<PAGE>
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL
MONEY MARKET SERIES--NEW YORK SERIES
(A SERIES OF PAINEWEBBER/KIDDER, PEABODY
MUNICIPAL MONEY MARKET SERIES)
October 10, 1995
Dear Shareholder:
The attached proxy materials describe a proposal that PaineWebber/Kidder,
Peabody Municipal Money Market Series--New York Series ('PW/KP Fund') reorganize
and become part of PaineWebber RMA New York Municipal Money Fund ('PW Fund'). If
the proposal is approved and implemented, each shareholder of PW/KP Fund
automatically will become a shareholder of PW Fund.
YOUR BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE REORGANIZATION PROPOSAL.
The board believes that combining the two Funds will benefit PW/KP Fund's
shareholders by providing them with a portfolio that has an investment objective
substantially identical to the investment objective of PW/KP Fund and that will
have lower operating expenses as a percentage of net assets. The attached
materials provide more information about the proposed reorganization and the two
Funds.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. Voting your
shares early will permit PW/KP Fund to avoid costly follow-up mail and telephone
solicitation. After reviewing the attached materials, please complete, date and
sign your proxy card and mail it in the enclosed return envelope today.
Very truly yours,
/s/ Margo Alexander
-------------------
MARGO N. ALEXANDER
President,
PaineWebber/Kidder, Peabody Municipal
Money Market Series--New York Series
<PAGE>
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL
MONEY MARKET SERIES--NEW YORK SERIES
(A SERIES OF PAINEWEBBER/KIDDER, PEABODY
MUNICIPAL MONEY MARKET SERIES)
------------------------
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 8, 1995
------------------------
To The Shareholders:
A special meeting of shareholders ('Meeting') of PaineWebber/Kidder,
Peabody Municipal Money Market Series--New York Series ('PW/KP Fund'), a series
of PaineWebber/Kidder, Peabody Municipal Money Market Series, will be held on
November 8, 1995, at 10:00 a.m., Eastern time, at 1285 Avenue of the Americas,
38th Floor, New York, New York 10019, for the following purposes:
(1) To consider an Agreement and Plan of Reorganization and
Termination under which PaineWebber RMA New York Municipal Money Fund ('PW
Fund'), a series of PaineWebber Managed Municipal Trust, a Massachusetts
business trust, would acquire the assets of PW/KP Fund, in exchange solely
for shares of beneficial interest in PW Fund and the assumption by PW Fund
of PW/KP Fund's liabilities, followed by the distribution of those shares
to the shareholders of PW/KP Fund, all as described in the accompanying
Prospectus/Proxy Statement; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
You are entitled to vote at the Meeting and any adjournment thereof if you
owned shares of PW/KP Fund at the close of business on September 25, 1995. IF
YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON. IF YOU DO NOT EXPECT
TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the board of trustees,
DIANNE E. O'DONNELL
Secretary
October 10, 1995
1285 Avenue of the Americas
New York, New York 10019
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed proxy card,
date and sign the card, and return it in the envelope provided. IF YOU SIGN,
DATE AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES
WILL BE VOTED 'FOR' THE PROPOSAL NOTICED ABOVE. In order to avoid the
additional expense of further solicitation, we ask your cooperation in
mailing in your proxy card promptly. Unless proxy cards submitted by
corporations and partnerships are signed by the appropriate persons as
indicated in the voting instructions on the proxy card, they will not be
voted.
<PAGE>
PAINEWEBBER RMA NEW YORK MUNICIPAL MONEY FUND
(A SERIES OF PAINEWEBBER MANAGED MUNICIPAL TRUST)
------------------------
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL
MONEY MARKET SERIES--NEW YORK SERIES
(A SERIES OF PAINEWEBBER/KIDDER, PEABODY
MUNICIPAL MONEY MARKET SERIES)
------------------------
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(TOLL-FREE) 1-800-647-1568
------------------------
PROSPECTUS/PROXY STATEMENT
OCTOBER 10, 1995
This Prospectus/Proxy Statement ('Proxy Statement') is being furnished to
shareholders of PaineWebber/Kidder, Peabody Municipal Money Market Series--New
York Series ('PW/KP Fund'), a series of PaineWebber/Kidder, Peabody Municipal
Money Market Series ('PW/KP Trust'), in connection with the solicitation of
proxies by PW/KP Trust's board of trustees for use at a special meeting of PW/KP
Fund shareholders to be held on November 8, 1995 at 10:00 a.m., Eastern time,
and at any adjournment thereof ('Meeting').
As more fully described in this Proxy Statement, the primary purpose of the
Meeting is to vote on a proposed reorganization ('Reorganization'). Under the
Reorganization, PaineWebber RMA New York Municipal Money Fund ('PW Fund'), a
series of PaineWebber Managed Municipal Trust ('PW Trust'), would acquire the
assets of PW/KP Fund, in exchange solely for shares of beneficial interest in PW
Fund and the assumption by PW Fund of PW/KP Fund's liabilities. Those PW Fund
shares then would be distributed to PW/KP Fund's shareholders so that each such
shareholder would receive a number of full and fractional shares of PW Fund
having an aggregate net asset value that, on the effective date of the
Reorganization, is equal to the aggregate net asset value of the shareholder's
shares in PW/KP Fund. As soon as practicable following the distribution, PW/KP
Fund will be terminated.
PW Fund is a non-diversified series of PW Trust, which is an open-end
management investment company comprised of two series. PW Fund's investment
objective is to provide maximum current income exempt from federal income tax
and New York State and New York City personal income taxes, consistent with
liquidity and conservation of capital. PW Fund seeks to achieve its objective by
investing in high-grade municipal money market instruments. Both PW Fund and
PW/KP Fund (each a 'Fund' and collectively, 'Funds') are money market funds that
seek to maintain a stable $1.00 price per share.
AN INVESTMENT IN EITHER FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. WHILE EACH FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE, THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
This Proxy Statement, which should be retained for future reference, sets
forth concisely the information about the Reorganization and PW Fund that a
shareholder should know before voting. This Proxy Statement is accompanied by
the Prospectus of PW Fund, dated August 29, 1995, which is incorporated by this
reference into this Proxy Statement. A Statement of Additional Information,
dated October 10, 1995, relating to the Reorganization and including historical
financial statements, has been filed with the Securities and Exchange Commission
('SEC') and is incorporated herein by this reference. A Prospectus of PW/KP Fund
dated February 28, 1995, a Statement of Additional Information of PW/KP Fund
dated February 28, 1995, and a Statement of Additional Information of PW Fund
dated August 29, 1995, have been filed with the SEC and also are incorporated
herein by this reference. Copies of these documents, as well as PW/KP Fund's
Annual Report for the fiscal year ended October 31, 1994, and each Fund's
Semi-Annual Report, if applicable, may be obtained without charge and further
inquiries may be made by contacting your PaineWebber Incorporated
('PaineWebber') investment executive or PaineWebber's correspondent firms or by
calling toll-free 1-800-647-1568.
<PAGE>
TABLE OF CONTENTS
PAGE
----
VOTING INFORMATION........................................................ 1
SYNOPSIS.................................................................. 2
COMPARISON OF PRINCIPAL RISK FACTORS...................................... 8
THE PROPOSED TRANSACTION.................................................. 8
MISCELLANEOUS............................................................. 12
APPENDIX A--AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION.......... A-1
<PAGE>
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL
MONEY MARKET SERIES--NEW YORK SERIES
(A SERIES OF PAINEWEBBER/KIDDER, PEABODY
MUNICIPAL MONEY MARKET SERIES)
------------------------
PROSPECTUS/PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
NOVEMBER 8, 1995
------------------------
VOTING INFORMATION
This Prospectus/Proxy Statement ('Proxy Statement') is being furnished to
shareholders of PaineWebber/Kidder, Peabody Municipal Money Market Series--New
York Series ('PW/KP Fund'), a series of PaineWebber/Kidder, Peabody Municipal
Money Market Series ('PW/KP Trust'), in connection with the solicitation of
proxies by its board of trustees for use at a special meeting of shareholders to
be held on November 8, 1995, and any adjournment thereof ('Meeting'). This Proxy
Statement will first be mailed to shareholders on or about October 11, 1995.
At least thirty percent of the shares of PW/KP Fund outstanding on
September 25, 1995, represented in person or by proxy, must be present for the
transaction of business at the Meeting. If a quorum is not present at the
Meeting or a quorum is present but sufficient votes to approve the proposal are
not received, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies. Any such 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 that they are entitled to vote FOR the proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST the
proposal against such adjournment. A shareholder vote may be taken on the
proposal in this Proxy Statement prior to any such adjournment if sufficient
votes have been received and it is otherwise appropriate.
Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present for purposes of determining whether a quorum is present but
will not be voted for or against any adjournment or proposal. Accordingly,
abstentions and broker non-votes effectively will be a vote against adjournment
or against the proposal where the required vote is a percentage of the shares
present or outstanding. Abstentions and broker non-votes will not be counted,
however, as votes cast for purposes of determining whether sufficient votes have
been received to approve the proposal.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your direction as indicated thereon if your proxy card is
received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you sign, date and return the proxy card, but give no
voting instructions, your shares will be voted in favor of approval of the
Agreement and Plan of Reorganization and Termination, dated as of September 1,
1995 ('Reorganization Plan'), which is attached to this Proxy Statement as
Appendix A. Under the Reorganization Plan, PaineWebber RMA New York Municipal
Money Fund ('PW Fund'), a series of PaineWebber Managed Municipal Trust ('PW
Trust'), would acquire the assets of PW/KP Fund in exchange solely for shares of
beneficial interest in PW Fund and the assumption by PW Fund of PW/KP Fund's
liabilities; those PW Fund shares then would be distributed to PW/KP Fund's
shareholders. (These transactions are collectively referred to herein as the
'Reorganization,' and PW/KP Fund and PW Fund may be referred to
<PAGE>
herein individually as a 'Fund' or collectively, as 'Funds'.) After completion
of the Reorganization, PW/KP Fund will be terminated.
In addition, if you sign, date and return the proxy card, but give no
voting instructions, the duly appointed proxies may vote your shares, in their
discretion, upon such other matters as may come before the Meeting. The proxy
card may be revoked by giving another proxy or by letter or telegram revoking
the initial proxy. To be effective, such revocation must be received by PW/KP
Trust prior to the Meeting and must indicate your name and account number. In
addition, if you attend the Meeting in person, you may, if you wish, vote by
ballot at the Meeting, thereby canceling any proxy previously given.
As of the record date, September 25, 1995 ('Record Date'), PW/KP Fund had
42,047,966.120 shares of beneficial interest outstanding. The solicitation of
proxies, the cost of which will be borne by the Funds in proportion to their
respective net assets, will be made primarily by mail but also may include
telephone or oral communications by representatives of PaineWebber Incorporated
('PaineWebber'), who will not receive any compensation therefor from the Funds,
or by Shareholder Communications Corporation, professional proxy solicitors
retained by the Funds, who will be paid fees and expenses of up to approximately
$2,000 for soliciting services. Management does not know of any single
shareholder or 'group' (as that term is used in Section 13(d) of the Securities
Exchange Act of 1934) who beneficially owns 5% or more of the shares of either
Fund as of the Record Date. Trustees and officers of PW Trust own in the
aggregate less than 1% of the shares of PW Fund.
Approval of the Reorganization Plan requires the affirmative vote of a
'majority of the outstanding voting securities' of PW/KP Fund. As defined in the
Investment Company Act of 1940 ('1940 Act'), 'majority of the outstanding voting
securities' means the lesser of (1) 67% of PW/KP Fund's shares present at a
meeting of shareholders if the owners of more than 50% of PW/KP Fund's shares
then outstanding are present in person or by proxy, or (2) more than 50% of
PW/KP Fund's outstanding shares. Each outstanding full share of PW/KP Fund is
entitled to one vote, and each outstanding fractional share thereof is entitled
to a proportionate fractional share of one vote. If the Reorganization Plan is
not approved by the requisite vote of the shareholders of PW/KP Fund, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. Although the shareholders of PW/KP Fund
may exchange or redeem out of the Fund, they do not have the appraisal rights
that may be accorded to shareholders of corporations that propose similar types
of reorganizations under the laws of some states.
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement, the Prospectuses of the Funds (which are incorporated
herein by this reference), and the Reorganization Plan. Shareholders should read
this Proxy Statement and the Prospectus of PW Fund carefully. As discussed more
fully below, the board of trustees of PW/KP Trust believes that the
Reorganization will benefit PW/KP Fund's shareholders. PW Fund has an investment
objective substantially identical to the investment objective of PW/KP Fund,
although its investment strategy may differ from the investment strategy of
PW/KP Fund in some respects. It is anticipated that, following the
Reorganization, the shareholders of PW/KP Fund will, as shareholders of PW Fund,
be subject to lower total operating expenses as a percentage of net assets.
THE REORGANIZATION
The Reorganization Plan was considered and approved by the boards of
trustees of PW/KP Trust and PW Trust (each a 'Trust' and collectively, 'Trusts')
at meetings held on July 20, 1995. The Reorganization Plan provides for the
acquisition of the assets of PW/KP Fund by PW Fund, in exchange solely for
shares of PW Fund
2
<PAGE>
and the assumption by PW Fund of the liabilities of PW/KP Fund. PW/KP Fund then
will distribute those shares to its shareholders, so that each PW/KP Fund
shareholder will receive the number of full and fractional shares of PW Fund
that is equal in value to such shareholder's holdings in PW/KP Fund as of the
Closing Date (defined below). PW/KP Fund then will be terminated as soon as
practicable thereafter.
The exchange of PW/KP Fund's assets for PW Fund shares and PW Fund's
assumption of its liabilities will occur as of 12:00 noon, Eastern time, on
November 13, 1995, or such later date as the conditions to the closing are
satisfied ('Closing Date').
Each Fund currently offers a single class of shares. PW Fund shares are
offered primarily to clients of PaineWebber and its correspondent firms who are
participants in the Resource Management Account ('RMA') or Business Services
Account ('BSA') programs. Shareholders of PW/KP Fund who receive shares of PW
Fund in the Reorganization may be eligible to become participants in the RMA or
BSA programs but will not become participants in such programs automatically.
Among the features of the RMA and BSA programs is a daily sweep of uninvested
cash in amounts of $1.00 or more into a designated money market fund. PW/KP Fund
shareholders who receive shares of PW Fund in the Reorganization but who do not
choose to participate in the RMA or BSA programs will have uninvested cash of
$5,000 or more swept into PW Fund on a daily basis, with amounts below $5,000
swept weekly. The RMA and BSA programs include a full array of premier account
services, such as checkwriting, a Gold or Business Card MasterCard and toll-free
telephone access to a customer service center. The features of the RMA and BSA
programs are summarized in the PW Fund Statement of Additional Information.
For the reasons set forth below under 'The Proposed Transaction--Reasons
for the Reorganization,' the board of trustees of PW/KP Trust, including the
trustees who are not 'interested persons' of either Trust as that term is
defined in the 1940 Act ('Independent Trustees'), has determined that the
Reorganization is in the best interests of PW/KP Fund, that the terms of the
Reorganization are fair and reasonable and that the interests of PW/KP Fund's
shareholders will not be diluted as a result of the Reorganization. Accordingly,
PW/KP Trust's board of trustees recommends approval of the transaction. In
addition, PW Trust's board of trustees, including its Independent Trustees, has
determined that the Reorganization is in the best interests of PW Fund, that the
terms of the Reorganization are fair and reasonable and that the interests of PW
Fund's shareholders will not be diluted as a result of the Reorganization.
COMPARATIVE FEE TABLE
The following tables show (1) transaction expenses currently incurred by
shareholders of each Fund, and transaction expenses that each shareholder will
incur after giving effect to the Reorganization, and (2) the current fees and
expenses incurred for the fiscal year ended June 30, 1995 by PW Fund and the
twelve months ended June 30, 1995 (unaudited) by PW/KP Fund, and pro forma fees
for PW Fund after giving effect to the Reorganization.
SHAREHOLDER TRANSACTION EXPENSES
COMBINED
PW/KP FUND PW FUND FUND
---------- ------- --------
Sales charge on purchases of shares.............. None None None
Sales charge on reinvested dividends............. None None None
Redemption fee or deferred sales charge.......... None None None
3
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
COMBINED FUND(1)
PW/KP FUND PW FUND(1) (PRO FORMA)
---------- ---------- ----------------
Management Fees..................... 0.50% 0.50% 0.50%
12b-1 Fees.......................... 0.12% 0.08% 0.08%
Other Expenses...................... 0.19% 0.13% 0.11%
---- ---- ----
Total Fund Operating Expenses....... 0.81%(2) 0.71%(3) 0.69%
---- ---- ----
---- ---- ----
- ------------------
(1) PaineWebber currently charges an annual $85 account charge for the RMA
program including the Gold MasterCard without a line of credit. The fee for
clients who choose a line of credit for their Gold MasterCard is $125. The
annual account charge for the BSA program, including the MasterCard Business
Card, is $125 ($165 with a line of credit). The account charges are not
included in the table because certain non-RMA and non-BSA participants are
permitted to purchase shares of PW Fund.
(2) PW/KP Fund's ratios of Total Fund Operating Expenses as a percentage of
average net assets were 0.78% and 0.80%, respectively, for the fiscal year
ended October 31, 1994 and for the six-month period ended April 30, 1995
(unaudited).
(3) The ratio of Total Fund Operating Expenses as a percentage of net assets
included in the table for PW Fund has been restated to reflect current fees
and expenses (i.e., absent any fee waiver). Total Fund Operating Expenses
for the fiscal year ended June 30, 1995 were 0.68%, as a result of the fee
waiver in effect during that period.
EXAMPLE OF EFFECT ON FUND EXPENSES
The following illustrates the expenses on a $1,000 investment under the
fees and expenses stated above, assuming a 5% annual return.
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
PW/KP Fund................ $8 $26 $ 45 $ 100
PW Fund................... $7 $23 $ 40 $ 88
Combined Fund............. $7 $22 $ 38 $ 86
This Example assumes that all dividends are reinvested, that the percentage
amounts listed under Annual Fund Operating Expenses remain the same in the years
shown, and that the shares are redeemed at the end of each time period shown.
The above tables and the assumption in this Example of a 5% annual return are
required by regulations of the Securities and Exchange Commission ('SEC')
applicable to all mutual funds; the assumed 5% annual return is not a prediction
of, and does not represent, the projected or actual performance of either Fund.
This Example should not be considered a representation of past or future
expenses, and each Fund's actual expenses may be more or less than those shown.
The actual expenses of each Fund will depend upon, among other things, the level
of its average net assets and the extent to which it incurs variable expenses,
such as transfer agency costs.
4
<PAGE>
FORMS OF ORGANIZATION
Each Trust is an open-end management investment company organized as a
Massachusetts business trust. Each Trust's Declaration of Trust authorizes its
trustees to issue an unlimited number of full and fractional shares of one or
more series, par value $.001. The Trusts do not issue share certificates. The
Trusts are also not required to (and do not) hold annual shareholder meetings.
PW Fund, a non-diversified series of PW Trust, commenced operations on
November 10, 1988. PW/KP Fund, a non-diversified series of PW/KP Trust,
commenced operations on February 1, 1991.
Shareholders of a Massachusetts business trust may, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust of each Trust expressly disclaims, and provides
indemnification against, such liability. Accordingly, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which a Fund itself would be unable to meet its
obligations, a possibility that PaineWebber, the investment adviser of each
Fund, believes is remote and, thus, does not pose a material risk.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each Fund are set forth below.
There can be no assurance that either Fund will achieve its investment
objective, and while each Fund seeks to maintain a stable net asset value of
$1.00 per share, there can be no assurance it will be able to do so.
PW Fund. The investment objective of PW Fund is to provide maximum current
income exempt from federal income tax and New York State and New York City
personal income taxes, consistent with liquidity and conservation of capital.
The Fund seeks to achieve its objective by investing principally in high-grade
New York Municipal Securities (defined below) with remaining maturities of 13
months or less. Except for temporary purposes, it invests at least 80%, and
seeks to invest 100%, of its net assets in municipal securities issued by New
York State, its municipalities and public authorities and other issuers if such
obligations pay interest exempt from federal income tax as well as New York
State and New York City personal income taxes ('New York Municipal Securities').
PW Fund will invest only in New York Municipal Securities that are 'First Tier
Securities.' First Tier Securities are obligations that Mitchell Hutchins Asset
Management Inc. ('Mitchell Hutchins') (as sub-adviser and sub-administrator to
the Fund) determines, pursuant to procedures adopted by PW Trust's board of
trustees, present minimal credit risks and are either (1) rated in the highest
rating category by at least two nationally recognized statistical rating
organizations ('NRSROs'), (2) rated in the highest rating category by a single
NRSRO if only that NRSRO has assigned the obligation a rating or (3) unrated,
but determined by Mitchell Hutchins to be of comparable quality.
Under normal market conditions, the Fund intends to invest in New York
Municipal Securities that pay interest that is not a tax preference item for
purposes of the federal alternative minimum tax ('AMT'), but may invest in
securities that pay interest that is such a tax preference item if, in Mitchell
Hutchins' judgment, market conditions warrant.
Instruments in which the Fund may invest include variable- and
floating-rate securities with remaining maturities of 13 months or more issued
by municipal issuers (if subject to a demand feature exercisable within 13
months or less), industrial development bonds, private activity bonds and
participation interests in the foregoing. The Fund may also purchase put bonds
(a municipal bond that gives the holder the unconditional right to sell the bond
back to the issuer or a third party at a specified price and exercise date). The
Fund may also enter into repurchase agreements but does not intend to do so
except as a temporary measure and under unusual
5
<PAGE>
circumstances. The Fund may borrow money for temporary purposes, but not in an
amount in excess of 10% of its total assets at the time of borrowing.
PW/KP Fund. The investment objective of PW/KP Fund is to maximize current
income exempt from federal income tax and New York State and New York City
personal income taxes, consistent with the preservation of capital and
maintenance of liquidity. The Fund seeks to achieve this objective by investing
primarily in debt securities of New York State, its political subdivisions,
authorities and corporations, the interest from which is, in the opinion of bond
counsel to the issuer, exempt from federal and state income tax ('New York
Municipal Obligations'). To the extent acceptable New York Municipal Obligations
are not available for investment, the Fund will invest in debt securities the
interest from which is exempt from federal income tax in the opinion of bond
counsel to the issuer ('municipal obligations'). It is a fundamental policy of
the Fund that it invest at least 80% of the value of its net assets (except when
maintaining a temporary defensive position) in municipal obligations and at
least 65% in New York Municipal Obligations.
All of the instruments purchased by the Fund have a remaining maturity of
397 days or less. In compliance with Rule 2a-7 under the 1940 Act, the Fund
invests only in U.S. dollar-denominated securities determined in accordance with
procedures established by PW/KP Trust's board of trustees to present minimal
credit risks and which are rated in one of the two highest rating categories for
debt obligations by at least two NRSROs (or one NRSRO if the instrument was
rated only by one such organization) or, if unrated, are of comparable quality
as determined in accordance with procedures established by the board of
trustees. The Fund may invest more than 25% of the value of its total assets in
industrial development bonds that are backed only by the assets and revenues of
the non-governmental users. The Fund may also purchase floating- and
variable-rate demand obligations and participation interests in municipal
obligations from financial institutions. The Fund may enter into repurchase
agreements. The Fund may borrow money from banks, but only for temporary or
emergency purposes (not for leveraging), in an amount up to 15% of total assets.
Other Policies of the Funds. Each Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less. Both Funds may invest 25% or more of the
value of their assets in securities the interest on which is paid from similar
types of projects. Both Funds may invest up to 20% of total assets in taxable
short-term investments, for other than defensive purposes. Each Fund will invest
no more than 10% of its net assets in illiquid securities. Both Funds may
acquire stand-by commitments with respect to municipal securities and may
purchase municipal securities on a 'when-issued' basis.
OPERATIONS OF PW FUND FOLLOWING THE REORGANIZATION
As noted above, there are some differences in the investment policies of
the two Funds, including the restriction of PW Fund to investment in First Tier
Securities. It is not expected, however, that PW Fund will revise its investment
policies following the Reorganization to reflect those of PW/KP Fund. Based on
its review of the investment portfolios of each Fund, Mitchell Hutchins believes
that all of the assets held by PW/KP Fund will be consistent with the investment
policies of PW Fund and thus can be transferred to and held by PW Fund if the
Reorganization is approved.
PURCHASES AND REDEMPTIONS
Shares of each Fund are available only through PaineWebber and its
correspondent firms. There is no minimum initial investment in PW Fund. PW Fund
shares are offered primarily to clients of PaineWebber and its correspondent
firms who are participants in the RMA or BSA programs. Shares of PW/KP Fund may
be purchased only by existing shareholders of PW/KP Fund through their
PaineWebber brokerage accounts.
6
<PAGE>
Shares of each Fund may be redeemed at their net asset value per share next
determined after a redemption request is properly received. Within three
Business Days after receipt of the request, redemption proceeds will be credited
to the shareholder's account or sent to the shareholder. A 'Business Day' is any
day on which the offices of a Fund's custodian and the New York City offices of
PaineWebber and PaineWebber's bank are all open for business. Clients of
PaineWebber or its correspondent firms may redeem shares for their Fund account
by wire, telephone or by mail.
If the Reorganization is approved, shares of PW/KP Fund will cease to be
offered on November 10, 1995, so that shares of PW/KP Fund will no longer be
available for purchase or exchange thereafter. If the Meeting is adjourned and
the Reorganization is approved on a later date, PW/KP Fund shares will no longer
be available for purchase or exchange on the Business Day following the date on
which the Reorganization is approved and all contingencies are met. Redemptions
of PW/KP Fund's shares and exchanges of such shares for shares of any other
PaineWebber/Kidder, Peabody fund may be effected through the Closing Date.
EXCHANGES
The exchange policies of the Funds differ. Shares of PW Fund are not
exchangeable for shares of any other fund, while shares of PW/KP Fund are
exchangeable for shares of other PaineWebber/Kidder, Peabody funds. After the
Reorganization, shares of PW Fund will continue to be not exchangeable.
DIVIDENDS
Each Business Day, each Fund declares as dividends all of its net
investment income. Dividends are accrued to shareholder accounts daily and are
automatically paid in additional Fund shares monthly. Shares begin earning
dividends on the day of purchase; shares do not earn dividends on the day of
redemption. Net investment income includes accrued interest and earned discount
(including original issue discount and market discount), less amortization of
market premium and accrued expenses. Daily dividends declared by each Fund do
not include any net investment income attributable to the accretion of market
discount on municipal obligations. Any such amounts, which are taxable to each
Fund's shareholders, are distributed annually, unless more frequent
distributions are necessary to maintain a Fund's net asset value per share at
$1.00 or to avoid income or excise taxes.
Each Fund distributes its net short-term capital gain, if any, annually but
may make more frequent distributions of such gain if necessary to maintain its
net asset value per share at $1.00 or to avoid income or excise taxes. The Funds
do not expect to realize net long-term capital gain and thus do not anticipate
payment of any long-term capital gain distributions.
On or before the Closing Date, PW/KP Fund will declare as a dividend
substantially all of its net tax-exempt interest income, taxable net investment
income and net short-term capital gain, if any, and distribute that amount plus
any previously declared but unpaid dividends, in order to continue to maintain
its tax status as a regulated investment company. Such distributions will be
paid only in cash.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
PW/KP Trust has received an opinion of Stroock & Stroock & Lavan, its
counsel, and PW Trust has received an opinion of Kirkpatrick & Lockhart LLP, its
counsel, to the effect that the Reorganization will constitute a tax-free
reorganization within the meaning of section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended ('Code'). Accordingly, no gain or loss will be
recognized to either Fund or its shareholders as a result of the Reorganization.
See 'The Proposed Transaction--Federal Income Tax Considerations,' page 11.
7
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COMPARISON OF PRINCIPAL RISK FACTORS
Because PW Fund's investment objective is substantially identical, and its
investment policies are generally similar, to those of PW/KP Fund, their
investment risks are generally similar. Such risks are those typically
associated with investing in a money market fund concentrating in one state's
securities, as described below. See the Prospectus of PW Fund, which accompanies
this Proxy Statement, for a more detailed discussion of risks associated with
investment in PW Fund.
Risk of Investment in New York Municipal Securities. The principal risk of
investing in PW Fund, after the Reorganization, is the same as the risk of
investing in either Fund before the Reorganization. That risk is the risk of
concentrating investments in one state. Concentration in New York Municipal
Securities involves greater risks than investments in a broader geographic
region. The Fund's yield and its ability to maintain a constant net asset value
per share can be affected by political and economic developments within the
State of New York ('State') and by the financial condition of the State, its
public authorities and political subdivisions, particularly the City of New York
('City'). Although the State reduced its accumulated General Fund deficits and
experienced operating surpluses in its fiscal year ('FY') 1991-92 through
1993-94, it continues to experience substantial financial difficulties related
to the recent recession, resulting in, among other things, reductions in General
Fund receipts. An estimated budget gap of approximately $4.7 billion is
projected for FY 1995-96, unless numerous and substantial corrective measures
are successfully implemented. The City (which is constrained in its fiscal
flexibility by an already heavy local tax burden, urgent social needs and its
extensive and deteriorating infrastructure) and most suburban county governments
have experienced serious fiscal problems related to the recessionary performance
of the regional economy, which has caused substantial broad-based and recurring
revenue shortfalls. Both the State's and the City's credit ratings have been,
and could be further, impaired.
Tender Option Bonds. Unlike PW Fund, PW/KP Fund is authorized to purchase
tender option bonds, although it has not done so. A tender option bond is a
municipal obligation (generally held pursuant to a custodial arrangement) having
a relatively long maturity, and bearing interest at a fixed rate substantially
higher than prevailing short-term tax exempt rates, that has been coupled with
the agreement of a third party, such as a bank, broker-dealer or other financial
institution, pursuant to which such institution grants the security holders the
option, at periodic intervals, to tender their securities to the institution and
receive the face value thereof. As consideration for providing the option, the
financial institution receives periodic fees equal to the difference between the
municipal obligation's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the securities, coupled with the tender option, to trade at par on
the date of such determination. Thus, after payment of this fee, the security
holder effectively holds a demand obligation that bears interest at the
prevailing short-term tax-exempt rate. In certain instances and for certain
tender option bonds, the option may be terminable in the event of a default in
payment of principal or interest on the underlying municipal obligations and for
other reasons.
THE PROPOSED TRANSACTION
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Reorganization Plan. Significant provisions of
the Reorganization Plan are summarized below; however, this summary is qualified
in its entirety by reference to the Reorganization Plan, which is attached as
Appendix A to this Proxy Statement.
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The Reorganization Plan contemplates (a) the acquisition by PW Fund on the
Closing Date of the assets of PW/KP Fund in exchange solely for PW Fund shares
and the assumption by PW Fund of PW/KP Fund's liabilities, and (b) the
constructive distribution of such shares to the shareholders of PW/KP Fund.
The assets of PW/KP Fund to be acquired by PW Fund include all cash, cash
equivalents, securities, receivables and other property owned by PW/KP Fund. PW
Fund will assume from PW/KP Fund all debts, liabilities, obligations and duties
of PW/KP Fund of whatever kind or nature; provided, however, that PW/KP Fund
will use its best efforts, to the extent practicable, to discharge all of its
known debts, liabilities, obligations and duties prior to the Closing Date. PW
Fund also will deliver its shares to PW/KP Fund, which then will be
constructively distributed to PW/KP Fund's shareholders.
The value of PW/KP Fund's assets to be acquired, and the amount of its
liabilities to be assumed, by PW Fund, and the net asset value of a share of PW
Fund, will be determined as of 12:00 noon on the Closing Date. The amortized
cost method will be used in valuing each Fund's securities. All other assets and
liabilities will be valued at fair value as determined in good faith by or under
the direction of each Trust's board of trustees, as applicable.
On, or as soon as practicable after, the Closing Date, PW/KP Fund will
distribute pro rata to its shareholders of record the shares of PW Fund it
received so that each PW/KP Fund shareholder will receive a number of full and
fractional shares of PW Fund equal in value to the shareholder's holdings in
PW/KP Fund; PW/KP Fund will be terminated as soon as practicable thereafter.
Such distribution will be accomplished by opening accounts on the books of PW
Fund in the names of PW/KP Fund shareholders and by transferring thereto the
shares previously credited to the account of PW/KP Fund on those books.
Fractional shares of PW Fund will be rounded to the third decimal place.
Accordingly, immediately after the Reorganization, each former shareholder
of PW/KP Fund will own shares of PW Fund that will be equal in value to that
shareholder's shares of PW/KP Fund immediately prior to the Reorganization.
Moreover, because shares of PW Fund will be issued at net asset value in
exchange for the net assets of PW/KP Fund, the aggregate net asset value of PW
Fund shares so issued will equal the aggregate net asset value of PW/KP Fund
shares. The net asset value per share of PW Fund will be unchanged by the
transaction. Thus, the Reorganization will not result in a dilution of any
shareholder's interest.
Any transfer taxes payable upon issuance of shares of PW Fund in a name
other than that of the registered holder of the shares on the books of PW/KP
Fund shall be paid by the person to whom such shares are to be issued as a
condition of such transfer. Any reporting responsibility of PW/KP Fund will
continue to be its responsibility up to and including the Closing Date and such
later date on which it is terminated.
The cost of the Reorganization, including professional fees and the cost of
soliciting proxies for the Meeting, consisting principally of printing and
mailing expenses, together with the cost of any supplementary solicitation, will
be borne by the Funds in proportion to their respective net assets. Mitchell
Hutchins recommended this method of expense allocation to the trustees of the
Trusts. Mitchell Hutchins based its recommendations on its belief that this
method is fair because, for the reasons discussed under 'Reasons for the
Reorganization,' the Reorganization has the potential to benefit both Funds. The
trustees of each Trust considered this expense allocation method in approving
the Reorganization and in finding that the Reorganization is in the best
interests of their respective Fund.
The consummation of the Reorganization is subject to a number of conditions
set forth in the Reorganization Plan, some of which may be waived by each Trust.
In addition, the Reorganization Plan may be amended in any mutually agreeable
manner, except that no amendment may be made subsequent to the Meeting that has
a material adverse effect on the shareholders' interests.
9
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REASONS FOR THE REORGANIZATION
The board of trustees of PW/KP Trust, including a majority of its
Independent Trustees, has determined that the Reorganization is in the best
interests of PW/KP Fund, that the terms of the Reorganization are fair and
reasonable and that the interests of PW/KP Fund's shareholders will not be
diluted as a result of the Reorganization. The board of trustees of PW Trust,
including a majority of its Independent Trustees, has determined that the
Reorganization is in the best interests of PW Fund, that the terms of the
Reorganization are fair and reasonable and that the interests of PW Fund's
shareholders will not be diluted as a result of the Reorganization.
In considering the Reorganization, the boards of trustees made an extensive
inquiry into a number of factors, including the following:
(1) the compatibility of the investment objectives, policies and
restrictions of the Funds;
(2) the investment performance of the Funds;
(3) the effect of the Reorganization on the expense ratio of PW Fund
relative to each Fund's current expense ratio;
(4) the costs to be incurred by each Fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) possible alternatives to the Reorganization, including continuing
to operate on a stand-alone basis or liquidation; and
(7) the potential benefits of the Reorganization to other persons,
especially PaineWebber and Mitchell Hutchins.
The Reorganization was recommended to each Trust's board of trustees by
Mitchell Hutchins at meetings thereof held on July 20, 1995. In approving the
Reorganization, the boards of trustees took into account the fact that the Funds
have substantially identical investment objectives and generally similar
investment policies with the differences noted and that Mitchell Hutchins did
not believe there was a compelling reason to offer two separate New York
municipal money market funds. In approving the proposed transaction, the boards
of trustees also took account of Mitchell Hutchins' opinion that PW Fund's
objective of achieving maximum current income exempt from federal income tax and
New York State and New York City personal income taxes by investing principally
in New York Municipal Securities remains an appropriate one to offer to
investors as part of an overall investment strategy.
The boards were advised by Mitchell Hutchins that combining the two Funds
would eliminate duplicative expenses and achieve other economies of scale in
connection with custody fees, state registration fees, printing expenses,
trustees fees and legal and audit expenses. In approving the Reorganization, the
boards considered the fact that the combined Fund would have lower operating
expenses as a percentage of net assets than either Fund. The board of PW Trust
considered the fact that the impact of these lower expenses would not be
immediately apparent to shareholders of PW Fund, as PaineWebber had been waiving
a portion of its fee with respect to PW Fund, but noted that the fee waiver was
voluntary and could be discontinued at any time.
THE BOARD OF TRUSTEES RECOMMENDS THAT THE
SHAREHOLDERS OF PW/KP FUND VOTE 'FOR' THE REORGANIZATION
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DESCRIPTION OF SECURITIES TO BE ISSUED
PW Trust is registered with the SEC as an open-end management investment
company. Its trustees are authorized to issue an unlimited number of shares of
beneficial interest of separate series (par value $.001 per share). The trustees
have established PW Fund as one of PW Trust's two series and have authorized the
public offering of a single class of shares of PW Fund. Shares of PW Fund
entitle their holders to one vote per full share and fractional votes for
fractional shares held. On the Closing Date, PW Fund will have outstanding a
single class of shares. Each share of PW Fund is entitled to participate equally
in dividends and the proceeds of any liquidation.
PW Trust does not hold annual meetings of shareholders. There will normally
be no meetings of shareholders for the purpose of electing trustees unless fewer
than a majority of the trustees holding office have been elected by
shareholders, at which time the trustees then in office will call a
shareholders' meeting for the election of trustees. Under the 1940 Act,
shareholders of record of at least two-thirds of the outstanding shares of an
investment company may remove a trustee by votes cast in person or by proxy at a
meeting called for that purpose. The trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
trustee when requested in writing to do so by the shareholders of record holding
at least 10% of the Trust's outstanding shares.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of PW/KP Fund's assets for shares of PW Fund and PW Fund's
assumption of PW/KP Fund's liabilities is intended to qualify for federal income
tax purposes as a tax-free reorganization under section 368(a)(1)(C) of the
Code. PW/KP Trust has received an opinion of Stroock & Stroock & Lavan, its
counsel, and PW Trust has received an opinion of Kirkpatrick & Lockhart LLP, its
counsel, each substantially to the effect that:
(1) PW Fund's acquisition of PW/KP Fund's assets in exchange solely
for PW Fund shares and PW Fund's assumption of PW/KP Fund's liabilities,
followed by PW/KP Fund's distribution of those shares to its shareholders
constructively in exchange for their PW/KP Fund shares, will constitute a
'reorganization' within the meaning of section 368(a)(1)(C) of the Code,
and each Fund will be 'a party to a reorganization' within the meaning of
section 368(b) of the Code;
(2) No gain or loss will be recognized to PW/KP Fund on the transfer
to PW Fund of its assets in exchange solely for PW Fund shares and PW
Fund's assumption of PW/KP Fund's liabilities or on the subsequent
distribution of those shares to PW/KP Fund's shareholders in constructive
exchange for their PW/KP Fund shares;
(3) No gain or loss will be recognized to PW Fund on its receipt of
the transferred assets in exchange solely for PW Fund shares and its
assumption of PW/KP Fund's liabilities;
(4) PW Fund's basis for the transferred assets will be the same as the
basis thereof in PW/KP Fund's hands immediately prior to the
Reorganization, and PW Fund's holding period for those assets will include
PW/KP Fund's holding period therefor;
(5) A PW/KP Fund shareholder will recognize no gain or loss on the
constructive exchange of all its PW/KP Fund shares solely for PW Fund
shares pursuant to the Reorganization; and
(6) A PW/KP Fund shareholder's basis for PW Fund shares to be received
by it in the Reorganization will be the same as the basis for its PW/KP
Fund shares to be constructively surrendered in exchange for those PW Fund
shares, and its holding period for those PW Fund shares will include its
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holding period for those PW/KP Fund shares, provided they are held as
capital assets by the shareholder on the Closing Date.
Each such opinion states that no opinion is expressed as to the effect of the
Reorganization on the Funds or any shareholder with respect to any asset as to
which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Shareholders of PW/KP Fund should consult their tax advisers regarding the
effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, those shareholders also should
consult their tax advisers as to state and local tax consequences, if any, of
the Reorganization.
CAPITALIZATION
The following table shows the capitalization of each Fund as of June 30,
1995 (unaudited, with respect to PW/KP Fund), and on a pro forma combined basis
(unaudited) as of that date, giving effect to the Reorganization:
COMBINED FUND
PW FUND PW/KP FUND (PRO FORMA)
------- ---------- -------------
Net Assets........................... $192,798,770 $47,254,185 $240,052,955
Net Asset Value Per Share............ $1.00 $1.00 $1.00
Shares Outstanding................... 192,932,698 47,256,106 240,188,804
MISCELLANEOUS
AVAILABLE INFORMATION
Each Trust is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act and in accordance therewith files reports,
proxy materials and other information with the SEC. Such reports, proxy
materials and other information can be inspected and copied at the Public
Reference Room maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of such materials can also be obtained from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington, D.C. 20549 at prescribed rates.
LEGAL MATTERS
Certain legal matters in connection with the issuance of PW Fund shares as
part of the Reorganization will be passed upon by Kirkpatrick & Lockhart LLP,
counsel to PW Trust.
EXPERTS
The financial statements of PW Fund and PW/KP Fund, incorporated herein by
reference and incorporated by reference or included in each Fund's Statement of
Additional Information, have been audited by Ernst & Young LLP, independent
auditors, and Deloitte & Touche LLP, independent auditors, respectively, whose
reports thereon are included in the Funds' Annual Reports to Shareholders for
the fiscal years ended June 30, 1995, and October 31, 1994, respectively. The
financial statements audited by Ernst & Young LLP and Deloitte & Touche LLP have
been incorporated herein by reference in reliance on their reports given on
their authority as experts in auditing and accounting.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ('Agreement') is
made as of September 1, 1995, between PaineWebber Managed Municipal Trust, a
Massachusetts business trust ('PW Trust'), on behalf of PaineWebber RMA New York
Municipal Money Fund, a segregated portfolio of assets ('series') thereof
('Acquiring Fund'), and PaineWebber/Kidder, Peabody Municipal Money Market
Series, a Massachusetts business trust ('PW/KP Trust'), on behalf of its
PaineWebber/Kidder, Peabody Municipal Money Market Series--New York Series
('Target'). (Acquiring Fund and Target are sometimes referred to herein
individually as a 'Fund' and collectively as the 'Funds,' and PW Trust and PW/KP
Trust are sometimes referred to herein individually as an 'Investment Company'
and collectively as the 'Investment Companies.')
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ('Code'). The reorganization will involve the transfer to
Acquiring Fund of Target's assets solely in exchange for voting shares of
beneficial interest in Acquiring Fund ('Acquiring Fund Shares') and the
assumption by Acquiring Fund of Target's liabilities, followed by the
constructive distribution of the Acquiring Fund Shares to the holders of shares
of beneficial interest in Target ('Target Shares') in exchange therefor, all
upon the terms and conditions set forth herein. The foregoing transactions are
referred to herein as the 'Reorganization.' All agreements, representations,
actions, and obligations described herein made or to be taken or undertaken by
either Fund are made and shall be taken or undertaken by PW Trust on behalf of
Acquiring Fund and by PW/KP Trust on behalf of Target.
In consideration of the mutual promises herein, the parties covenant and
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION OF TARGET
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ('Assets') to Acquiring Fund. Acquiring
Fund agrees in exchange therefor:
(a) to issue and deliver to Target the number of full and fractional
Acquiring Fund Shares determined by dividing the net value of Target
(computed as set forth in paragraph 2.1) by the net asset value (computed
as set forth in paragraph 2.2) ('NAV') of an Acquiring Fund Share; and
(b) to assume all of Target's liabilities described in paragraph 1.3
('Liabilities').
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement,
including without limitation Target's share of
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the expenses described in paragraph 7.2. Notwithstanding the foregoing, Target
agrees to use its best efforts to discharge all of its known Liabilities prior
to the Effective Time.
1.4. Before the Effective Time, Target shall declare and pay to its
shareholders a dividend in an amount large enough so that it will have
distributed substantially all (and in any event not less than 90%) of its
investment company taxable income (computed without regard to any deduction for
dividends paid) and net interest income excludable from gross income under
section 103(a) of the Code for the current taxable year through the Effective
Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiring Fund Shares
received by it pursuant to paragraph 1.1 to Target's shareholders of record,
determined as of the Effective Time (collectively 'Shareholders' and
individually a 'Shareholder'), in exchange for their Target Shares. Such
distribution shall be accomplished by the Funds' transfer agent ('Transfer
Agent') opening accounts on Acquiring Fund's share transfer books in the
Shareholders' names and transferring such Acquiring Fund Shares thereto. Each
Shareholder's account shall be credited with the respective pro rata number of
full and fractional (rounded to the third decimal place) Acquiring Fund Shares
due that Shareholder. All outstanding Target Shares, including any represented
by certificates, shall simultaneously be canceled on Target's share transfer
records. Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, Target shall be terminated as a series of
PW/KP Trust and any further actions shall be taken in connection therewith as
required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of 12:00 noon on the date of the Closing
('Valuation Time'), using the valuation procedures set forth in Target's
then-current prospectus and statement of additional information less (b) the
amount of the Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund Share
shall be computed as of the Valuation Time, using the valuation procedures set
forth in Acquiring Fund's then-current prospectus and statement of additional
information.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of Mitchell Hutchins Asset Management Inc.
2.4. If the difference between the NAVs per share of the Funds equals or
exceeds $.0025 at the Valuation Time, or such earlier or later day and time as
the parties may agree and set forth in writing signed by their duly authorized
officers, as computed by using the market values of the Funds' assets in
accordance with the policies and procedures established by the Funds (or as
otherwise mutually determined by the Investment
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Companies' boards of trustees), either Fund may postpone the Valuation Time
until such time as such per share NAV difference is less than $.0025.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ('Closing'), shall occur at the Funds' principal office on November 13,
1995, or at such other place and/or on such other date as the parties may agree.
All acts taking place at the Closing shall be deemed to take place
simultaneously as of 12:00 noon on the date thereof or at such other time as the
parties may agree ('Effective Time'). If, immediately before the Valuation Time,
(a) the New York Stock Exchange, Inc. ('NYSE') is closed to trading or trading
thereon is restricted or (b) trading or the reporting of trading on the NYSE or
elsewhere is disrupted, so that accurate appraisal of the net value of Target
and the NAV per Acquiring Fund Share is impracticable, the Effective Time shall
be postponed until the first business day after the day when such trading shall
have been fully resumed and such reporting shall have been restored.
3.2. PW/KP Trust shall deliver to PW Trust at the Closing a schedule of the
Assets as of the Effective Time, which shall set forth for all portfolio
securities included therein their adjusted tax basis and holding period by lot.
Target's custodian shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets held by the custodian will be transferred to
Acquiring Fund at the Effective Time and (b) all necessary taxes in conjunction
with the delivery of the Assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has been
made.
3.3. PW/KP Trust shall deliver to PW Trust at the Closing a list of the
names and addresses of the Shareholders and the number of outstanding Target
Shares owned by each Shareholder, all as of the Effective Time, certified by the
Secretary or Assistant Secretary of PW/KP Trust. The Transfer Agent shall
deliver at the Closing a certificate as to the opening on Acquiring Fund's share
transfer books of accounts in the Shareholders' names. PW Trust shall issue and
deliver a confirmation to PW/KP Trust evidencing the Acquiring Fund Shares to be
credited to Target at the Effective Time or provide evidence satisfactory to
PW/KP Trust that such Acquiring Fund Shares have been credited to Target's
account on Acquiring Fund's books. At the Closing, each party shall deliver to
the other such bills of sale, checks, assignments, stock certificates, receipts,
or other documents as the other party or its counsel may reasonably request.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. PW/KP Trust is an unincorporated voluntary association with
transferable shares organized as a business trust under a written
instrument ('Business Trust'); it is duly organized, validly existing, and
in good standing under the laws of the Commonwealth of Massachusetts; and a
copy of its Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts;
4.1.2. PW/KP Trust is duly registered as an open-end management
investment company under the Investment Company Act of 1940 ('1940 Act'),
and such registration will be in full force and effect at the Effective
Time;
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4.1.3. Target is a duly established and designated series of PW/KP
Trust;
4.1.4. At the Closing, Target will have good and marketable title to
the Assets and full right, power, and authority to sell, assign, transfer,
and deliver the Assets free of any liens or other encumbrances; and upon
delivery and payment for the Assets, Acquiring Fund will acquire good and
marketable title thereto;
4.1.5. Target's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the Securities Act of 1933 ('1933 Act') and the 1940 Act and the rules
and regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.1.6. Target is not in violation of, and the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby
will not conflict with or violate, Massachusetts law or any provision of
PW/KP Trust's Declaration of Trust or By-Laws or of any agreement,
instrument, lease, or other undertaking to which Target is a party or by
which it is bound or result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which Target is a party or by which it is bound, except as previously
disclosed in writing to and accepted by PW Trust;
4.1.7. Except as disclosed in writing to and accepted by PW Trust, all
material contracts and other commitments of or applicable to Target (other
than this Agreement and investment contracts) will be terminated, or
provision for discharge of any liabilities of Target thereunder will be
made, at or prior to the Effective Time, without either Fund's incurring
any liability or penalty with respect thereto and without diminishing or
releasing any rights Target may have had with respect to actions taken or
omitted to be taken by any other party thereto prior to the Closing;
4.1.8. Except as otherwise disclosed in writing to and accepted by PW
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Target's
knowledge) threatened against PW/KP Trust with respect to Target or any of
its properties or assets that, if adversely determined, would materially
and adversely affect Target's financial condition or the conduct of its
business; Target knows of no facts that might form the basis for the
institution of any such litigation, proceeding, or investigation and is not
a party to or subject to the provisions of any order, decree, or judgment
of any court or governmental body that materially or adversely affects its
business or its ability to consummate the transactions contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of PW/KP Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders and receipt of any necessary exemptive relief or
no-action assurances requested from the Securities and Exchange Commission
('SEC') or its staff with respect to sections 17(a) and 17(d) of the 1940
Act, this Agreement will constitute a valid and legally binding obligation
of Target, enforceable in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights and
by general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
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4.1.11. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934 ('1934 Act'), or the 1940 Act for the execution or performance of this
Agreement by PW/KP Trust, except for (a) the filing with the SEC of a
registration statement by PW Trust on Form N-14 relating to the Acquiring
Fund Shares issuable hereunder, and any supplement or amendment thereto
('Registration Statement'), including therein a prospectus/proxy statement
('Proxy Statement'), (b) receipt of the exemptive relief referenced in
subparagraph 4.1.9, and (c) such consents, approvals, authorizations, and
filings as have been made or received or as may be required subsequent to
the Effective Time;
4.1.12. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by PW Trust for use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary course
of its business;
4.1.14. Target is a 'fund' as defined in section 851(h)(2) of the
Code; it qualified for treatment as a regulated investment company under
Subchapter M of the Code ('RIC') for each past taxable year since it
commenced operations and will continue to meet all the requirements for
such qualification for its current taxable year; and it has no earnings and
profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it. The Assets shall be invested at all times
through the Effective Time in a manner that ensures compliance with the
foregoing;
4.1.15. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of section 368(a)(3)(A) of the Code;
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five or
fewer issuers; and
4.1.17. Target will be terminated as soon as reasonably practicable
after the Reorganization, but in all events within six months after the
Effective Time.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. PW Trust is a Business Trust; it is duly organized, validly
existing, and in good standing under the laws of the Commonwealth of
Massachusetts; and a copy of its Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts;
4.2.2. PW Trust is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
PW Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
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4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued
and outstanding shares of Acquiring Fund, fully paid and non-assessable,
except to the extent that under Massachusetts law shareholders of a
Business Trust may, under certain circumstances, be held personally liable
for its obligations. Except as contemplated by this Agreement, Acquiring
Fund does not have outstanding any options, warrants, or other rights to
subscribe for or purchase any of its shares, nor is there outstanding any
security convertible into any of its shares;
4.2.6. Acquiring Fund's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations thereunder
and do not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Massachusetts law or
any provision of PW Trust's Declaration of Trust or By-Laws or of any
provision of any agreement, instrument, lease, or other undertaking to
which Acquiring Fund is a party or by which it is bound or result in the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree to which Acquiring Fund is a party or by
which it is bound, except as previously disclosed in writing to and
accepted by PW/KP Trust;
4.2.8. Except as otherwise disclosed in writing to and accepted by
PW/KP Trust, no litigation, administrative proceeding, or investigation of
or before any court or governmental body is presently pending or (to
Acquiring Fund's knowledge) threatened against PW Trust with respect to
Acquiring Fund or any of its properties or assets that, if adversely
determined, would materially and adversely affect Acquiring Fund's
financial condition or the conduct of its business; Acquiring Fund knows of
no facts that might form the basis for the institution of any such
litigation, proceeding, or investigation and is not a party to or subject
to the provisions of any order, decree, or judgment of any court or
governmental body that materially or adversely affects its business or its
ability to consummate the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of PW Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to receipt of
any necessary exemptive relief or no-action assurances requested from the
SEC or its staff with respect to sections 17(a) and 17(d) of the 1940 Act,
this Agreement will constitute a valid and legally binding obligation of
Acquiring Fund, enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by PW Trust, except for (a)
the filing with the SEC of the Registration Statement, (b) receipt of the
exemptive relief referenced in subparagraph 4.2.9, and (c) such consents,
approvals, authorizations, and filings as have been made or received or as
may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
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respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by PW/KP Trust for use therein;
4.2.12. Acquiring Fund is a 'fund' as defined in section 851(h)(2) of
the Code; it qualified for treatment as a RIC for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; Acquiring
Fund intends to continue to meet all such requirements for the next taxable
year; and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund have any plan or intention to
redeem or otherwise reacquire any Acquiring Fund Shares issued to the
Shareholders pursuant to the Reorganization, other than through redemptions
arising in the ordinary course of that business;
4.2.14. Acquiring Fund (a) will actively continue Target's business in
substantially the same manner that Target conducted that business
immediately before the Reorganization, (b) has no plan or intention to sell
or otherwise dispose of any of the Assets, except for dispositions made in
the ordinary course of that business and dispositions necessary to maintain
its status as a RIC, and (c) expects to retain substantially all the Assets
in the same form as it receives them in the Reorganization, unless and
until subsequent investment circumstances suggest the desirability of
change or it becomes necessary to make dispositions thereof to maintain
such status;
4.2.15. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or business trust or any
'fund' thereof (within the meaning of section 851(h)(2) of the Code)
following the Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock and securities of
any one issuer and (b) not more than 50% of the value of such assets will
be invested in the stock and securities of five or fewer issuers; and
4.2.17. Acquiring Fund does not own, directly or indirectly, nor at
the Effective Time will it own, directly or indirectly, nor has it owned,
directly or indirectly, at any time during the past five years, any shares
of Target.
4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares, when
received by the Shareholders, will be approximately equal to the fair
market value of their Target Shares constructively surrendered in exchange
therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem or otherwise dispose of any portion of the Acquiring
Fund Shares to be received by them in the Reorganization and (b) does not
anticipate dispositions of those Acquiring Fund Shares at the time of or
soon after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Target as
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a series of an open-end investment company. Consequently, its management
expects that the percentage of Shareholder interests, if any, that will be
disposed of as a result of or at the time of the Reorganization will be de
minimis. Nor does its management anticipate that there will be
extraordinary redemptions of Acquiring Fund Shares immediately following
the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto, plus any liabilities and expenses of the parties
incurred in connection with the Reorganization;
4.3.5. The fair market value on a going concern basis of the Assets
will equal or exceed the Liabilities to be assumed by Acquiring Fund and
those to which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds that
was issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair
market value of the net assets, and at least 70% of the fair market value
of the gross assets, held by Target immediately before the Reorganization.
For the purposes of this representation, any amounts used by Target to pay
its Reorganization expenses and redemptions and distributions made by it
immediately before the Reorganization (except for (a) distributions made to
conform to its policy of distributing all or substantially all of its
income and gains to avoid the obligation to pay federal income tax and/or
the excise tax under section 4982 of the Code and (b) redemptions not made
as part of the Reorganization) will be included as assets thereof held
immediately before the Reorganization;
4.3.8. None of the compensation received by any Shareholder who is an
employee of Target will be separate consideration for, or allocable to, any
of the Target Shares held by such Shareholder-employee; none of the
Acquiring Fund Shares received by any such Shareholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
the consideration paid to any such Shareholder-employee will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services; and
4.3.9. Immediately after the Reorganization, the Shareholders will not
own shares constituting 'control' of Acquiring Fund within the meaning of
section 304(c) of the Code.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that (a)
such ordinary course will include declaring and paying customary dividends and
other distributions and such changes in operations as are contemplated by each
Fund's normal business activities and (b) each Fund will retain exclusive
control of the composition of its portfolio until the Closing; provided that
Target shall not dispose of more than an insignificant portion of its historic
business assets during such period without Acquiring Fund's prior consent.
5.2. Target covenants to call a shareholders' meeting to consider and act
upon this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
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5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist PW Trust in obtaining such
information as PW Trust reasonably requests concerning the beneficial ownership
of Target Shares.
5.5. Target covenants that Target's books and records (including all books
and records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to PW Trust at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or cause to
be taken such further action, as the other Fund may deem necessary or desirable
in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession
of all the Assets, and (b) Target, title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.
5.8. PW Trust covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and such
state securities laws it may deem appropriate in order to continue its
operations after the Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all the obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by PW/KP Trust's board of trustees and shall have
been approved by Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained,
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except where failure to obtain same would not involve a risk of a material
adverse effect on the assets or properties of either Fund, provided that either
Fund may for itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. PW/KP Trust shall have received an opinion of Kirkpatrick & Lockhart
LLP, counsel to PW Trust, substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of PW Trust, a
Business Trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts with power under its Declaration of Trust to
own all of its properties and assets and, to the knowledge of such counsel,
to carry on its business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by PW Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by PW/KP Trust on
behalf of Target, is a valid and legally binding obligation of PW Trust
with respect to Acquiring Fund, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly issued
and outstanding and fully paid and non-assessable, except to the extent
that under Massachusetts law shareholders of a Business Trust may, under
certain circumstances, be held personally liable for its obligations, and
no shareholder of Acquiring Fund has any preemptive right to subscribe for
or purchase such shares;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate PW Trust's Declaration of Trust or By-Laws or any provision of any
agreement (known to such counsel, without any independent inquiry or
investigation) to which PW Trust (with respect to Acquiring Fund) is a
party or by which it is bound or (to the knowledge of such counsel, without
any independent inquiry or investigation) result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which PW Trust (with respect to Acquiring Fund) is a
party or by which it is bound, except as set forth in such opinion or as
previously disclosed in writing to and accepted by PW/KP Trust;
6.4.5. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order of
any court or governmental authority is required for the consummation by PW
Trust on behalf of Acquiring Fund of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act, and the
1940 Act and such as may be required under state securities laws;
6.4.6. PW Trust is registered with the SEC as an investment company,
and to the knowledge of such counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to PW Trust (with respect to Acquiring Fund) or any of its
properties or assets
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attributable or allocable to Acquiring Fund and (b) PW Trust (with respect
to Acquiring Fund) is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially and adversely affects Acquiring Fund's business, except as set
forth in such opinion or as otherwise disclosed in writing to and accepted
by PW/KP Trust.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel, (ii) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (iii) limit such opinion to applicable federal
and state law, and (iv) define the word 'knowledge' and related terms to mean
the knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization.
6.5. PW Trust shall have received an opinion of Stroock & Stroock & Lavan,
counsel to PW/KP Trust, substantially to the effect that:
6.5.1. Target is a duly established series of PW/KP Trust, a Business
Trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts with power under its Declaration of Trust to
own all of its properties and assets and, to the knowledge of such counsel,
to carry on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by PW/KP Trust on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by PW Trust on
behalf of Acquiring Fund, is a valid and legally binding obligation of
PW/KP Trust with respect to Target, enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws relating
to or affecting creditors' rights and by general principles of equity;
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate PW/KP Trust's Declaration of Trust or By-Laws or any provision of
any agreement (known to such counsel, without any independent inquiry or
investigation) to which PW/KP Trust (with respect to Target) is a party or
by which it is bound or (to the knowledge of such counsel, without any
independent inquiry or investigation) result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which PW/KP Trust (with respect to Target) is a
party or by which it is bound, except as set forth in such opinion or as
previously disclosed in writing to and accepted by PW Trust;
6.5.4. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order of
any court or governmental authority is required for the consummation by
PW/KP Trust on behalf of Target of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act, and the
1940 Act and such as may be required under state securities laws;
6.5.5. PW/KP Trust is registered with the SEC as an investment
company, and to the knowledge of such counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to PW/KP Trust (with respect to Target) or any of its
properties or assets attributable or allocable to Target and (b) PW/KP
Trust (with respect to Target) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that
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materially and adversely affects its business, except as set forth in such
opinion or as otherwise disclosed in writing to and accepted by PW Trust.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel, (ii) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (iii) limit such opinion to applicable federal
and state law, and (iv) define the word 'knowledge' and related terms to mean
the knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization.
6.6. PW Trust shall have received an opinion of Kirkpatrick & Lockhart LLP,
its counsel, addressed to and in form and substance satisfactory to it, and
PW/KP Trust shall have received an opinion of Stroock & Stroock & Lavan, its
counsel, addressed to and in form and substance satisfactory to it, each as to
the federal income tax consequences mentioned below (each a 'Tax Opinion'). In
rendering its Tax Opinion, each such counsel may rely as to factual matters,
exclusively and without independent verification, on the representations made in
this Agreement (or in separate letters addressed to such counsel) and the
certificates delivered pursuant to paragraph 3.4. Each Tax Opinion shall be
substantially to the effect that, based on the facts and assumptions stated
therein, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares to the
Shareholders constructively in exchange for the Shareholders' Target
Shares, will constitute a reorganization within the meaning of section
368(a)(1)(C) of the Code, and each Fund will be 'a party to a
reorganization' within the meaning of section 368(b) of the Code;
6.6.2. No gain or loss will be recognized to Target on the transfer to
Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. No gain or loss will be recognized to Acquiring Fund on its
receipt of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same as the
basis thereof in Target's hands immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's basis for the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the basis for its
Target Shares to be constructively surrendered in exchange for those
Acquiring Fund Shares, and its holding period for those Acquiring Fund
Shares will include its holding period for those Target Shares, provided
they are held as capital assets by the Shareholder at the Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, each Tax Opinion may state that
no opinion is expressed as to the effect of the Reorganization on the Funds or
any Shareholder with respect to any asset as to which any unrealized gain or
loss is required to be recognized for federal income tax purposes at the end of
a taxable year (or on the termination or transfer thereof) under a
mark-to-market system of accounting.
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At any time before the Closing, (a) Acquiring Fund may waive any of the
foregoing conditions if, in the judgment of PW Trust's board of trustees, such
waiver will not have a material adverse effect on its shareholders' interests,
and (b) Target may waive any of the foregoing conditions if, in the judgment of
PW/KP Trust's board of trustees, such waiver will not have a material adverse
effect on the Shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
7.2. Except as otherwise provided herein, all expenses incurred in
connection with the transactions contemplated by this Agreement (whether or not
they are consummated) will be borne by the Funds proportionately, as follows:
each such expense will be borne by the Funds in proportion to their respective
net assets as of the close of business on the last business day of the month in
which such expense was incurred. Such expenses include: (a) expenses incurred in
connection with entering into and carrying out the provisions of this Agreement;
(b) expenses associated with the preparation and filing of the Registration
Statement; (c) registration or qualification fees and expenses of preparing and
filing such forms as are necessary under applicable state securities laws to
qualify the Acquiring Fund Shares to be issued in connection herewith in each
state in which Target's shareholders are resident as of the date of the mailing
of the Proxy Statement to such shareholders; (d) printing and postage expenses;
(e) legal and accounting fees; and (f) solicitation costs.
8. ENTIRE AGREEMENT; SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall survive
the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
prior to the Effective Time, (b) if a condition to its obligations has not been
met and it reasonably appears that such condition will not or cannot be met, or
(c) if the Closing has not occurred on or before March 31, 1996; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be
no liability for damages on the part of either Fund, or the trustees or officers
of either Investment Company, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
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<PAGE>
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Massachusetts; provided that, in the
case of any conflict between such laws and the federal securities laws, the
latter shall govern.
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3. The parties acknowledge that each Investment Company is a Business
Trust. Notice is hereby given that this instrument is executed on behalf of each
Investment Company's trustees solely in their capacity as trustees, and not
individually, and that each Investment Company's obligations under this
instrument are not binding on or enforceable against any of its trustees,
officers, or shareholders, but are only binding on and enforceable against the
respective Funds' assets and property. Each Fund agrees that, in asserting any
rights or claims under this Agreement, it shall look only to the other Fund's
assets and property in settlement of such rights or claims and not to such
trustees or shareholders.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its duly authorized officer.
ATTEST: PAINEWEBBER MANAGED MUNICIPAL TRUST,
on behalf of its series,
PAINEWEBBER RMA NEW YORK
MUNICIPAL MONEY FUND
By: /s/ Ilene Shore /s/ Dianne E. O'Donnell
------------------- -----------------------
Assistant Secretary Vice President
ATTEST: PAINEWEBBER/KIDDER, PEABODY MUNICIPAL MONEY
MARKET SERIES, on behalf of its series,
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL
MONEY MARKET SERIES--NEW YORK SERIES
By: /s/ Stephanie H. Johnson /s/ Scott Griff
------------------------ ---------------
Assistant Secretary Vice President
A-14
<PAGE>
PAINEWEBBER/KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES--NEW YORK SERIES
(A SERIES OF PAINEWEBBER/KIDDER, PEABODY MUNICIPAL MONEY MARKET SERIES)
SPECIAL MEETING OF SHAREHOLDERS--NOVEMBER 8, 1995
The undersigned hereby appoints as proxies Dianne E. O'Donnell and Ilene Shore
and each of them (with power of substitution) to vote for the undersigned all
shares of beneficial interest of the undersigned at the aforesaid meeting and
any adjournment thereof with all the power the undersigned would have if
personally present. The shares represented by this proxy will be voted as
instructed. Unless indicated to the contrary, this proxy shall be deemed to
grant authority to vote "FOR" all proposals. This proxy is solicited on behalf
of the Board of Trustees of PaineWebber/Kidder, Peabody Municipal Money Market
Series--New York Series (a series of PaineWebber/Kidder, Peabody Municipal
Money Market Series).
This proxy will not be voted unless it is
dated and signed exactly as instructed.
If shares are held jointly, each Shareholder
named should sign. If only one signs, his or
her signature will be binding. If the
Shareholder is a corporation, the President
or a Vice President should sign in his or
her own name, indicating this. If the
Shareholder is a partnership, a partner
should sign his or her own name, indicating
that he or she is a 'Partner'.
Sign exactly as name appears hereon.
Dated: ___________________________, 1995
________________________________________
Signature of Shareholder
<PAGE>
PLEASE INDICATE YOUR VOTE BY FILLING IN THE APPROPRIATE BOX BELOW.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE 'FOR'
1. Approval of an Agreement and Plan of For Against Abstain
Reorganization and Termination between / / / / / /
PaineWebber RMA New York Municipal Money Fund,
a series of PaineWebber Managed Municipal Trust
and PaineWebber/Kidder, Peabody Municipal Money
Market Series--New York Series, (a series of
PaineWebber/Kidder, Peabody Municipal Money
Market Series).
Please sign and date 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.
