options
thereon;
(8) invest in oil, gas or mineral-related programs or leases;
(9) make loans, except through loans of portfolio securities as described
herein and except through repurchase agreements; provided that for purposes of
this restriction the acquisition of bonds, debentures, or other corporate debt
securities and investment in government obligations, short-term commercial
paper, certificates of deposit and bankers' acceptances shall not be deemed to
be the making of loans;
(10) purchase any securities issued by any other investment company, except
in connection with the merger, consolidation or acquisition of all the
securities or assets of such an issuer;
(11) issue senior securities or borrow money, except from banks for
temporary purposes and except for reverse repurchase agreements, and then in an
aggregate amount not in excess of 10% of the Fund's total assets; provided
further that the Fund will not purchase securities while borrowings in excess of
5% of the Fund's total assets are outstanding; or
(12) make an investment in any one industry if the investment would cause
the aggregate value of the Fund's investments in such industry to exceed 25% of
the Fund's total assets.
The Fund will continue to interpret fundamental investment limitation (6) to
prohibit investment in real estate limited partnerships.
FR-2
<PAGE>
FINANCIAL SERVICES FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks or through
reverse repurchase agreements for emergency or temporary purposes, and then in
an aggregate amount not in excess of 10% of the value of the Fund's total assets
at the time of such borrowing, provided that the Fund will not purchase
securities while borrowings (including reverse repurchase agreements) in excess
of 5% of the Fund's total assets are outstanding;
(2) make an investment in any one industry if doing so would cause the value
of investments in such industry or group of industries to equal or exceed 25% of
the total assets of the Fund taken at market value, except that the Fund will
invest, under normal circumstances, at least 25% of its total assets, taken at
market value, in the related group of industries consisting of the financial
services industries;
(3) purchase securities of any one issuer (other than U.S. government
securities) if as a result more than 5% of the Fund's total assets would be
invested in securities of such issuer or the Fund would own or hold 10% or more
of the outstanding voting securities of that issuer, except that up to 25% of
the Fund's total assets may be invested without regard to these limitations;
(4) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions, and except that the Fund may make
margin deposits in connection with its use of options, futures contracts and
options on futures contracts;
(5) underwrite securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under federal securities laws;
(6) make short sales of securities or maintain a short position, except that
the Fund may make short sales and maintain short positions in connection with
its use of options, futures contracts and options on futures contracts and may
sell short "against the box";
(7) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein, including real estate
investment trusts;
(8) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell stock index, interest rate and foreign currency
futures contracts and options thereon;
(9) invest in oil, gas or mineral-related programs or leases, provided that
the Fund may invest in securities issued by companies that engage in such
activities;
(10) make loans, except through loans of portfolio securities as described
in the Prospectus or this Statement of Additional Information and except through
repurchase agreements, provided that for purposes of this limitation the
acquisition of publicly distributed bonds, debentures or other corporate debt
securities and investment in government obligations, short-term commercial
paper, certificates of deposit and bankers' acceptances shall not be deemed to
be the making of a loan; or
(11) purchase any securities issued by any other investment company, except
by purchase in the open market where no commission or profit, other than a
customary brokers' commission, is earned by any sponsor or dealer associated
with the investment company whose shares are acquired as a result of such
purchase, provided that such securities in the aggregate do not represent more
than 10% of the total assets of the Fund, and except in connection with the
merger, consolidation or acquisition of all the securities or assets of another
investment company.
The Fund will continue to interpret fundamental investment limitation (7) to
prohibit investment in real estate limited partnerships.
* * * * *
In addition to the foregoing fundamental limitations, the Fund currently has
an affirmative policy of investing, under normal circumstances, at least 65% of
its total assets in equity securities of financial services companies, which may
not be changed without approval of its Shareholders.
FR-3
<PAGE>
INVESTMENT SERIES
GLOBAL INCOME FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks or through
reverse repurchase agreements for emergency or temporary purposes, and then in
an aggregate amount not in excess of 10% of the value of the Fund's total assets
at the time of such borrowing; provided that the Fund will not purchase
securities while borrowings (including reverse repurchase agreements) in excess
of 5% of the value of the Fund's total assets are outstanding;
(2) purchase securities of any one issuer if as a result more than 5% of the
Fund's total assets would be invested in such issuer or the Fund would own or
hold more than 10% of the outstanding voting securities of that issuer, except
that up to 50% of the Fund's total assets may be invested without regard to this
limitation and provided that this limitation does not apply to securities issued
or guaranteed by the U.S. government, its agencies and instrumentalities;
(3) make an investment in any one industry if the investment would cause the
value of such investments at the time of purchase in such industry to be 25% or
more of the total assets of the Fund taken at market value;
(4) purchase securities on margin, except for short-term credits necessary
for clearance of portfolio transactions, and except that the Fund may make
margin deposits in connection with its use of options, futures contracts and
options on futures contracts;
(5) underwrite securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under federal securities laws;
(6) make short sales of securities or maintain a short position, except that
the Fund may (a) make short sales and maintain short positions in connection
with its use of options, futures contracts and options on futures contracts and
(b) sell short "against the box";
(7) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein;
(8) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell interest rate and foreign currency futures contracts
and options thereon, may engage in transactions in foreign currency and may
purchase or sell options on foreign currencies for hedging purposes;
(9) invest in oil, gas or mineral-related programs or leases;
(10) make loans, except through loans of portfolio securities as described
in the Statement of Additional Information and except through repurchase
agreements, provided that for purposes of this restriction the acquisition of
publicly distributed bonds, debentures or other corporate debt securities and
investment in government obligations, short-term commercial paper, certificates
of deposit and bankers' acceptances shall not be deemed to be the making of a
loan; or
(11) purchase any securities issued by any other investment company, except
in connection with the merger, consolidation or acquisition of all the
securities or assets of such an issuer.
The Fund will continue to interpret fundamental investment limitation (7) to
prohibit investment in real estate limited partnerships.
FR-4
<PAGE>
INVESTMENT TRUST
TACTICAL FUND
Under the investment restrictions adopted by the Trust with respect to the Fund:
(1) The Fund will not purchase securities (other than Government Securities)
of any issuer if, as a result of the purchase, more than 5% of the value of the
Fund's total assets would be invested in the securities of the issuer, except
that up to 25% of the value of the Fund's total assets may be invested without
regard to this 5% limitation.
(2) The Fund will not purchase more than 10% of the voting securities of any
one issuer, or more than 10% of the securities of any class of any one issuer,
except that this limitation is not applicable to the Fund's investments in
Government Securities, and up to 25% of the Fund's assets may be invested
without regard to these 10% limitations.
(3) The Fund will not borrow money, except that the Fund may borrow from
banks for temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests and cash payments of dividends and distributions
that might otherwise require the untimely disposition of securities, in an
amount not to exceed 20% of the value of the Fund's total assets (including the
amount borrowed) valued at market less liabilities (not including the amount
borrowed) at the time the borrowing is made. Whenever borrowings exceed 5% of
the value of the total assets of the Fund, the Fund will not make any additional
investments.
(4) The Fund will not lend money to other persons, except through purchasing
debt obligations, lending portfolio securities in an amount not to exceed 30% of
the Fund's assets taken at value and entering into repurchase agreements.
(5) The Fund will invest no more than 25% of the value of its total assets
in securities of issuers in any one industry.
(6) The Fund will not purchase securities on margin, except that the Fund
may obtain any short-term credits necessary for the clearance of purchases and
sales of securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with futures contracts or options on
futures contracts will not be deemed to be a purchase of securities on margin.
(7) The Fund will not make short sales of securities or maintain a short
position, unless at all times when a short position is open, the Fund owns an
equal amount of the securities or securities convertible into or exchangeable
for, without payment of any further consideration, securities of the same issue
as, and equal in amount to, the securities sold short.
(8) The Fund will not purchase or sell real estate or real estate limited
partnership interests, except that the Fund may purchase and sell securities of
companies that deal in real estate or interests in real estate.
(9) The Fund will not purchase or sell commodities or commodity contracts
(except futures contracts and related options and other similar contracts).
(10) The Fund will not act as an underwriter of securities, except that the
Fund may acquire securities under circumstances in which, if the securities were
sold, the Fund might be deemed to be an underwriter for purposes of the 1933
Act.
FR-5
<PAGE>
INVESTMENT TRUST
GLOBAL EQUITY FUND
The Fund may not:
(1) purchase securities (other than Government Securities) of any issuer if,
as a result of the purchase, more than 5% of the value of the Fund's total
assets would be invested in the securities of the issuer, except that up to 25%
of the value of the Fund's total assets may be invested without regard to this
5% limitation;
(2) purchase more than 10% of the voting securities of any one issuer, or
more than 10% of the securities of any class of any one issuer, except that this
limitation is not applicable to the Fund's investments in Government Securities,
and up to 25% of the Fund's assets may be invested without regard to these 10%
limitations;
(3) borrow money, except that the Fund may borrow from banks for temporary
or emergency (not leveraging) purposes, including the meeting of redemption
requests and cash payment of dividends and distributions that might otherwise
require the untimely disposition of securities, provided that such amounts shall
not exceed 20% of the value of the Fund's total assets (including the amount
borrowed) valued at market less liabilities (not including the amount borrowed)
at the time the borrowing is made, and (b) whenever borrowings exceed 5% of the
value of the total asset of the Fund, the Fund will not make any additional
investments;
(4) lend money to other persons, except through purchasing debt obligations,
lending portfolio securities in an amount not to exceed 30% of the Fund's assets
taken at value and entering into repurchase agreements;
(5) invest more than 25% of the value of its total assets in securities of
issuers in any one industry, which term will be deemed to include (a) the
government of any country other than the United States, but not the United
States government and (b) any supranational organization;
(6) purchase securities on margin, except that (a) the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities, and (b) the deposit or payment of initial or variation margin in
connection with futures contracts or options on futures contracts will not be
deemed to be a purchase of securities on margin;
(7) make short sales of securities or maintain a short position, unless at
all times when a short position is open, the Fund owns an equal amount of the
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issue as, and equal in
amount to, the securities sold short;
(8) purchase or sell real estate or real estate limited partnership
interests, except that the Fund may purchase and sell securities of companies
that deal in real estate or interests in real estate;
(9) purchase or sell commodities or commodity contracts (except currencies,
stock index, currency and interest rate futures contracts and related options,
forward foreign currency contracts and other similar contracts);
(10) invest in oil, gas or other mineral leases or exploration or
development programs;
(11) act as an underwriter of securities, except that the Fund may acquire
securities under circumstances in which, if the securities were sold, the Fund
might be deemed to be an underwriter for purpose of the 1933 Act;
(12) purchase any security, other than a security acquired pursuant to a
plan of reorganization or an offer of exchange, if as a result of the purchase
(a) the Fund would own any securities of an open-end
FR-6
<PAGE>
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company or (b) more than 5% of the value of the Fund's
total assets would be invested in securities of any one or more closed-end
investment companies;
(13) participate on a joint or joint-and several basis in any securities
trading account; or
(14) make investments for the purpose of exercising control of management.
FR-7
<PAGE>
INVESTMENT TRUST II
EMERGING MARKETS FUND
Under the investment restrictions adopted by the Trust with respect to the Fund:
(1) The Fund will not purchase securities (other than Government Securities)
of any issuer if, as a result of the purchase, more than 5% of the value of the
Fund's total assets would be invested in the securities of the issuer, except
that up to 25% of the value of the Fund's total assets may be invested without
regard to this 5% limitation.
(2) The Fund will not purchase more than 10% of the voting securities of any
one issuer, except that this limitation is not applicable to the Fund's
investments in Government Securities, and up to 25% of the Fund's assets may be
invested without regard to this 10% limitation.
(3) The Fund may borrow from banks for leveraging purposes, as well as for
temporary or emergency purposes such as the meeting of redemption requests and
cash payments of dividends and distributions that might otherwise require the
untimely disposition of securities, in an amount not to exceed 33 1/3% of the
value of the Fund's total assets (including the amount borrowed) valued at
market less liabilities (not including the amount borrowed) at the time the
borrowing is made. Whenever borrowings for temporary or emergency purposes
exceed 5% of the value of the Fund's total assets, the Fund will not make any
additional investments.
(4) The Fund will not lend money to other persons, except through purchasing
debt obligations, lending portfolio securities in an amount not to exceed 33
1/3% of the value of the Fund's total assets and entering into repurchase
agreements.
(5) The Fund will invest no more than 25% of the value of its total assets
in securities of issuers in any one industry. For purposes of this restriction,
the term industry will be deemed to include (a) the government of any country
other than the United States, but not the United States Government and (b) all
supranational organizations.
(6) The Fund will not purchase securities on margin, except that the Fund
may engage in short sales of securities and obtain any short-term credits
necessary for the clearance of purchases and sales of securities. For purposes
of this restriction, the deposit or payment of initial or variation margin in
connection with futures contracts or options on futures contracts will not be
deemed to be a purchase of securities on margin.
(7) The Fund will not purchase or sell real estate or real estate limited
partnership interests, except that the Fund may purchase and sell securities of
companies that deal in real estate or interests in real estate.
(8) The Fund will not purchase or sell commodities or commodity contracts
(except currencies, securities index and currency futures contracts and related
options, forward foreign currency contracts and other similar contracts).
(9) The Fund will not invest in oil, gas or other mineral leases or
exploration or development programs.
(10) The Fund will not act as an underwriter of securities, except that the
Fund may acquire securities under circumstances in which, if the securities were
sold, the Fund might be deemed to be an underwriter for purposes of the 1933
Act.
FR-8
<PAGE>
INVESTMENT TRUST III
SMALL CAP GROWTH FUND
Under the investment restrictions adopted by the Trust with respect to the Fund:
(1) The Fund will not purchase securities (other than Government Securities)
of any issuer if, as a result of the purchase, more than 5% of the value of the
Fund's total assets would be invested in the securities of the issuer, except
that up to 25% of the value of the Fund's total assets may be invested without
regard to this 5% limitation.
(2) The Fund will not purchase more than 10% of the voting securities of any
one issuer, except that this limitation is not applicable to the Fund's
investments in Government Securities, and up to 25% of the Fund's assets may be
invested without regard to this 10% limitation.
(3) The Fund will not borrow money, except that the Fund may borrow from
banks for temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests and cash payments of dividends and distributions
that might otherwise require the untimely disposition of securities, in an
amount not to exceed 20% of the value of the Fund's total assets (including the
amount borrowed) valued at market less liabilities (not including the amount
borrowed) at the time the borrowing is made. Whenever borrowings exceed 5% of
the value of the total assets of the Fund, the Fund will not make any additional
investments.
(4) The Fund will not lend money to other persons, except through purchasing
debt obligations, lending portfolio securities in an amount not to exceed 30% of
the Fund's assets taken at value and entering into repurchase agreements.
(5) The Fund will invest no more than 25% of the value of its total assets
in securities of issuers in any one industry. For purposes of this restriction,
the term industry will be deemed to include the government of any country other
than the United States, but not the U.S. Government.
(6) The Fund will not purchase securities on margin, except that the Fund
may obtain any short-term credits necessary for the clearance of purchases and
sales of securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with futures contracts or options on
futures contracts will not be deemed to be a purchase of securities on margin.
(7) The Fund will not make short sales of securities or maintain a short
position, unless at all times when a short position is open, the Fund owns an
equal amount of the securities or securities convertible into or exchangeable
for, without payment of any further consideration, securities of the same issue
as, and equal in amount to, the securities sold short.
(8) The Fund will not purchase or sell real estate or real estate limited
partnership interests, except that the Fund may purchase and sell securities of
companies that deal in real estate or interests in real estate.
(9) The Fund will not purchase or sell commodities or commodity contracts,
except futures contracts and related options and other similar contracts.
(10) The Fund will not act as an underwriter of securities, except that the
Fund may acquire securities under circumstances in which, if the securities were
sold, the Fund might be deemed to be an underwriter for purposes of the
Securities Act of 1933, as amended.
FR-9
<PAGE>
MANAGED ASSETS TRUST
CAPITAL APPRECIATION FUND
The Fund may not:
(1) purchase securities of any one issuer (except U.S. government
securities) if as a result more than 5% of the Fund's total assets would be
invested in such issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, provided, however, that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations;
(2) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may make margin
deposits in connection with its use of options, futures contracts and options on
futures contracts;
(3) underwrite securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under the federal securities laws;
(4) make short sales of securities or maintain a short position, except that
the Fund may (a) make short sales of securities it does not own in an amount up
to 25% of its net assets, (b) make short sales and maintain short positions in
connection with its use of options, futures contracts and options on futures
contracts and (c) sell short "against the box";
(5) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell financial futures contracts, such as stock index,
interest rate and bond index futures contracts and options thereon;
(7) invest in oil, gas or mineral-related programs or leases;
(8) make loans, except through loans of portfolio securities as described in
the Prospectus or the Statement of Additional Information and except through
repurchase agreements; provided that for purposes of this restriction the
acquisition of bonds, debentures, or other corporate debt securities and
investment in government obligations, short-term commercial paper, certificates
of deposit and bankers' acceptances shall not be deemed to be the making of
loans;
(9) purchase any securities issued by any other investment company, except
in connection with the merger, consolidation or acquisition of all the
securities or assets of such an issuer;
(10) issue senior securities or borrow money, except from banks for
temporary purposes and except for reverse repurchase agreements, and then in an
aggregate amount not in excess of 10% of the Fund's total assets; provided
further that the Fund will not purchase securities while borrowings in excess of
5% of the Fund's total assets are outstanding; or
(11) make an investment in any one industry if the investment would cause
the aggregate value of the Fund's investments in such industry to equal or
exceed 25% of the Fund's total assets.
The Fund will interpret fundamental investment limitation (5) to prohibit
investment in real estate limited partnerships.
FR-10
<PAGE>
MANAGED INVESTMENTS TRUST
HIGH INCOME FUND
The Fund may not:
(1) purchase the securities of any issuer if as a result more than 5% of the
total assets of the Fund would be invested in the securities of that issuer;
provided that securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities are not subject to this limitation and further
provided that up to 25% of the value of the Fund's assets may be invested
without regard to this limitation;
(2) issue senior securities or borrow money, except from banks or through
reverse repurchase agreements for temporary or emergency purposes, and then in
an aggregate amount not in excess of 10% of the Fund's total assets at the time
of such borrowings; provided that the Fund will not purchase securities while
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding;
(3) purchase securities if, as a result of the purchase, the Fund would have
more than 25% of the value of its total assets invested in securities of issuers
in any one industry, except that this limitation does not apply to obligations
issued or guaranteed by the U.S. government, its agencies and instrumentalities;
(4) underwrite securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under federal securities laws;
(5) purchase or sell real estate, except that investments in Ginnie Mae
certificates and other debt securities secured by real estate or real estate
interests are not subject to this limitation;
(6) purchase securities on margin, make short sales of securities or
maintain a short position in any security, except that the Fund may (a) make
margin deposits, make short sales and maintain short positions in connection
with its use of options, futures contracts and options on futures contracts and
(b) sell short "against the box";
(7) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell interest rate futures contracts and options thereon;
(8) invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in issuers which invest in such programs;
(9) purchase securities of other open-end investment companies, except in
connection with a merger, consolidation or acquisition;
(10) make loans, except through repurchase agreements and except in
connection with the loan of securities as described herein; provided that for
purposes of this restriction the acquisition of bonds or other debt obligations
shall not be deemed to be the making of a loan; or
(11) hold more than 10% of the outstanding voting securities of any issuer.
The Fund will continue to interpret fundamental investment limitation (5) to
prohibit investment in real estate limited partnerships. The Fund will continue
to interpret fundamental investment limitation (8) to prohibit investment in
oil, gas or mineral leases.
FR-11
<PAGE>
MANAGED INVESTMENTS TRUST
INVESTMENT GRADE FUND
The Fund may not:
(1) purchase the securities of any issuer if as a result more than 5% of the
total assets of the Fund would be invested in the securities of that issuer;
provided that securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities are not subject to this limitation and further
provided that up to 25% of the value of the Fund's assets may be invested
without regard to this limitation;
(2) issue senior securities or borrow money, except from banks or through
reverse repurchase agreements for temporary or emergency purposes, and then in
an aggregate amount not in excess of 10% of the Fund's total assets at the time
of such borrowings; provided that the Fund will not purchase securities while
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding;
(3) purchase securities if, as a result of the purchase, the Fund would have
more than 25% of the value of its total assets invested in securities of issuers
in any one industry, except that this limitation does not apply to obligations
issued or guaranteed by the U.S. government, its agencies and instrumentalities;
(4) underwrite securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under federal securities laws;
(5) purchase or sell real estate, except that investments in Ginnie Mae
certificates and other debt securities secured by real estate or real estate
interests are not subject to this limitation;
(6) purchase securities on margin, make short sales of securities or
maintain a short position in any security, except that a Fund may (a) make
margin deposits, make short sales and maintain short positions in connection
with its use of options, futures contracts and options on futures contracts and
(b) sell short "against the box";
(7) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell interest rate futures contracts and options thereon;
(8) invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in issuers which invest in such programs;
(9) purchase securities of other open-end investment companies, except in
connection with a merger, consolidation or acquisition;
(10) make loans, except through repurchase agreements and except in
connection with the loan of securities as described herein; provided that for
purposes of this restriction the acquisition of bonds or other debt obligations
shall not be deemed to be the making of a loan; or
(11) hold more than 10% of the outstanding voting securities of any issuer.
The Fund will continue to interpret fundamental investment limitation (5) to
prohibit investment in real estate limited partnerships. The Fund will continue
to interpret fundamental investment limitation (8) to prohibit investment in
oil, gas or mineral leases.
FR-12
<PAGE>
MANAGED INVESTMENTS TRUST
LOW DURATION FUND
The Fund may not:
(1) purchase the securities of any issuer if as a result more than 5% of the
total assets of the Fund would be invested in the securities of that issuer;
provided that securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities are not subject to this limitation and further
provided that up to 25% of the value of the Fund's assets may be invested
without regard to this limitation;
(2) issue senior securities or borrow money, except from banks or through
reverse repurchase agreements and mortgage dollar rolls, and then in an
aggregate amount not in excess of 33 1/3% of the Fund's total assets (including
the amount of the borrowings and senior securities issued but reduced by any
liabilities not constituting senior securities) at the time of such borrowings,
except that the Fund may borrow up to an additional 5% of total assets (not
including the amount borrowed) for temporary or emergency purposes;
(3) purchase securities if, as a result of the purchase, the Fund would have
more than 25% of the value of its total assets invested in securities of issuers
in any one industry, except that this limitation does not apply to (a)
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities and (b) investments in mortgage- and asset-backed securities,
which (whether or not issued or guaranteed by an agency or instrumentality of
the U.S. government) shall be considered a single industry for purposes of this
limitation;
(4) underwrite securities of other issuers, except to the extent that in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under federal securities laws;
(5) purchase or sell real estate (including real estate limited
partnerships), except that investments in mortgage-backed securities and other
debt securities secured by real estate or interests therein are not subject to
this limitation, and provided further that the Fund may exercise rights under
agreements relating to such securities, including the right to enforce security
interests and to liquidate real estate acquired as a result of such enforcement;
(6) purchase securities on margin, make short sales of securities or
maintain a short position in any security, except that the Fund may (a) make
margin deposits, make short sales and maintain short positions in connection
with its use of options, futures contracts and options on futures contracts and
(b) sell short "against the box";
(7) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell financial futures contracts, such as interest rate and
bond index futures contracts and options thereon;
(8) invest in oil, gas or mineral exploration or development programs or
leases, except that the Fund may invest in issuers which invest in such
programs;
(9) purchase securities of other open-end investment companies, except in
connection with a merger, consolidation or acquisition; or
(10) make loans, except through repurchase agreements and except in
connection with the loan of securities as described herein or in the Prospectus;
provided that for purposes of this restriction the acquisition of bonds or other
debt instruments, or interests therein, shall not be deemed to be the making of
a loan.
For purposes of fundamental investment limitation (1), mortgage- and
asset-backed securities will not be considered to have been issued by the same
issuer by reason of such securities having the same sponsor, and mortgage- and
asset-backed securities issued by a finance subsidiary or other single purpose
subsidiary of a corporation that are not guaranteed by the parent corporation
will be considered to be issued by a separate issuer from its parent
corporation.
FR-13
<PAGE>
MANAGED INVESTMENTS TRUST
U.S. GOVERNMENT FUND
The Fund may not:
(1) purchase the securities of any issuer if as a result more than 5% of the
total assets of the Fund would be invested in the securities of that issuer;
provided that securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities are not subject to this limitation and further
provided that up to 25% of the value of the Fund's assets may be invested
without regard to this limitation;
(2) issue senior securities or borrow money, except from banks or through
reverse repurchase agreements and dollar rolls, and then in an aggregate amount
not in excess of 33 1/3% of the Fund's total assets (including the amount of the
borrowings and senior securities issued but reduced by any liabilities not
constituting senior securities) at the time of such borrowings, except that the
Fund may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(3) purchase securities if, as a result of the purchase, the Fund would have
more than 25% of the value of its total assets invested in securities of issuers
in any one industry, except that this limitation does not apply to (a)
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities and (b) investments in mortgage-backed and asset-backed
securities, which (whether or not issued or guaranteed by an agency or
instrumentality of the U.S. government) shall be considered a single industry
for purposes of this limitation;
(4) underwrite securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under federal securities laws;
(5) purchase or sell real estate, except that investments in Government
National Mortgage Association ("Ginnie Mae") certificates and other debt
securities secured by real estate or real estate interests are not subject to
this limitation;
(6) purchase securities on margin, make short sales of securities or
maintain a short position in any security, except that the Fund may (a) make
margin deposits, make short sales and maintain short positions in connection
with its use of options, futures contracts and options on futures contracts, and
(b) sell short "against the box";
(7) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell interest rate futures contracts and options thereon;
(8) invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in issuers which invest in such programs;
(9) purchase securities of other open-end investment companies, except in
connection with a merger, consolidation or acquisition;
(10) make loans, except through repurchase agreements and except in
connection with the loan of securities as described herein; provided that for
purposes of this restriction the acquisition of bonds or other debt obligations
shall not be deemed to be the making of a loan; or
(11) hold more than 10% of the outstanding voting securities of any issuer.
The Fund will continue to interpret fundamental investment limitation (5) to
prohibit investment in real estate limited partnerships. The Funds will continue
to interpret fundamental investment limitation (8) to prohibit investment in
oil, gas or mineral leases.
FR-14
<PAGE>
MANAGED INVESTMENTS TRUST
UTILITY FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks or through
reverse repurchase agreements for emergency or temporary purposes, and then in
an aggregate amount not in excess of 10% of the value of the Fund's total assets
at the time of such borrowing, provided that the Fund will not purchase
securities while borrowings (including reverse repurchase agreements) in excess
of 5% of the value of the Fund's total assets are outstanding;
(2) purchase securities of any one issuer if as a result more than 5% of the
Fund's total assets would be invested in such issuer or the Fund would own or
hold 10% of the outstanding securities of that issuer, except that up to 25% of
the Fund's total assets may be invested without regard to this limitation and
provided that this limitation does not apply to securities issued or guaranteed
by the U.S. government, its agencies and instrumentalities;
(3) make an investment in any one industry if the investment would cause the
aggregate value of the Fund's investments in such industry to exceed 25% of the
Fund's total assets, except that U.S. government securities are not subject to
this limitation and except that the Fund, under normal circumstances, will
invest 25% or more of its total assets in utility industries as a group (utility
industries for this purpose consist of companies primarily engaged in the
ownership or operation of facilities used in the generation, transmission or
distribution of electricity, telecommunications, gas or water);
(4) purchase securities on margin, except for short-term credits necessary
for clearance of portfolio transactions, and except that the Fund may make
margin deposits in connection with its use of options, futures contracts and
options on futures contracts;
(5) engage in the business of underwriting securities of other issuers,
except to the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed an underwriter under federal securities laws
and except that the Fund may write options;
(6) make short sales of securities or maintain a short position, except that
the Fund may (a) make short sales and maintain short positions in connection
with its use of options, futures contracts, options on futures contracts and
forward contracts and (b) sell short "against the box";
(7) Purchase or sell real estate (including real estate limited partnership
interests), provided that the Fund may invest in securities secured by real
estate or interests therein or issued by companies which invest in real estate
or interests therein;
(8) purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell financial futures contracts, such as interest rate,
stock index, bond index and foreign currency futures contracts and options
thereon, may engage in transactions in foreign currencies and may purchase or
sell options on foreign currencies;
(9) invest in oil, gas or mineral-related programs or leases; or
(10) make loans, except through loans of portfolio securities and except
through repurchase agreements, provided that for purposes of this restriction
the acquisition of publicly distributed bonds, debentures or other corporate
debt securities and investment in government obligations, short-term commercial
paper, certificates of deposit and bankers' acceptances shall not be deemed to
be the making of a loan.
FR-15
<PAGE>
MASTER SERIES
BALANCED FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks or through
reverse repurchase agreements for emergency or temporary purposes, and then in
an aggregate amount not in excess of 10% of the value of the Fund's total assets
at the time of such borrowing, provided that the Fund will not purchase
securities while borrowings (including reverse repurchase agreements) in excess
of 5% of the value of the Fund's total assets are outstanding;
(2) purchase any securities other than those its investment objective and
policies permit it to purchase;
(3) purchase securities of any one issuer if as a result more than 5% of the
Fund's total assets would be invested in such issuer or the Fund would own or
hold 10% of the outstanding securities of that issuer, except that up to 25% of
the Fund's total assets may be invested without regard to this limitation and
provided that this limitation does not apply to securities issued or guaranteed
by the U.S. government, its agencies and instrumentalities;
(4) purchase securities on margin except for short-term credit necessary for
clearance of portfolio transactions;
(5) underwrite securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under federal securities laws;
(6) make short sales of securities or maintain a short position, except that
the Fund may sell short "against the box;"
(7) purchase or sell real estate, including interests in real estate limited
partnerships, provided that the Fund may invest in securities secured by real
estate or interests therein or issued by companies which invest in real estate
or interests therein;
(8) purchase or sell commodities or commodity contracts;
(9) invest in oil, gas or mineral-related programs or leases;
(10) make loans, except through loans of portfolio securities as described
in the Prospectus or Statement of Additional Information and except through
repurchase agreements, provided that for purposes of this restriction the
acquisition of publicly distributed bonds, debentures, or other corporate debt
securities and investment in government obligations, short-term commercial
paper, certificates of deposit and bankers' acceptances shall not be deemed to
be the making of a loan; or
(11) purchase any securities issued by any other investment company, except
in connection with the merger, consolidation or acquisition of all the
securities or assets of such an issuer.
FR-16
<PAGE>
MASTER SERIES
PW MONEY MARKET FUND
The Fund may not:
(1) borrow money, except from banks for temporary purposes and except for
reverse repurchase agreements if otherwise permitted and then in an aggregate
amount not in excess of 10% of the asset value of the Fund at the time of such
borrowing;
(2) make loans, except that the Fund may purchase or hold debt instruments,
including repurchase agreements, in accordance with its investment policies and
restrictions;
(3) purchase or sell real estate, provided that the Fund may purchase
commercial paper issued by companies, including real estate investment trusts,
which invest in real estate or interests therein;
(4) purchase securities on margin, make short sales of securities, or
maintain a short position;
(5) act as underwriter of securities;
(6) purchase or sell commodities or commodity contracts, or invest in oil,
gas or mineral exploration or development programs;
(7) acquire voting securities of any issuer or acquire securities of other
investment companies, except in connection with a merger, consolidation or
acquisition;
(8) purchase securities of any one issuer, other than the U.S. government,
its agencies and instrumentalities, if immediately after such purchase more than
5% of the Fund's total asset value would be invested in such issuer, except that
up to 25% of the Fund's total assets may be invested without regard to such 5%
limitation; or
(9) purchase securities if immediately after such purchase more than 25% of
the value of its total assets would be invested in the securities of one or more
issuers conducting their principal business activities in the same industry,
provided that there is no limitation with respect to investments in U.S.
Treasury bills, other obligations issued or guaranteed by the U.S. government,
its agencies and instrumentalities, and certificates of deposit and bankers'
acceptances of domestic branches of U.S. banks. With respect to this limitation,
as to utility companies, gas, electric, water and telephone companies will be
considered separate industries. As to finance companies, the following
categories will be considered separate industries: (a) captive automotive
finance; (b) captive equipment finance; (c) retail finance; (d) consumer loan
companies; and (e) diversified finance companies.
FR-17
<PAGE>
MUNICIPAL SERIES
MUNICIPAL HIGH INCOME FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks for temporary
purposes, provided that the aggregate amount borrowed does not exceed 10% of the
total asset value of the Fund at the time of such borrowing and further provided
that the Fund will not purchase securities while borrowings in excess of 5% of
its total assets are outstanding;
(2) underwrite securities of other issuers, except to the extent that, in
connection with the purchase of municipal securities directly from an issuer
thereof in accordance with the Fund's investment objective, policies and
limitations or the disposition of portfolio securities, the Fund may be deemed
to be an underwriter;
(3) purchase or sell real estate, except that the Fund may invest in
municipal securities secured by real estate or interests therein;
(4) purchase securities on margin, make short sales of securities or
maintain a short position, except that the Fund may (a) make margin deposits,
make short sales and maintain short positions in connection with its use of
options, futures contracts and options on futures contracts and (b) sell short
"against the box";
(5) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell futures contracts on municipal securities and on
indexes of municipal securities and options thereon;
(6) invest in oil, gas or mineral exploration or development programs;
(7) purchase voting securities of any issuer or acquire securities of other
investment companies, except in connection with a merger, consolidation or
acquisition and except to the extent permitted by Section 12 of the Investment
Company Act of 1940 ("1940 Act") (currently, up to 10% of the total assets of
the Fund and no more than 5% of total assets in any single investment company
and no more than 3% of the total outstanding voting stock of any one investment
company);
(8) make loans, except through repurchase agreements; provided that for
purposes of this restriction the acquisition of publicly distributed municipal
securities and other publicly distributed debt obligations shall not be deemed
to be the making of a loan; and
(9) purchase any security if, as a result, 25% or more of the value of the
Fund's total assets would be invested in the securities of issuers having their
principal business activities in the same industry, except that this limitation
does not apply to municipal securities or securities issued or guaranteed by the
U.S. government, its agencies and instrumentalities.
For purposes of limitation (9), the District of Columbia, Puerto Rico, each
state or territory, each public subdivision, agency, instrumentality and
authority thereof, and each multi-state agency of which a state is a member is a
separate "issuer." When the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the sole
issuer. Similarly, in the case of an industrial development bond ("IDB") or
private activity bond ("PAB"), if that bond is backed only by the assets and
revenues of the nongovernmental user, then such nongovernmental user would be
deemed to be the sole issuer. However, if in either case the creating government
or some other agency guarantees a security, such a guarantee would be considered
a separate security and would be treated as an issuer of such government or
other agency. While limitation (4) permits the Fund to sell short "against the
box" and limitation (7) permits the
FR-18
<PAGE>
Fund to invest up to 10% of its total assets in the securities of other
investment companies, the Fund does not have any present intention of engaging
in these practices.
It is possible that the Fund from time to time will invest more than 25% of
its total assets in a particular segment of the municipal securities market,
such as hospital revenue bonds, housing agency bonds, IDBs, PABs or airport
bonds or in securities the interest upon which is paid from revenues of a
similar type of project. In such circumstances, economic, business, political or
other changes affecting one bond might also affect other bonds in the same
segment, thereby potentially increasing market risk.
The Fund will continue to interpret fundamental investment limitation (3) to
prohibit investment in real estate limited partnerships.
FR-19
<PAGE>
MUNICIPAL SERIES
NEW YORK TAX-FREE FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks for temporary
purposes, provided that the aggregate amount borrowed does not exceed 10% of the
total asset value of the Fund at the time of such borrowing and further provided
that the Fund will not purchase securities while borrowings in excess of 5% of
its total assets are outstanding;
(2) underwrite securities of other issuers, except to the extent that, in
connection with the purchase of municipal securities directly from an issuer
thereof in accordance with the Fund's investment objective, policies and
limitations or the disposition of portfolio securities, the Fund may be deemed
to be an underwriter;
(3) purchase or sell real estate, except that the Fund may invest in
municipal securities secured by real estate or interests therein;
(4) purchase securities on margin, make short sales of securities or
maintain a short position, except that the Fund may (a) make margin deposits,
make short sales and maintain short positions in connection with its use of
options, futures contracts and options on futures contracts and (b) sell short
"against the box";
(5) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell futures contracts on municipal securities and on
indexes of municipal securities and options thereon;
(6) invest in oil, gas or mineral exploration or development programs;
(7) purchase voting securities of any issuer or acquire securities of other
investment companies, except in connection with a merger, consolidation or
acquisition and except to the extent permitted by Section 12 of the Investment
Company Act of 1940 ("1940 Act") (currently, up to 10% of the total assets of
the Fund and no more than 5% of total assets in any single investment company
and no more than 3% of the total outstanding voting stock of any one investment
company);
(8) make loans, except through repurchase agreements; provided that for
purposes of this restriction the acquisition of publicly distributed municipal
securities and other publicly distributed debt obligations shall not be deemed
to be the making of a loan; and
(9) purchase any security if, as a result, 25% or more of the value of the
Fund's total assets would be invested in the securities of issuers having their
principal business activities in the same industry, except that this limitation
does not apply to municipal securities or securities issued or guaranteed by the
U.S. government, its agencies and instrumentalities.
For purposes of limitation (9), the District of Columbia, Puerto Rico, each
state or territory, each public subdivision, agency, instrumentality and
authority thereof, and each multi-state agency of which a state is a member is a
separate "issuer." When the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the sole
issuer. Similarly, in the case of an industrial development bond ("IDB") or
private activity bond ("PAB"), if that bond is backed only by the assets and
revenues of the nongovernmental user, then such nongovernmental user would be
deemed to be the sole issuer. However, if in either case the creating government
or some other agency guarantees a security, such a guarantee would be considered
a separate security and would be treated as an issuer of such government or
other agency. While limitation (4) permits the Fund to sell short "against the
box" and limitation (7) permits the
FR-20
<PAGE>
Fund to invest up to 10% of its total assets in the securities of other
investment companies, the Fund does not have any present intention of engaging
in these practices.
It is possible that the Fund from time to time will invest more than 25% of
its total assets in a particular segment of the municipal securities market,
such as hospital revenue bonds, housing agency bonds, IDBs, PABs or airport
bonds or in securities the interest upon which is paid from revenues of a
similar type of project. In such circumstances, economic, business, political or
other changes affecting one bond might also affect other bonds in the same
segment, thereby potentially increasing market risk.
The Fund will continue to interpret fundamental investment limitation (3) to
prohibit investment in real estate limited partnerships.
* * * * *
In addition to the foregoing fundamental limitations, the Fund currently has
an affirmative policy to invest, except under unusual market conditions, at
least 80%, and to seek to invest 100%, of its net assets in investment grade
debt obligations of varying maturities issued by the State of New York, its
municipalities and public authorities or by other issuers if such obligations
pay interest that is exempt from federal income tax as well as New York State
and New York City personal income taxes and is not an item of tax preference for
purposes of the federal alternative minimum tax. The revisions to the Fund's
fundamental restrictions under Proposal 3 will not change that policy.
FR-21
<PAGE>
MUTUAL FUND TRUST
CALIFORNIA TAX-FREE FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks for temporary
purposes, provided that the aggregate amount borrowed does not exceed 10% of the
total asset value of the Fund at the time of such borrowing and further provided
that the Fund will not purchase securities while borrowings in excess of 5% of
its total assets are outstanding;
(2) underwrite securities of other issuers, except to the extent that, in
connection with the purchase of municipal securities directly from an issuer
thereof in accordance with the Fund's investment objective, policies and
limitations or the disposition of portfolio securities, the Fund may be deemed
to be an underwriter;
(3) purchase or sell real estate, except that the Fund may invest in
municipal securities secured by real estate or interests therein;
(4) purchase securities on margin, make short sales of securities or
maintain a short position, except that the Fund may (a) make margin deposits,
make short sales and maintain short positions in connection with its use of
options, futures contracts and options on futures contracts and (b) sell short
"against the box";
(5) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell futures contracts on municipal securities and on
indexes of municipal securities and options thereon;
(6) invest in oil, gas or mineral exploration or development programs;
(7) purchase voting securities of any issuer or acquire securities of other
investment companies, except in connection with a merger, consolidation or
acquisition and except to the extent permitted by Section 12 of the Investment
Company Act of 1940 ("1940 Act") (currently, up to 10% of the total assets of
the Fund and no more than 5% of total assets in any single investment company
and no more than 3% of the total outstanding voting stock of any one investment
company);
(8) make loans, except through repurchase agreements; provided that for
purposes of this restriction the acquisition of publicly distributed municipal
securities and other publicly distributed debt obligations shall not be deemed
to be the making of a loan; and
(9) purchase any security if, as a result, 25% or more of the value of the
Fund's total assets would be invested in the securities of issuers having their
principal business activities in the same industry, except that this limitation
does not apply to municipal securities or securities issued or guaranteed by the
U.S. government, its agencies and instrumentalities.
For purposes of limitation (9), the District of Columbia, Puerto Rico, each
state or territory, each public subdivision, agency, instrumentality and
authority thereof, and each multi-state agency of which a state is a member is a
separate "issuer." When the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the sole
issuer. Similarly, in the case of an industrial development bond ("IDB") or
private activity bond ("PAB"), if that bond is backed only by the assets and
revenues of the nongovernmental user, then such nongovernmental user would be
deemed to be the sole issuer. However, if in either case the creating government
or some other agency guarantees a security, such a guarantee would be considered
a separate security and would be treated as an issuer of such government or
other agency. While limitation (4) permits the Fund to sell short "against the
box" and limitation (7) permits the
FR-22
<PAGE>
Fund to invest up to 10% of its total assets in the securities of other
investment companies, the Fund does not have any present intention of engaging
in these practices.
It is possible that the Fund from time to time will invest more than 25% of
its total assets in a particular segment of the municipal securities market,
such as hospital revenue bonds, housing agency bonds, IDBs, PABs or airport
bonds or in securities the interest upon which is paid from revenues of a
similar type of project. In such circumstances, economic, business, political or
other changes affecting one bond might also affect other bonds in the same
segment, thereby potentially increasing market risk.
The Fund will continue to interpret fundamental investment limitation (3) to
prohibit investment in real estate limited partnerships.
* * * * *
In addition to the foregoing fundamental limitations, the Fund currently has
an affirmative policy to invest, except under unusual market conditions, at
least 80%, and to seek to invest 100%, of its net assets in investment grade
debt obligations of varying maturities issued by the State of California, its
municipalities and public authorities or by other issuers if such obligations
pay interest that is exempt from federal income tax and California personal
income tax and is not an item of tax preference for purposes of the federal
alternative minimum tax. The revisions to the Fund's fundamental restrictions
under Proposal 3 will not change that policy.
FR-23
<PAGE>
MUTUAL FUND TRUST
NATIONAL TAX-FREE FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks for temporary
purposes, provided that the aggregate amount borrowed does not exceed 10% of the
total asset value of the Fund at the time of such borrowing and further provided
that the Fund will not purchase securities while borrowings in excess of 5% of
its total assets are outstanding;
(2) underwrite securities of other issuers, except to the extent that, in
connection with the purchase of municipal securities directly from an issuer
thereof in accordance with the Fund's investment objective, policies and
limitations or the disposition of portfolio securities, the Fund may be deemed
to be an underwriter;
(3) purchase or sell real estate, except that the Fund may invest in
municipal securities secured by real estate or interests therein;
(4) purchase securities on margin, make short sales of securities or
maintain a short position, except that the Fund may (a) make margin deposits,
make short sales and maintain short positions in connection with its use of
options, futures contracts and options on futures contracts and (b) sell short
"against the box";
(5) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell futures contracts on municipal securities and on
indexes of municipal securities and options thereon;
(6) invest in oil, gas or mineral exploration or development programs;
(7) purchase voting securities of any issuer or acquire securities of other
investment companies, except in connection with a merger, consolidation or
acquisition and except to the extent permitted by Section 12 of the Investment
Company Act of 1940 ("1940 Act") (currently, up to 10% of the total assets of
the Fund and no more than 5% of total assets in any single investment company
and no more than 3% of the total outstanding voting stock of any one investment
company);
(8) make loans, except through repurchase agreements; provided that for
purposes of this restriction the acquisition of publicly distributed municipal
securities and other publicly distributed debt obligations shall not be deemed
to be the making of a loan; and
(9) purchase any security if, as a result, 25% or more of the value of the
Fund's total assets would be invested in the securities of issuers having their
principal business activities in the same industry, except that this limitation
does not apply to municipal securities or securities issued or guaranteed by the
U.S. government, its agencies and instrumentalities.
For purposes of limitation (9), the District of Columbia, Puerto Rico, each
state or territory, each public subdivision, agency, instrumentality and
authority thereof, and each multi-state agency of which a state is a member is a
separate "issuer." When the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the sole
issuer. Similarly, in the case of an industrial development bond ("IDB") or
private activity bond ("PAB"), if that bond is backed only by the assets and
revenues of the nongovernmental user, then such nongovernmental user would be
deemed to be the sole issuer. However, if in either case the creating government
or some other agency guarantees a security, such a guarantee would be considered
a separate security and would be treated as an issuer of such government or
other agency. While limitation (4) permits the Fund to sell short "against the
box" and limitation (7) permits the
FR-24
<PAGE>
Fund to invest up to 10% of its total assets in the securities of other
investment companies, the Fund does not have any present intention of engaging
in these practices.
It is possible that the Fund from time to time will invest more than 25% of
its total assets in a particular segment of the municipal securities market,
such as hospital revenue bonds, housing agency bonds, IDBs, PABs or airport
bonds or in securities the interest upon which is paid from revenues of a
similar type of project. In such circumstances, economic, business, political or
other changes affecting one bond might also affect other bonds in the same
segment, thereby potentially increasing market risk.
The Fund will continue to interpret fundamental investment limitation (3) to
prohibit investment in real estate limited partnerships.
FR-25
<PAGE>
OLYMPUS FUND
GROWTH FUND
The Fund may not:
(1) issue senior securities or borrow money, except from banks for temporary
purposes and except for reverse repurchase agreements, and then in an aggregate
amount not in excess of 10% of the Fund's total assets; provided further that
the Fund will not purchase securities while borrowings (including reverse
repurchase agreements) in excess of 5% of the Fund's total assets are
outstanding;
(2) make an investment in any one industry if the investment would cause the
aggregate value of the Fund's investments in such industry to exceed 25% of the
Fund's total assets;
(3) purchase securities of any one issuer (except U.S. government
securities) if as a result more than 5% of the Fund's total assets would be
invested in such issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, provided, however, that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations;
(4) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may make margin
deposits in connection with its use of options, futures contracts and options on
futures contracts;
(5) underwrite securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under federal securities laws;
(6) make short sales of securities or maintain a short position, except that
the Fund may (a) make short sales and may maintain short positions in connection
with its use of options, futures contracts and options on future contracts and
(b) sell short "against the box";
(7) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
that invest in real estate or interests therein;
(8) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell stock index futures and interest rate futures and
options thereon;
(9) invest in oil, gas or mineral-related programs or leases;
(10) make loans, except through loans of portfolio securities as described
herein and except through repurchase agreements; provided that for purposes of
this restriction the acquisition of bonds, debentures or other corporate debt
securities and investments in government obligations, short-term commercial
paper, certificates of deposit and bankers' acceptances shall not be deemed to
be the making of loans; or
(11) purchase any securities issued by any other investment company, except
by purchase in the open market where no commission or profit, other than a
customary brokers' commission, is earned by any sponsor or dealer associated
with the investment company whose shares are acquired as a result of such
purchase, provided that such securities in the aggregate do not represent more
than 10% of the Fund's total assets, and except in connection with the merger,
consolidation or acquisition of all the securities or assets of such an issuer.
The Fund will continue to interpret fundamental investment limitation (7) to
prohibit investment in real estate limited partnerships.
FR-26
<PAGE>
SECURITIES TRUST
SMALL CAP VALUE FUND
The Fund may not:
(1) purchase securities of any one issuer (except U.S. government
securities) if as a result more than 5% of the Fund's total assets would be
invested in such issuer or the Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, provided, however, that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations;
(2) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may make margin
deposits in connection with its use of options, futures contracts and options on
futures contracts;
(3) underwrite securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under the federal securities laws;
(4) make short sales of securities or maintain a short position, except that
the Fund may make short sales and maintain short positions in connection with
its use of options, futures contracts and options on futures contracts;
(5) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell financial futures contracts, such as stock index,
interest rate and bond index futures contracts and options thereon;
(7) invest in oil, gas or mineral-related programs or leases;
(8) make loans, except through loans of portfolio securities as described
herein and except through repurchase agreements; provided that for purposes of
this restriction the acquisition of bonds, debentures, or other corporate debt
securities and investment in government obligations, short-term commercial
paper, certificates of deposit and bankers' acceptances shall not be deemed to
be the making of loans;
(9) purchase any securities issued by any other investment company, except
in connection with the merger, consolidation or acquisition of all or
substantially all the securities or assets of such an issuer;
(10) issue senior securities or borrow money, except from banks for
temporary purposes and for reverse repurchase agreements, and then in an
aggregate amount not in excess of 10% of the Fund's total assets; provided
further that the Fund will not purchase securities while borrowings in excess of
5% of the Fund's assets are outstanding; or
(11) make an investment in any one industry if the investment would cause
the aggregate value of the Fund's investments in such industry to equal or
exceed 25% of the Fund's total assets. The Fund will interpret fundamental
investment limitation (5) to prohibit investment in real estate limited
partnerships.
FR-27
<PAGE>
SECURITIES TRUST
STRATEGIC INCOME FUND
The Fund may not:
(1) issue senior securities (including borrowing money from banks and other
entities and through reverse repurchase agreements) in excess of 33 1/3% of its
total assets (including the amount of senior securities issued, but reduced by
any liabilities and indebtedness not constituting senior securities), except
that the Fund may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes;
(2) make an investment in any one industry if the investment would cause the
aggregate value of all investments in such industry to equal 25% or more of the
Fund's total assets; provided, that this limitation does not apply to
investments in securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities;
(3) purchase securities on margin, except for short-term credits necessary
for clearance of portfolio transactions and except that the Fund may make margin
deposits in connection with its use of options, futures contracts, options on
futures contracts, forward currency contracts and other financial instruments;
(4) engage in the business of underwriting securities of other issuers,
except to the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed an underwriter under federal securities laws
and except that the Fund may write options;
(5) make short sales of securities or maintain a short position, except that
the Fund may maintain short positions in connection with its use of options,
futures contracts, options on futures contracts and forward currency contracts;
(6) purchase or sell real estate (including real estate limited partnership
interests), provided that the Fund may invest in securities secured by real
estate or interests therein or issued by entities that invest in real estate or
interests therein, and provided further that the Fund may exercise rights under
agreements relating to such securities, including the right to enforce security
interests and to liquidate real estate acquired as a result of such enforcement;
(7) purchase or sell commodities or commodity contracts, except that the
Fund may sell commodities received upon the exercise of warrants, may purchase
or sell financial and currency futures contracts and options thereon, may
purchase and sell forward contracts, may engage in transactions in foreign
currencies and may purchase or sell options on foreign currencies:
(8) invest in oil, gas or mineral-related programs or leases; or
(9) make loans, except through loans of portfolio instruments and repurchase
agreements, provided that for purposes of this restriction the acquisition of
bonds, debentures or other debt instruments or interests therein and investment
in loan assignments and participations, government obligations, short-term
commercial paper, certificates of deposit and bankers' acceptances shall not be
deemed to be the making of a loan.
FR-28
<PAGE>
PROXY
-----
Mitchell Hutchins/Kidder, Peabody Investment Trust
Mitchell Hutchins/Kidder, Peabody Investment Trust II
Mitchell Hutchins/Kidder, Peabody Investment Trust III
PaineWebber America Fund
PaineWebber Financial Services Growth Fund Inc.
PaineWebber Investment Series
PaineWebber Managed Assets Trust
PaineWebber Managed Investments Trust
PaineWebber Master Series, Inc.
PaineWebber Municipal Series, Inc.
PaineWebber Mutual Fund Trust
PaineWebber Olympus Fund
PaineWebber Securities Trust
Special Meetings of Shareholders - April 10, 1996
This proxy is solicited on behalf of the Boards of Trustees/Directors of each of
the above listed Companies and relates to proposals with respect to one or more
of their respective series or portfolios ("Funds"). The undersigned hereby
appoints as proxies _______________ and ______________ and each of them (with
power of substitution) to vote for the undersigned all shares of beneficial
interest/common stock of the undersigned in the Company or Fund specified on the
mailing label on this proxy card at the above referenced meetings, 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 relating to the relevant Company or Fund.
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/Directors recommends a vote "FOR"
1. For each Company:
Election of eleven members of its Board of Trustees/Directors to serve
indefinite terms until their successors are duly elected and qualified;
_____ FOR all nominees listed below (except _____ WITHHOLD AUTHORITY to
as marked to the contrary below) vote for all nominees
below
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
though the nominee's name in the list below.)
Margo N. Alexander, Richard Q. Armstrong, E. Garrett Bewkes, Jr., Richard Burt,
Mary C. Farrell, Meyer Feldberg, George W. Gowen, Frederic V. Malek, Carl W.
Schafer, John R. Torell III, [___________]
FOR AGAINST ABSTAIN
2. For each Fund:
Ratification of the selection of _____ _____ _____
independent auditors for its
current fiscal year
3. For each Fund:
Approval of certain changes to
the Fund's fundamental
investment restrictions _____ _____ _____
4. Only for PaineWebber High Income
Fund (a series of PaineWebber
Managed Investments Trust):
Approval of a change to its
investment objective _____ _____ _____
Continued and to be signed on reverse side
<PAGE>
This proxy will not be voted unless it is dated and signed
exactly as instructed below
If Shares are held by an individual, sign your name exactly as it appears on
this proxy card. If shares are held jointly, either party may sign, but the
name of the party signing should conform exactly to the name shown on this proxy
card. If Shares are held by a corporation, partnership or similar account, the
name and the capacity of the individual signing the proxy card should be
indicated - for example: "ABC Corp., John Doe, Treasurer."
Signed exactly as name appears hereon.
___________________________ (L.S.)
___________________________ (L.S.)
Date________________________, 1996
