<PAGE>
As filed with the Securities and Exchange Commission on February 27, 1998
1933 Act Registration No. 2-91362
1940 Act Registration No. 811-4040
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-lA
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 52 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 45
(Check appropriate box or boxes.)
PAINEWEBBER MANAGED INVESTMENTS TRUST
(Exact name of registrant as specified in charter)
1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
DIANNE E. O'DONNELL, Esq.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)
Copies to:
ROBERT A. WITTIE, Esq.
JENNIFER R. GONZALEZ, Esq.
Kirkpatrick & Lockhart LLP 1800
Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
Telephone: (202)778-9000
Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment.
[ ] Immediately upon filing pursuant to Rule 485(b)
[x] On March 1, 1998 pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(1)
[ ] On pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On pursuant to Rule 485(a)(2)
Title of Securities Being Registered: Shares of Beneficial Interest.
<PAGE>
PaineWebber Managed Investments Trust
Contents of Registration Statement
This registration statement consists of the following papers and documents.
Cover Sheet
Contents of Registration Statement
Cross Reference Sheets
PaineWebber Asia Pacific Growth Fund
- ------------------------------------
Part A - Prospectus
Part B - Statement of Additional Information
Part C- Other Information
Signature Page
Exhibits
<PAGE>
PaineWebber Managed Investments Trust:
PaineWebber Asia Pacific Growth Fund
Form N-1A Cross Reference Sheet
<TABLE>
<CAPTION>
Part A Item No. and Caption Prospectus Caption
--------------------------- ------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis The Funds at a Glance; Expense Table
3. Condensed Financial Financial Highlights; Performance
Information
4. General Description of The Funds at a Glance; Investment Objectives & Policies;
Registrant Investment Philosophy & Process; The Funds' Investments;
General Information
5. Management of the Fund Management; General Information
5A. Management's Discussion of Financial Highlights
Fund Performance
6. Capital Stock and other Cover Page; Flexible Pricing SM; Dividends & Taxes; General
Securities Information
7. Purchase of Securities Flexible Pricing; How to Buy Shares; Other Services;
Being Offered Management; Determining the Shares' Net Asset Value
8. Redemption or How to Sell Shares; Other Services
Repurchase
9. Pending Legal Proceedings Not Applicable
Part B Item No. And Caption Statement of Additional Information Caption
--------------------------- -------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Other Information
History
13. Investment Objectives and Policies Investment Policies and Restrictions; Hedging and Other
Strategies Using Derivative Instruments; Portfolio
Transactions
14. Management of the Fund Trustees and Officers; Principal Holders of Securities
15. Control Persons and Principal Holders of Trustees and Officers; Principal Holders of Securities
Securities
16. Investment Advisory and Other Services Investment Advisory and Distribution Arrangements
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Securities Conversion of Class B Shares; Other Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part B Item No. and Caption Statement of Additional Information Caption
--------------------------- -------------------------------------------
<S> <C>
19. Purchase, Redemption and Pricing of Securities Reduced Sales Charges, Additional Exchange and Redemption
Being Offered Information and Other Services; Valuation of Shares
20. Tax Status Taxes
21. Underwriters Investment Advisory and Distribution Arrangements
22. Calculation of Performance Performance Information
Data
23. Financial Statements Financial Statements
</TABLE>
Part C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
------------------------------
PAINEWEBBER ASIA PACIFIC GROWTH FUND
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019
PROSPECTUS -- MARCH 1, 1998
PaineWebber Global Funds are designed for investors generally seeking
long-term growth by investing mainly in foreign stocks or high current
income by investing mainly in global debt instruments. PaineWebber Asia
Pacific Growth Fund seeks long-term capital appreciation by investing
primarily in equity securities of companies in the Asia Pacific region,
excluding Japan. PaineWebber Emerging Markets Equity Fund seeks long-term
capital appreciation by investing primarily in equity securities of
companies in newly industrializing countries. PaineWebber Global Equity
Fund seeks long-term growth of capital by investing primarily in U.S. and
foreign equity securities. PaineWebber Global Income Fund seeks high
current income and, secondarily, capital appreciation by investing
primarily in high-quality bonds of foreign and U.S. issuers.
This Prospectus concisely sets forth information that a prospective
investor should know about the Funds before investing. Please read this
Prospectus carefully and retain a copy for future reference.
A Statement of Additional Information, dated March 1, 1998, has been filed
with the Securities and Exchange Commission (the 'Commission') and is
legally part of this Prospectus. The Statement of Additional Information
can be obtained without charge, and further inquiries can be made, by
contacting an individual Fund, your investment executive at PaineWebber or
one of its correspondent firms or by calling toll-free 1-800-647-1568. In
addition, the Commission maintains a website (http://www.sec.gov) that
contains the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file
electronically with the Commission.
THE PAINEWEBBER FAMILY OF MUTUAL FUNDS
The PaineWebber Family of Mutual Funds consists of six broad
categories, which are presented here. Generally, investors seeking to
maximize return must assume greater risk. The Funds offered by this
Prospectus are all in the GLOBAL category.
<TABLE>
<S> <C>
/ / MONEY MARKET FUND for income and stability by / / ASSET ALLOCATION FUNDS for high total return by in-
investing in high-quality, short-term investments. vesting in stocks and bonds.
/ / BOND FUNDS for income by investing mainly in bonds. / / STOCK FUNDS for long-term growth by investing mainly
in stocks.
/ / TAX-FREE BOND FUNDS for income exempt from federal / / GLOBAL FUNDS for long-term growth by investing mainly
income tax and, in some cases, state and local income in foreign stocks or high current income by investing
taxes, by investing in municipal bonds. mainly in global debt instruments.
</TABLE>
A complete listing of the PaineWebber Family of Mutual Funds is found on
the back cover of this Prospectus.
INVESTORS SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR REFERRED TO IN
THIS PROSPECTUS. THE FUNDS AND THEIR DISTRIBUTOR HAVE NOT AUTHORIZED
ANYONE TO PROVIDE INVESTORS WITH INFORMATION THAT IS DIFFERENT. THIS
PROSPECTUS IS NOT AN OFFER TO SELL SHARES OF THE FUNDS IN ANY JURISDICTION
WHERE THE FUNDS OR THEIR DISTRIBUTOR MAY NOT LAWFULLY SELL THOSE SHARES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
Prospectus Page 1
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Funds at a Glance................... 3
Expense Table........................... 6
Financial Highlights.................... 9
Investment Objectives & Policies........ 21
Investment Philosophy & Process......... 23
Performance............................. 25
The Funds' Investments.................. 29
Flexible Pricing(Service Mark).......... 36
How to Buy Shares....................... 39
How to Sell Shares...................... 41
Other Services.......................... 41
Management.............................. 42
Determining the Shares' Net Asset
Value................................. 45
Dividends & Taxes....................... 45
General Information..................... 47
</TABLE>
--------------------
Prospectus Page 2
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
THE FUNDS AT A GLANCE
- --------------------------------------------------------------------------------
The Funds offered by this Prospectus are not intended to provide a complete or
balanced investment program, but one or more of them may be appropriate as a
component of an investor's overall portfolio. Some common reasons to invest in
the Funds are to finance college educations, plan for retirement or diversify a
portfolio. When selling shares, investors should be aware that they may get more
or less for their shares than they originally paid for them. As with any mutual
fund, there is no assurance that the Funds will achieve their goals.
ASIA PACIFIC GROWTH FUND
GOAL: To increase the value of your investment by investing primarily in equity
securities of Asia Pacific Region companies (as described under 'Investment
Objectives and Policies').
INVESTMENT OBJECTIVE: Long-term capital apprecia-
tion.
SIZE: On January 31, 1998, the Fund had approximately $42.7 million in net
assets.
WHO SHOULD INVEST: Asia Pacific Growth Fund is for investors who want long-term
capital appreciation and who can withstand short-term market fluctuations. The
Fund seeks to achieve this by investing primarily in equity securities of Asia
Pacific Region companies. While recent currency devaluations have diminished
prospects for short-term growth in corporate earnings in many Asia Pacific
Region countries, conditions in the Asia Pacific Region may provide for high
levels of economic activity in the long-term, offering the potential for
long-term capital appreciation from investment in equity securities of Asia
Pacific Region companies. Because the value of these securities tends to be more
volatile than that of U.S. stocks, investors must be willing to tolerate greater
fluctuations in the value of the Fund's investments. These fluctuations may be
caused by events affecting the companies' businesses, as well as market
conditions, currency fluctuations, interest rate changes, liquidity concerns,
and adverse changes in economic, political and social conditions. The Fund may
be appropriate as a longer-term component of an investor's overall portfolio,
but it is not intended to provide current income.
EMERGING MARKETS EQUITY FUND
GOAL: To increase the value of your investment by investing primarily in equity
securities of companies in newly industrializing countries.
INVESTMENT OBJECTIVE: Long-term capital apprecia-
tion.
SIZE: On January 31, 1998, the Fund had approximately $15.6 million in net
assets.
WHO SHOULD INVEST: Emerging Markets Equity Fund is for investors who want
long-term capital appreciation. The Fund seeks to achieve this by investing
primarily in equity securities of companies in emerging market countries. Over
time, foreign stocks have shown substantial growth potential. However, because
their value tends to fluctuate more than that of U.S. stocks, investors must be
willing to tolerate volatility in the value of the Fund's investments. These
risks are greater with respect to securities of issuers located in emerging
markets. Accordingly, Emerging Markets Equity Fund is designed for investors who
are able to bear the risk that comes with investment in equity securities of
emerging market issuers. The Fund may be appropriate as a longer-term component
of an investor's overall portfolio, but it is not intended to provide current
income.
GLOBAL EQUITY FUND
GOAL: To increase the value of your investment by investing primarily in equity
securities of U.S. and foreign companies.
INVESTMENT OBJECTIVE: Long-term growth of capital.
SIZE: On January 31, 1998, the Fund had approximately $466.3 million in net
assets.
WHO SHOULD INVEST: Global Equity Fund is for investors who want long-term growth
of capital. The Fund seeks to achieve this by investing primarily in equity
securities of U.S. and foreign companies. Over time, foreign stocks have shown
substantial growth potential. However, because their value tends to fluctuate
more than that of U.S. stocks, investors must be willing to tolerate volatility
in the value of the Fund's investments. Accordingly, Global Equity Fund is
designed for investors who are able to bear the risk that comes with investments
in foreign equity securities. The Fund may be appropriate as a longer-term
component of an investor's overall portfolio, but it is not intended to provide
current income.
--------------------
Prospectus Page 3
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
THE FUNDS AT A GLANCE
(Continued)
- --------------------------------------------------------------------------------
GLOBAL INCOME FUND
GOAL: To provide high current income and, secondarily, capital appreciation by
investing primarily in high-quality foreign and U.S. bonds.
INVESTMENT OBJECTIVE: The primary investment objective is high current income
consistent with prudent investment risk; capital appreciation is a secondary
objective.
SIZE: On January 31, 1998, the Fund had approximately $578.6 million in net
assets.
WHO SHOULD INVEST: Global Income Fund is for investors who want high current
income consistent with prudent investment risk and, secondarily, capital
appreciation. The Fund seeks to achieve this by investing primarily in high
quality bonds of foreign and U.S. issuers. The Fund also may invest in bonds
rated below investment grade, including bonds of issuers in emerging market
countries. Global Income Fund is designed for investors who are able to bear the
special risks that come with investments in foreign securities.
MANAGEMENT
Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), an asset
management subsidiary of PaineWebber Incorporated ('PaineWebber'), is the
investment adviser and administrator of Asia Pacific Growth Fund, Emerging
Markets Equity Fund, Global Equity Fund and Global Income Fund (each a 'Fund'
and, collectively, the 'Funds'). Mitchell Hutchins has appointed Schroder
Capital Management International Inc. ('Schroder Capital') as the investment
sub-adviser for Asia Pacific Growth Fund and Emerging Markets Equity Fund, and
GE Investment Management Incorporated ('GE Investment Management') as the
investment sub-adviser for Global Equity Fund.
MINIMUM INVESTMENT
To open an account, investors need $1,000; to add to an account, investors need
only $100.
RISKS
EACH FUND invests in foreign securities, including emerging market securities.
Investors in any of the Funds should be able to assume the special risks of
investing in these securities. These include possible adverse political, social
and economic developments abroad and differing characteristics of foreign
economies and markets. These risks are greater with respect to securities of
issuers located in emerging markets. Most of the Funds' foreign securities are
denominated in foreign currencies, and the value of these investments can be
adversely affected by fluctuations in foreign currency values. Foreign currency
values and securities prices in the Asia Pacific Region recently have been
highly volatile, and recent currency devaluations in some Asia Pacific Region
countries have resulted in high interest rate levels and sharp reductions in
economic activity. Each Fund may use derivatives, such as options, futures and
forward currency contracts and, in the case of Asia Pacific Growth Fund and
Global Income Fund, swap agreements, all of which may involve additional risks.
Each Fund's share price will rise and fall, and investors may lose money by
investing in a Fund. Investment in any of the Funds is not guaranteed.
ASIA PACIFIC GROWTH FUND, EMERGING MARKETS EQUITY FUND AND GLOBAL EQUITY FUND
all invest primarily in equity securities. Historically, equity
securities have shown greater growth potential than other types of securities,
but they also have shown greater volatility.
GLOBAL INCOME FUND invests primarily in bonds, which are subject to interest
rate and credit risk. Interest rate risk is the risk that interest rates will
rise and bond prices will fall, lowering the value of the Fund's investments and
share price. Credit risk is the risk that an issuer may be unable to pay
interest and principal. Certain investment grade bonds in which the Fund may
invest have speculative characteristics. Bonds rated below investment grade, in
which the Fund may invest up to 20% of its total assets, are subject to greater
risks of default or price fluctuation than investment grade bonds and are
considered predominantly speculative. The Fund may invest in mortgage-backed
securities, which involve special risks. The Fund is a non-diversified fund, as
defined in the Investment Company Act of 1940 ('1940 Act'), and as such is
subject to greater risk than funds that have a broader range of investments.
--------------------
Prospectus Page 4
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
THE FUNDS AT A GLANCE
(Continued)
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES OF THE FUNDS
Investors may select among these classes of shares:
CLASS A SHARES
The price is the net asset value plus the initial sales charge; the maximum
sales charge is 4.5% of the public offering price (4% in the case of Global
Income Fund). Although investors pay an initial sales charge when they buy Class
A shares, the ongoing expenses for this class are lower than the ongoing
expenses of Class B and Class C shares.
CLASS B SHARES
The price is the net asset value. Investors do not pay an initial sales charge
when they buy Class B shares. As a result, 100% of their purchase is immediately
invested. However, Class B shares have higher ongoing expenses than Class A
shares. Depending upon how long they own the shares, investors may have to pay a
sales charge when they sell Class B shares. This sales charge is called a
'contingent deferred sales charge' and applies when investors sell their Class B
shares within six years after purchase. After six years, Class B shares convert
to Class A shares, which have lower ongoing expenses and no contingent deferred
sales charge.
CLASS C SHARES
The price is the net asset value. Investors do not pay an initial sales charge
when they buy Class C shares. As a result, 100% of their purchase is immediately
invested. However, Class C shares have higher ongoing expenses than Class A
shares. A contingent deferred sales charge of 1% (0.75% in the case of Global
Income Fund) is charged on shares sold within one year of purchase. Class C
shares never convert to any other class of shares.
CLASS Y SHARES
Class Y shares are offered only to limited groups of investors. See 'How to Buy
Shares.' The price is the net asset value. Investors do not pay an initial sales
charge when they buy Class Y shares. As a result, 100% of their purchase is
immediately invested. Investors also do not pay a contingent deferred sales
charge when they sell Class Y shares. Class Y shares have lower ongoing expenses
than any other class of shares.
--------------------
Prospectus Page 5
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
EXPENSE TABLE
- --------------------------------------------------------------------------------
The following tables are intended to assist investors in understanding the
expenses associated with investing in each class of shares of the Funds.
Expenses shown below are based on those incurred for the most recent fiscal
year, except in the case of Asia Pacific Growth Fund, where amounts were
annualized because it commenced operations on March 25, 1997 and 'Other
Expenses' are based on estimated amounts for its current fiscal year. In
addition, in the case of Emerging Markets Equity Fund, expenses shown below
reflect anticipated fee waivers.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge on Purchases of Shares (as a % of
offering price)
<CAPTION>
ASIA PACIFIC GROWTH FUND, EMERGING MARKETS EQUITY FUND
AND GLOBAL EQUITY FUND.................................. 4.5% None None None
GLOBAL INCOME FUND...................................... 4% None None None
Sales Charge on Reinvested Dividends (as a % of offering
price)...................................................... None None None None
Maximum Contingent Deferred Sales Charge (as a % of offering
price or net asset value at the time of sale, whichever is
less)
ASIA PACIFIC GROWTH FUND, EMERGING MARKETS EQUITY FUND
AND GLOBAL EQUITY FUND.................................. None 5% 1% None
GLOBAL INCOME FUND...................................... None 5% 0.75% None
Exchange Fee................................................ None None None None
ANNUAL FUND OPERATING EXPENSES (as a % of average net
assets)
ASIA PACIFIC GROWTH FUND
Management Fees............................................. 1.20% 1.20% 1.20% 1.20%
12b-1 Fees.................................................. 0.25 1.00 1.00 None
Other Expenses.............................................. 0.88 0.92 0.90 0.88
------- ------- ------- -------
Total Operating Expenses.................................... 2.33% 3.12% 3.10% 2.08%
------- ------- ------- -------
------- ------- ------- -------
EMERGING MARKETS EQUITY FUND
Management Fees (after fee waivers)*........................ 0.70% 0.70% 0.70% 0.70%
12b-1 Fees.................................................. 0.25 1.00 1.00 None
Other Expenses.............................................. 1.49 1.49 1.49 1.49
------- ------- ------- -------
Total Operating Expenses.................................... 2.44% 3.19% 3.19% 2.19%
------- ------- ------- -------
------- ------- ------- -------
GLOBAL EQUITY FUND
Management Fees............................................. 0.85% 0.85% 0.85% 0.85%
12b-1 Fees.................................................. 0.25 1.00 1.00 None
Other Expenses.............................................. 0.34 0.41 0.35 0.25
------- ------- ------- -------
Total Operating Expenses.................................... 1.44% 2.26% 2.20% 1.10%
------- ------- ------- -------
------- ------- ------- -------
GLOBAL INCOME FUND
Management Fees............................................. 0.74% 0.74% 0.74% 0.74%
12b-1 Fees.................................................. 0.25 1.00 0.75 None
Other Expenses.............................................. 0.22 0.25 0.20 0.20
------- ------- ------- -------
Total Operating Expenses.................................... 1.21% 1.99% 1.69% 0.94%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
- ------------------
* 'Management Fees' for Emerging Markets Equity Fund reflect anticipated fee
waivers by Mitchell Hutchins. Under an advisory contract for Emerging Markets
Equity Fund effective February 25, 1997, the annual percentage rate at which
the investment advisory and administrative fee is payable to Mitchell
Hutchins is 1.20% of the Fund's average daily net assets. This fee is lower
than the fee that was payable under the prior advisory contract; however,
after giving effect to fee waivers, the effective annual rate actually paid
by the Fund during the fiscal year ended October 31, 1997, was 0.78%. Without
taking into account anticipated fee waivers, 'Management Fees' and 'Total
Operating Expenses' for shares of Emerging Markets Equity Fund would be as
follows: 1.20% and 2.94% for Class A; 1.20% and 3.69% for Class B; 1.20% and
3.69% for Class C; and 1.20% and 2.69% for Class Y.
--------------------
Prospectus Page 6
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
EXPENSE TABLE
(Continued)
- --------------------------------------------------------------------------------
CLASS A SHARES: Sales charge waivers and a reduced sales charge purchase plan
are available. Purchases of $1 million or more are not subject to an initial
sales charge; however, if a shareholder sells these shares within one year
after purchase, a contingent deferred sales charge of 1% of the offering price
or the net asset value of the shares at the time of sale by the shareholder,
whichever is less, is imposed.
CLASS B SHARES: Sales charge waivers are available. The maximum 5% contingent
deferred sales charge applies to sales of shares during the first year after
purchase. The charge generally declines by 1% annually, reaching zero after six
years.
CLASS C SHARES: If a shareholder sells these shares within one year after
purchase, a contingent deferred sales charge of 1% (0.75% in the case of Global
Income Fund) of the offering price or the net asset value of the shares at the
time of sale by the shareholder, whichever is less, is imposed.
CLASS Y SHARES: No initial or contingent deferred sales charge is imposed, nor
are Class Y shares subject to 12b-1 distribution or service fees. Class Y
shares may be purchased by participants in certain investment programs that are
sponsored by PaineWebber and that may invest in PaineWebber mutual funds ('PW
Programs'), when Class Y shares are purchased through that Program.
Participation in a PW Program is subject to an advisory fee at an annual rate
of no more than 1.5% of assets held through that PW Program. This account
charge is not included in the table because investors who are not PW Programs
participants also are permitted to purchase Class Y Shares.
12b-1 distribution fees are asset-based sales charges. Long-term Class B and
Class C shareholders may pay more in direct and indirect sales charges
(including 12b-1 distribution fees) than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc. 12b-1 fees have two components, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
12b-1 service fees................. 0.25% 0.25% 0.25% None
12b-1 distribution fees............ 0.00 0.75 0.75* None
</TABLE>
* 12b-1 distribution fees for Class C shares of Global Income Fund are 0.50%.
For more information, see 'Management' and 'Flexible Pricing(Service Mark).'
EXAMPLES OF EFFECT OF FUND EXPENSES
The following examples should assist investors in understanding various costs
and expenses they would incur as shareholders of a Fund. The assumed 5% annual
return shown in the examples is required by regulations of the Securities and
Exchange Commission ('SEC') applicable to all mutual funds. THESE EXAMPLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES OF A FUND MAY BE MORE OR LESS THAN THOSE SHOWN.
An investor would pay the following expenses, directly or indirectly, on a
$1,000 investment in a Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
ASIA PACIFIC GROWTH FUND
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Class A............................ $68 $114 $164 $ 300
Class B (Assuming sale of all
shares at end of period)......... $81 $126 $184 $ 308
Class B (Assuming no sale of
shares).......................... $31 $ 96 $164 $ 308
Class C (Assuming sale of all
shares at end of period)......... $41 $ 96 $162 $ 341
Class C (Assuming no sale of
shares).......................... $31 $ 96 $162 $ 341
Class Y............................ $21 $ 65 $112 $ 241
</TABLE>
--------------------
Prospectus Page 7
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
EXPENSE TABLE
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A............................ $69 $118 $169 $310
Class B (Assuming sale of all
shares at end of period)......... $82 $128 $187 $316
Class B (Assuming no sale of
shares).......................... $32 $ 98 $167 $316
Class C (Assuming sale of all
shares at end of period)......... $42 $ 98 $167 $349
Class C (Assuming no sale of
shares).......................... $32 $ 98 $167 $349
Class Y............................ $22 $ 69 $117 $252
<CAPTION>
GLOBAL EQUITY FUND
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A............................ $59 $ 89 $120 $210
Class B (Assuming sale of all
shares at end of period)......... $73 $101 $141 $220
Class B (Assuming no sale of
shares).......................... $23 $ 71 $121 $220
Class C (Assuming sale of all
shares at end of period)......... $32 $ 69 $118 $253
Class C (Assuming no sale of
shares).......................... $22 $ 69 $118 $253
Class Y............................ $11 $ 35 $ 61 $134
<CAPTION>
GLOBAL INCOME FUND
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A............................ $52 $ 77 $104 $181
Class B (Assuming sale of all
shares at end of period)......... $70 $ 92 $127 $193
Class B (Assuming no sale of
shares).......................... $20 $ 62 $107 $193
Class C (Assuming sale of all
shares at end of period)......... $25 $ 53 $ 92 $200
Class C (Assuming no sale of
shares).......................... $17 $ 53 $ 92 $200
Class Y............................ $10 $ 30 $ 52 $115
</TABLE>
ASSUMPTIONS MADE IN THE EXAMPLES
o ALL CLASSES: Reinvestment of all dividends and other distributions;
percentage amounts listed under 'Annual Fund Operating Expenses' remain the
same for years shown.
o CLASS A SHARES: Deduction of the maximum 4.5% (4% in the case of Global
Income Fund) initial sales charge at the time of purchase.
o CLASS B SHARES: Deduction of the maximum applicable contingent deferred
sales charge at the time of sale, which declines over a period of six years.
Ten-year figures assume that Class B shares convert to Class A shares at the
end of the sixth year.
o CLASS C SHARES: Deduction of a 1% (0.75% in the case of Global Income Fund)
contingent deferred sales charge for sales of shares within one year of
purchase.
--------------------
Prospectus Page 8
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ASIA PACIFIC GROWTH FUND
The following table provides investors with data and ratios for one Class A,
Class B and Class C share for the period shown. The Fund had no Class Y shares
outstanding during that period. This information is supplemented by the
financial statements and accompanying notes appearing in Asia Pacific Growth
Fund's Annual Report to Shareholders for the period ended October 31, 1997 and
the report of Ernst & Young LLP, independent auditors, appearing in the Fund's
Annual Report to Shareholders. The financial statements, accompanying notes and
auditors' report are incorporated by reference into the Statement of Additional
Information. The financial statements and notes, as well as the financial
information in the table below relating to the period March 25, 1997
(commencement of operations) through October 31, 1997, have been audited by
Ernst & Young LLP, independent auditors. Further information about the Fund's
performance is also included in the Annual Report to Shareholders, which may be
obtained without charge by calling 1-800-647-1568.
<TABLE>
<CAPTION>
ASIA PACIFIC GROWTH FUND
-----------------------------------------------------------
CLASS A CLASS B CLASS C
----------------- ----------------- -----------------
FOR THE FOR THE FOR THE
PERIOD ENDED PERIOD ENDED PERIOD ENDED
OCTOBER 31, 1997+ OCTOBER 31, 1997+ OCTOBER 31, 1997+
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period......................... $ 12.50 $ 12.50 $ 12.50
----------------- ----------------- -----------------
Net investment income (loss)................................. 0.03 (0.03) (0.03)
Net realized and unrealized losses from investments and
foreign currency........................................... (3.57) (3.55) (3.55)
----------------- ----------------- -----------------
Net decrease from investment operations...................... (3.54) (3.58) (3.58)
----------------- ----------------- -----------------
Net asset value, end of period............................... $ 8.96 $ 8.92 $ 8.92
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Total investment return (1).................................. (28.32)% (28.64)% (28.64)%
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Ratios/Supplemental Data:
Net assets, end of period (000's)............................ $21,466 $22,949 $13,887
Expenses to average net assets............................... 2.33%* 3.12%* 3.10%*
Net investment income (loss) to average net assets........... 0.37%* (0.43)%* (0.42)%*
Portfolio turnover rate...................................... 13% 13% 13%
Average commission rate paid................................. $0.0156 $0.0156 $0.0156
</TABLE>
- ------------------
* Annualized
+ For the period March 25, 1997 (commencement of operations) to October 31,
1997.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions, if any, at net asset value on the payable dates, and a sale
at net asset value on the last day of each period reported. The figures do
not include sales charges; results for each class would be lower if sales
charges were included. Total investment returns for periods less than a year
have not been annualized.
--------------------
Prospectus Page 9
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
The following tables provide investors with data and ratios for one Class A,
Class B, Class C and Class Y share for each of the periods shown. This
information is supplemented by the financial statements and accompanying notes
appearing in Emerging Markets Equity Fund's Annual Report to Shareholders for
the fiscal year ended October 31, 1997 and the report of Ernst & Young LLP,
independent auditors, appearing in the Fund's Annual Report to Shareholders. The
financial statements, accompanying notes and auditors' report are incorporated
by reference into the Statement of Additional Information. The financial
statements and notes, as well as the financial information in the table below
relating to the fiscal year ended October 31, 1997, the four months ended
October 31, 1996 and the fiscal year ended June 30, 1996, have been audited by
Ernst & Young LLP, independent auditors. The financial information for the prior
years was audited by another independent accounting firm, whose reports thereon
were unqualified. Further information about the Fund's performance is also
included in the Annual Report to Shareholders, which may be obtained without
charge by calling 1-800-647-1568.
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
------------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------------
FOR THE YEARS ENDED
FOR THE FOR THE JUNE 30, FOR THE
YEAR ENDED FOUR MONTHS ENDED -------------------- PERIOD ENDED
OCTOBER 31, 1997*** OCTOBER 31, 1996 1996 1995** JUNE 30, 1994+
------------------- ----------------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 9.46 $ 10.06 $ 9.73 $ 10.79 $ 12.00
-------- -------- -------- -------- --------
Net investment income
(loss)...................... (0.06) (0.13) (0.14) (0.04) 0.04
Net realized and unrealized
gains (losses) from
investment and foreign
currency.................... (0.01) (0.47) 0.47 (0.97) (1.25)
-------- -------- -------- -------- --------
Net increase (decrease) from
investment operations....... (0.07) (0.60) 0.33 (1.01) (1.21)
-------- -------- -------- -------- --------
Dividends from net investment
income...................... -- -- -- (0.05) --
-------- -------- -------- -------- --------
Net asset value, end of
period...................... $ 9.39 $ 9.46 $ 10.06 $ 9.73 $ 10.79
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (1)... (0.74)% (5.96)% 3.39% (9.29)% (10.08)%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $ 9,222 $14,992 $20,680 $33,043 $ 46,758
Expenses, net of fee waivers,
to average
net assets.................. 2.44% 2.44%* 2.44% 2.44% 2.47%*
Expenses, before fee waivers,
to average
net assets.................. 3.01% 3.48%* 3.42% 2.54% 2.47%*
Net investment income (loss),
net of fee waivers, to
average net assets.......... (0.40)% (1.42)%* (0.52)% (0.76)% 0.72%*
Net investment income (loss),
before fee waivers, to
average net assets.......... (0.97)% (2.46)%* (1.50)% (0.86)% 0.72%*
Portfolio turnover rate....... 87% 22% 69% 76% 8%
Average commission rate paid
(2)......................... $0.0009 $0.0024 -- -- --
</TABLE>
- ------------------
* Annualized
** Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.
*** Investment sub-advisory functions for the Fund were transferred from
Emerging Markets Management to Schroder Capital effective February 25, 1997.
+ For the period January 19, 1994 (commencement of operations) to June 30,
1994.
++ For the period December 5, 1995 (commencement of offering of shares) to June
30, 1996.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates, and a sale at net asset value on the last
day of each period reported. The figures do not include sales charges;
results for each class would be lower if sales charges were included. Total
investment returns for periods of less than one year have not been
annualized.
(2) Effective for fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose the average commission rate paid per share of
common stock investments purchased or sold.
--------------------
Prospectus Page 10
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
------------------------------------------------------------
CLASS B
------------------------------------------------------------
FOR THE
YEAR ENDED FOR THE FOR THE
OCTOBER 31, FOUR MONTHS ENDED PERIOD ENDED
1997*** OCTOBER 31, 1996 JUNE 30, 1996++
--------------- ----------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of
period...................... $ 9.32 $ 9.94 $ 9.13
--------------- -------- ------
Net investment income
(loss)...................... (0.10) (0.07) (0.01)
Net realized and unrealized
gains (losses) from
investment and foreign
currency.................... (0.03) (0.55) 0.82
--------------- -------- ------
Net increase (decrease) from
investment operations....... (0.13) (0.62) 0.81
--------------- -------- ------
Dividends from net investment
income...................... -- -- --
--------------- -------- ------
Net asset value, end of $ 9.19 $ 9.32 $ 9.94
period...................... --------------- -------- ------
--------------- -------- ------
(1.39)% (6.24)% 8.87%
Total investment return (1)... --------------- -------- ------
--------------- -------- ------
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $ 1,598 $ 879 $ 936
Expenses, net of fee waivers,
to average
net assets.................. 3.19% 3.19%* 3.19%*
Expenses, before fee waivers,
to average
net assets.................. 3.82% 4.23%* 4.97%*
Net investment income (loss),
net of fee waivers, to
average net assets.......... (1.25)% (2.12)%* (0.21)%*
Net investment income (loss),
before fee waivers, to
average net assets.......... (1.88)% (3.16)%* (1.99)%*
Portfolio turnover rate....... 87% 22% 69%
Average commission rate paid
(2)......................... $0.0009 $0.0024 --
<CAPTION>
CLASS C
----------------------------------------------------------------------------------
FOR THE FOR THE YEARS ENDED
YEAR ENDED FOR THE JUNE 30, FOR THE
OCTOBER 31, FOUR MONTHS ENDED -------------------- PERIOD ENDED
1997*** OCTOBER 31, 1996 1996 1995** JUNE 30, 1994+
--------------- ----------------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 9.32 $ 9.94 $ 9.67 $ 10.75 $ 12.00
--------------- -------- -------- -------- --------
Net investment income
(loss)...................... (0.14) (0.22) (0.24) (0.17) --
Net realized and unrealized
gains (losses) from
investment and foreign
currency.................... (0.01) (0.40) 0.51 (0.90) (1.25)
--------------- -------- -------- -------- --------
Net increase (decrease) from
investment operations....... (0.15) (0.62) 0.27 (1.07) (1.25)
--------------- -------- -------- -------- --------
Dividends from net investment
income...................... -- -- -- (0.01) --
--------------- -------- -------- -------- --------
Net asset value, end of
period...................... $ 9.17 $ 9.32 $ 9.94 $ 9.67 $ 10.75
--------------- -------- -------- -------- --------
--------------- -------- -------- -------- --------
Total investment return (1)... (1.61)% (6.24)% 2.79% (10.01)% (10.42)%
--------------- -------- -------- -------- --------
--------------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $ 5,345 $ 7,882 $11,561 $18,551 $ 26,721
Expenses, net of fee waivers,
to average
net assets.................. 3.19% 3.19%* 3.19% 3.19% 3.22%*
Expenses, before fee waivers,
to average
net assets.................. 3.78% 4.23%* 4.17% 3.29% 3.22%*
Net investment income (loss),
net of fee waivers, to
average net assets.......... (1.18)% (2.16)%* (1.28)% (1.50)% (0.03)%*
Net investment income (loss),
before fee waivers, to
average net assets.......... (1.77)% (3.20)%* (2.26)% (1.60)% (0.03)%*
Portfolio turnover rate.......
Average commission rate paid 87% 22% 69% 76% 8%
(2)......................... $0.0009 $0.0024 -- -- --
--------------------
Prospectus Page 11
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
------------------------------------------------------------------------------------
CLASS Y
------------------------------------------------------------------------------------
FOR THE YEARS ENDED
FOR THE FOR THE JUNE 30, FOR THE
YEAR ENDED FOUR MONTHS ENDED -------------------- PERIOD ENDED
OCTOBER 31, 1997*** OCTOBER 31, 1996 1996 1995** JUNE 30, 1994+
------------------- ----------------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 9.51 $ 10.11 $ 9.75 $ 10.80 $ 12.00
-------- -------- -------- -------- --------
Net investment income
(loss)...................... (0.02) (0.05) (0.01) 0.01 0.05
Net realized and unrealized
gains (losses) from
investment and foreign
currency.................... (0.03) (0.55) 0.37 (0.99) (1.25)
-------- -------- -------- -------- --------
Net increase (decrease) from
investment operations....... (0.05) (0.60) 0.36 (0.98) (1.20)
-------- -------- -------- -------- --------
Dividends from net investment
income...................... -- -- -- (0.07) --
-------- -------- -------- -------- --------
Net asset value, end of
period...................... $ 9.46 $ 9.51 $ 10.11 $ 9.75 $ 10.80
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (1)... (0.53)% (5.93)% 3.69% (9.03)% (10.00)%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $10,053 $11,375 $12,979 $12,332 $ 15,435
Expenses, net of fee waivers,
to average
net assets.................. 2.19% 2.19%* 2.19% 2.19% 2.22%*
Expenses, before fee waivers,
to average
net assets.................. 2.69% 3.23%* 3.29% 2.29% 2.22%*
Net investment income (loss),
net of fee waivers, to
average net assets.......... (0.15)% (1.13)%* (0.15)% (0.51)% 0.97%*
Net investment income (loss),
before fee waivers, to
average net assets.......... (0.65)% (2.17)%* (1.25)% (0.61)% 0.97%*
Portfolio turnover rate....... 87% 22% 69% 76% 8%
Average commission rate paid
(2)......................... $0.0009 $0.0024 -- -- --
</TABLE>
- ------------------
* Annualized
** Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.
*** Investment sub-advisory functions for the Fund were transferred from
Emerging Markets Management to Schroder Capital effective February 25, 1997.
+ For the period January 19, 1994 (commencement of operations) to June 30,
1994.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates, and a sale at net asset value on the last
day of each period reported. Total investment returns for periods of less
than one year have not been annualized.
(2) Effective for fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose the average commission rate paid per share of
common stock investments purchased or sold.
--------------------
Prospectus Page 12
<PAGE>
[This page intentionally left blank]
--------------------
Prospectus Page 13
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
The following tables provide investors with data and ratios for one Class A,
Class B, Class C and Class Y share for each of the periods shown. This
information is supplemented by the financial statements and accompanying notes
appearing in Global Equity Fund's Annual Report to Shareholders for the fiscal
year ended October 31, 1997 and the report of Ernst & Young LLP, independent
auditors, appearing in the Fund's Annual Report to Shareholders. The financial
statements, accompanying notes and auditors' report are incorporated by
reference into the Statement of Additional Information. The financial
statements and notes, as well as the financial information in the table below
relating to the fiscal year ended October 31, 1997, the two months ended October
31, 1996 and to each of the two years in the period ended August 31, 1996, have
been audited by Ernst & Young LLP, independent auditors. The financial
information for the prior years was audited by another independent accounting
firm, whose reports thereon were unqualified. Further information about the
Fund's performance is also included in the Annual Report to Shareholders, which
may be obtained without charge by calling 1-800-647-1568.
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
-----------------------------------------------------------------------------------------------
CLASS A
-----------------------------------------------------------------------------------------------
FOR THE FOR THE
YEAR TWO MONTHS FOR THE
ENDED ENDED FOR THE YEARS ENDED AUGUST 31, PERIOD
OCTOBER 31, OCTOBER 31, ------------------------------------------------- NOV. 14, 1991+
1997 1996 1996 1995** 1994 1993 TO AUG. 31, 1992
----------- ----------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 17.43 $ 16.81 $ 16.12 $ 16.98 $ 14.55 $ 12.87 $ 12.00
----------- ----------- -------- -------- -------- -------- --------
Net investment income
(loss)...................... 0.00 (0.02) 0.02 0.02 0.01 0.03 0.09
Net realized and unrealized
gains (losses) from
investments and foreign
currency.................... 1.52 0.64 1.24 0.37 2.63 1.89 0.78
----------- ----------- -------- -------- -------- -------- --------
Net increase (decrease) from
investment operations....... 1.52 0.62 1.26 0.39 2.64 1.92 0.87
----------- ----------- -------- -------- -------- -------- --------
Dividends from net investment
income...................... -- -- -- -- -- (0.08) --
Distributions from net
realized gains.............. (0.58) -- (0.57) (1.25) (0.21) (0.16) --
----------- ----------- -------- -------- -------- -------- --------
Total dividends and
distributions............... (0.58) 0.00 (0.57) (1.25) (0.21) (0.24) 0.00
----------- ----------- -------- -------- -------- -------- --------
Net asset value, end of
period...................... $ 18.37 $ 17.43 $ 16.81 $ 16.12 $ 16.98 $ 14.55 $ 12.87
----------- ----------- -------- -------- -------- -------- --------
----------- ----------- -------- -------- -------- -------- --------
Total investment return (1)... 8.87% 3.69% 8.06% 3.24% 18.23% 15.24% 7.25%
----------- ----------- -------- -------- -------- -------- --------
----------- ----------- -------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $ 294,878 $ 307,267 $305,218 $360,652 $185,493 $156,451 $113,070
Expenses to average net
assets...................... 1.44% 1.53%* 1.48% 1.71%(2) 1.58% 1.53% 1.68%*
Net investment income (loss)
to average net assets....... 0.01% (0.80)%* 0.10% 0.09%(2) 0.07% 0.22% 0.93%*
Portfolio turnover rate....... 86% 3% 33% 40% 51% 56% 30%
Average commission rate paid
(3)......................... $ 0.0069 $ 0.0069 $ 0.0120 -- -- -- --
</TABLE>
- ------------------
* Annualized
** Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.
+ Commencement of operations
++ Commencement of offering of shares
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. The figures do not
include sales charges; results for each class would be lower if sales
charges were included. Total investment returns for periods of less than one
year have not been annualized.
(2) These ratios include non-recurring reorganization expenses of 0.06%, 0.00%
and 0.06% for Class A, Class B and Class C shares, respectively.
(3) Effective for fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose the average commission rate paid per share of common
stock investments purchased or sold.
--------------------
Prospectus Page 14
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
--------------------------------------------------------------
CLASS B
--------------------------------------------------------------
FOR THE
FOR THE TWO MONTHS FOR THE FOR THE
YEAR ENDED ENDED YEAR ENDED PERIOD
OCTOBER 31, OCTOBER 31, AUGUST 31, AUG. 25, 1995++
1997 1996 1996 TO AUG. 31, 1995
----------- ----------- ---------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 16.93 $ 16.35 $ 15.82 $ 15.83
----------- ----------- ---------- --------
Net investment income
(loss)...................... (0.21) (0.05) (0.12) 0.00
Net realized and unrealized
gains (losses) from
investments and foreign
currency.................... 1.55 0.63 1.22 (0.01)
----------- ----------- ---------- --------
Net increase (decrease) from
investment operations....... 1.34 0.58 1.10 (0.01)
----------- ----------- ---------- --------
Dividends from net investment
income...................... -- -- -- --
Distributions from net
realized gains.............. (0.58) -- (0.57) --
----------- ----------- ---------- --------
Total dividends and
distributions............... (0.58) 0.00 (0.57) 0.00
----------- ----------- ---------- --------
Net asset value, end of
period...................... $ 17.69 $ 16.93 $ 16.35 $ 15.82
----------- ----------- ---------- --------
----------- ----------- ---------- --------
Total investment return (1)... 8.05% 3.55% 7.18% (0.06)%
----------- ----------- ---------- --------
----------- ----------- ---------- --------
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $ 87,104 $ 113,445 $113,235 $ 142,880
Expenses to average net
assets...................... 2.26% 2.34%* 2.25% 2.17%*(2)
Net investment income (loss)
to average net assets....... (0.80)% (1.61)%* (0.68)% (1.92)%*(2)
Portfolio turnover rate....... 86% 3% 33% 40%
Average commission rate paid
(3)......................... $ 0.0069 $ 0.0069 $ 0.0120 --
<CAPTION>
CLASS C
-----------------------------------------------------------------------------------
FOR THE
FOR THE TWO MONTHS
YEAR ENDED ENDED FOR THE YEARS ENDED AUGUST 31, FOR THE PERIOD
OCTOBER 31, OCTOBER 31, -------------------------------- MAY 10, 1993++
1997 1996 1996 1995** 1994 TO AUG. 31, 1993
----------- ----------- -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 16.93 $ 16.35 $ 15.82 $ 16.81 $ 14.52 $ 13.80
----------- ----------- -------- ------- ------- -------
Net investment income
(loss)...................... (0.23) (0.05) (0.13) (0.11) (0.07) (0.02)
Net realized and unrealized
gains (losses) from
investments and foreign
currency.................... 1.57 0.63 1.23 0.37 2.57 0.74
----------- ----------- -------- ------- ------- -------
Net increase (decrease) from
investment operations....... 1.34 0.58 1.10 0.26 2.50 0.72
----------- ----------- -------- ------- ------- -------
Dividends from net investment
income...................... -- -- -- -- -- --
Distributions from net
realized gains.............. (0.58) -- (0.57) (1.25) (0.21) --
----------- ----------- -------- ------- ------- -------
Total dividends and
distributions............... (0.58) 0.00 (0.57) (1.25) (0.21) 0.00
----------- ----------- -------- ------- ------- -------
Net asset value, end of
period...................... $ 17.69 $ 16.93 $ 16.35 $ 15.82 $ 16.81 $ 14.52
----------- ----------- -------- ------- ------- -------
----------- ----------- -------- ------- ------- -------
Total investment return (1)... 8.05% 3.55% 7.18% 2.46% 17.29% 5.22%
----------- ----------- -------- ------- ------- -------
----------- ----------- -------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $ 54,510 $67,530 $ 66,585 $83,485 $31,837 $ 10,807
Expenses to average net
assets...................... 2.20% 2.30%* 2.27% 2.48%(2) 2.33% 2.28%*
Net investment income (loss)
to average net assets....... (0.75)% (1.57)%* (0.70)% (0.68)%(2) (0.68)% (0.53)%*
Portfolio turnover rate....... 86% 3% 33% 40% 51% 56%
Average commission rate paid
(3)......................... $ 0.0069 $0.0069 $ 0.0120 -- -- --
</TABLE>
--------------------
Prospectus Page 15
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
--------------------------------------------------------------------------------
CLASS Y
--------------------------------------------------------------------------------
FOR THE FOR THE
YEAR TWO MONTHS FOR THE
ENDED ENDED FOR THE YEARS ENDED AUGUST 31, PERIOD
OCTOBER 31, OCTOBER 31, -------------------------------- MAY 10, 1993+
1997 1996 1996 1995** 1994 TO AUGUST 31, 1993
----------- ----------- ------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 17.60 $ 16.97 $ 16.22 $ 17.03 $ 14.56 $ 13.80
----------- ----------- ------- ------- ------- -------
Net investment income (loss)....................... 0.10 (0.01) 0.07 0.07 0.05 0.02
Net realized and unrealized gains from investments
and foreign currency............................. 1.51 0.64 1.25 0.37 2.63 0.74
----------- ----------- ------- ------- ------- -------
Net increase from investment operations............ 1.61 0.63 1.32 0.44 2.68 0.76
----------- ----------- ------- ------- ------- -------
Dividends from net investment income............... -- -- -- -- -- --
Distributions from net realized gains.............. (0.58) -- (0.57) (1.25) (0.21) --
----------- ----------- ------- ------- ------- -------
Total dividends and distributions.................. (0.58) 0.00 (0.57) (1.25) (0.21) 0.00
----------- ----------- ------- ------- ------- -------
Net asset value, end of period..................... $ 18.63 $ 17.60 $ 16.97 $ 16.22 $ 17.03 $ 14.56
----------- ----------- ------- ------- ------- -------
----------- ----------- ------- ------- ------- -------
Total investment return (1)........................ 9.31% 3.71% 8.39% 3.54% 18.49% 5.51%
----------- ----------- ------- ------- ------- -------
----------- ----------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's).................. $57,683 $63,225 $61,736 $57,150 $28,390 $ 19,098
Expenses to average net assets..................... 1.10% 1.18%* 1.17% 1.46%(2) 1.33% 1.28%*
Net investment income (loss) to average net
assets........................................... 0.36% (0.45)%* 0.46% 0.36%(2) 0.32% 0.47%*
Portfolio turnover rate............................ 0.86% 3% 33% 40% 51% 56%
Average commission rate paid (3)................... $0.0069 $0.0069 $0.0120 -- -- --
</TABLE>
- ------------------
* Annualized
** Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.
+ Commencement of offering of shares
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates, and a sale
at net asset value on the last day of each period reported. Total investment
returns for periods of less than one year have not been annualized.
(2) These ratios include non-recurring reorganization expenses of 0.06% for
Class Y shares.
(3) Effective for fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose the average commission rate paid per share of common
stock investments purchased or sold.
--------------------
Prospectus Page 16
<PAGE>
[This page intentionally left blank]
--------------------
Prospectus Page 17
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
GLOBAL INCOME FUND
The following tables provide investors with data and ratios for one Class A,
Class B, Class C and Class Y share for each of the periods shown. This
information is supplemented by the financial statements and accompanying notes
appearing in Global Income Fund's Annual Report to Shareholders for the fiscal
year ended October 31, 1997 and the report of Price Waterhouse LLP, independent
accountants, appearing in the Fund's Annual Report to Shareholders. The
financial statements, accompanying notes and independent accountants' report are
incorporated by reference into the Statement of Additional Information. The
financial statements and notes, as well as the financial information in the
table below insofar as they relate to each of the periods presented in the five
year period ended October 31, 1997, have been audited by Price Waterhouse LLP,
independent accountants. Further information about the Fund's performance is
also included in the Annual Report to Shareholders, which may be obtained
without charge by calling 1-800-647-1568.
<TABLE>
<CAPTION>
GLOBAL INCOME FUND
--------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------
FOR THE
PERIOD
JULY 1,
FOR THE YEARS ENDED OCTOBER 31, 1991+ TO
----------------------------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 10.46 $ 10.35 $ 9.99 $ 10.97 $ 10.64 $ 10.75 $ 10.40
-------- -------- -------- -------- -------- -------- -----
Net investment income.......... 0.69@ 0.72@ 0.77@ 0.72 0.59 0.83 0.20
Net realized and unrealized
gains (losses) from
investments and foreign
currency...................... (0.19)@ 0.13@ 0.31@ (1.05) 0.68 (0.12) 0.40
-------- -------- -------- -------- -------- -------- -----
Net increase (decrease) from
investment transactions....... 0.50 0.85 1.08 (0.33) 1.27 0.71 0.60
-------- -------- -------- -------- -------- -------- -----
Dividends from net investment
income........................ (0.54) (0.74) (0.72) (0.33) (0.80) (0.64) (0.23)
Distributions from net realized
gains from investments and
foreign currency
transactions.................. -- -- -- -- (0.14) (0.18) (0.02)
Distributions in excess of net
investment income............. (0.06) -- -- -- -- -- --
Distributions from
paid-in-capital............... (0.09) -- -- (0.32) -- -- --
-------- -------- -------- -------- -------- -------- -----
Total dividends and
distributions to
shareholders.................. (0.69) (0.74) (0.72) (0.65) (0.94) (0.82) (0.25)
-------- -------- -------- -------- -------- -------- -----
Net asset value, end of
period........................ $ 10.27 $ 10.46 $ 10.35 $ 9.99 $ 10.97 $ 10.64 $ 10.75
-------- -------- -------- -------- -------- -------- -----
-------- -------- -------- -------- -------- -------- -----
Total investment return (1).... 4.99% 8.60% 11.09% (3.10)% 12.41% 6.70% 5.79%
-------- -------- -------- -------- -------- -------- -----
-------- -------- -------- -------- -------- -------- -----
Ratios/supplemental data:
Net assets, end of period
(000's)....................... $486,718 $549,932 $663,022 $611,855 $648,853 $107,033 $16,501
Expenses to average net
assets........................ 1.21% 1.27% 1.24%(2) 1.17% 1.32%** 1.21% 1.35%*
Net investment income to
average net assets............ 6.66% 6.88% 7.47%(2) 6.94% 6.82%** 7.84% 8.59%*
Portfolio turnover rate........ 172% 126% 113% 108% 90% 92% 53%
<CAPTION>
CLASS B
------------------------------------------------
FOR THE YEARS
ENDED OCTOBER 31,
------------------------------------------------
1997 1996 1995 1994
----------- -------- -------- --------
<S> <<C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 10.44 $ 10.31 $ 9.96 $ 10.95
----------- -------- -------- --------
Net investment income.......... 0.58@ 0.64@ 0.69@ 0.86
Net realized and unrealized
gains (losses) from
investments and foreign
currency...................... (0.17)@ 0.15@ 0.30@ (1.28)
----------- -------- -------- --------
Net increase (decrease) from
investment transactions....... 0.41 0.79 0.99 (0.42)
----------- -------- -------- --------
Dividends from net investment
income........................ (0.48) (0.66) (0.64) (0.29)
Distributions from net realized
gains from investments and
foreign currency
transactions.................. -- -- -- --
Distributions in excess of net
investment income............. (0.05) -- -- --
Distributions from
paid-in-capital............... (0.08) -- -- (0.28)
----------- -------- -------- --------
Total dividends and
distributions to
shareholders.................. (0.61) (0.66) (0.64) (0.57)
----------- -------- -------- --------
Net asset value, end of
period........................ $ 10.24 $ 10.44 $ 10.31 $ 9.96
----------- -------- -------- --------
----------- -------- -------- --------
Total investment return (1).... 4.11% 7.95% 10.24% (3.90)%
----------- -------- -------- --------
----------- -------- -------- --------
Ratios/supplemental data:
Net assets, end of period
(000's)....................... $ 103,312 $307,577 $484,534 $725,553
Expenses to average net
assets........................ 1.99% 1.99% 2.00%(2) 1.94%
Net investment income to
average net assets............ 5.83% 6.14% 6.71%(2) 6.05%
Portfolio turnover rate........ 172% 126% 113% 108%
</TABLE>
- ------------------
@ Calculated using the average shares outstanding for the year.
* Annualized
** Includes 0.15% of interest expense related to the reverse repurchase
agreement transactions entered into during the fiscal year.
+ Commencement of issuance of shares.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for each class would be lower if sales
charges were included. Total investment return information for periods of
less than one year is not annualized.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
--------------------
Prospectus Page 18
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL INCOME FUND
----------------------------------------------------------------------------
CLASS B
----------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
----------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 10.62 $ 10.74 $ 11.07 $ 10.08 $ 11.10 $ 10.28
---------- ---------- ---------- ---------- ---------- ----------
Net investment income.......... 0.78 0.94 0.85 1.01 1.01 0.98
Net realized and unrealized
gains (losses) from
investments and foreign
currency...................... 0.40 (0.32) (0.09) 0.96 (0.64) 1.15
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment transactions....... 1.18 0.62 0.76 1.97 0.37 2.13
---------- ---------- ---------- ---------- ---------- ----------
Dividends from net investment
income........................ (0.71) (0.56) (0.97) (0.98) (0.94) (1.06)
Distributions from net realized
gains from investments and
foreign currency
transactions.................. (0.14) (0.18) (0.12) -- (0.45) (0.25)
Distributions in excess of net
investment income............. -- -- -- -- -- --
Distributions from
paid-in-capital............... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions to
shareholders.................. (0.85) (0.74) (1.09) (0.98) (1.39) (1.31)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
period........................ $ 10.95 $ 10.62 $ 10.74 $ 11.07 $ 10.08 $ 11.10
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total investment return (1).... 11.45% 5.93% 7.39% 20.32% 3.66% 18.29%
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Ratios/supplemental data:
Net assets, end of period
(000's)....................... $1,188,890 $1,542,255 $1,593,814 $1,323,495 $1,085,851 $1,145,460
Expenses to average net
assets........................ 2.11%** 1.98% 1.94% 1.90% 1.95% 2.05%
Net investment income to
average net assets............ 5.97%** 7.11% 8.09% 9.88% 9.73% 9.13%
Portfolio turnover rate........ 90% 92% 33% 126% 124% 120%
<CAPTION>
CLASS C
-------------------------------------------------------------
FOR THE
PERIOD
JULY 2,
FOR THE YEARS ENDED OCTOBER 31, 1992+ TO
------------------------------------------------- OCTOBER
1997 1996 1995 1994 1993 31, 1992
------- ------- ------- ------- ------- ----------
<S> <<C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 10.45 $ 10.33 $ 9.98 $ 10.96 $ 10.64 $ 10.94
------- ------- ------- ------- ------- -----
Net investment income.......... 0.63@ 0.67@ 0.71@ 0.70 0.68 0.20
Net realized and unrealized
gains (losses) from
investments and foreign
currency...................... (0.18)@ 0.14@ 0.31@ (1.09) 0.52 (0.13)
------- ------- ------- ------- ------- -----
Net increase (decrease) from
investment transactions....... 0.45 0.81 1.02 (0.39) 1.20 0.07
------- ------- ------- ------- ------- -----
Dividends from net investment
income........................ (0.50) (0.69) (0.67) (0.30) (0.74) (0.21)
Distributions from net realized
gains from investments and
foreign currency
transactions.................. -- -- -- -- (0.14) (0.16)
Distributions in excess of net
investment income............. (0.06) -- -- -- -- --
Distributions from
paid-in-capital............... (0.08) -- -- (0.29) -- --
------- ------- ------- ------- ------- -----
Total dividends and
distributions to
shareholders.................. (0.64) (0.69) (0.67) (0.59) (0.88) (0.37)
------- ------- ------- ------- -------
Net asset value, end of
period........................ $ 10.26 $ 10.45 $ 10.33 $ 9.98 $ 10.96 $ 10.64
------- ------- ------- ------- ------- -----
------- ------- ------- ------- ------- -----
Total investment return (1).... 4.48% 8.12% 10.49% (3.56)% 11.64% 0.61%
------- ------- ------- ------- ------- -----
------- ------- ------- ------- ------- -----
Ratios/supplemental data:
Net assets, end of period
(000's)....................... $36,935 $50,928 $71,329 $92,480 $135,847 $36,598
Expenses to average net
assets........................ 1.69% 1.73% 1.75%(2) 1.68% 1.83%** 1.75%*
Net investment income to
average net assets............ 6.17% 6.40% 6.96%(2) 6.34% 6.17%** 7.02%*
Portfolio turnover rate........ 172% 126% 113% 108% 90% 92%
</TABLE>
--------------------
Prospectus Page 19
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
FINANCIAL HIGHLIGHTS
(Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL INCOME FUND
-----------------------------------------------------------------------------
CLASS Y
-----------------------------------------------------------------------------
FOR THE
PERIOD
AUGUST 26,
FOR THE YEARS ENDED OCTOBER 31, 1991+ TO
-------------------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 10.49 $ 10.35 $ 9.99 $ 10.97 $ 10.64 $ 10.76 $ 10.53
------- ------- ------- ------- ------- ------- -----------
Net investment income................... 0.71@ 0.75@ 0.78@ 0.75 0.71 0.81 0.17
Net realized and unrealized gains
(losses) from investments and
foreign currency...................... (0.21)@ 0.17@ 0.32@ (1.06) 0.58 (0.08) 0.32
------- ------- ------- ------- ------- ------- -----------
Net increase (decrease) from investment
transactions.......................... 0.50 0.92 1.10 (0.31) 1.29 0.73 0.49
------- ------- ------- ------- ------- ------- -----------
Dividends from net investment income.... (0.56) (0.78) (0.74) (0.34) (0.82) (0.67) (0.24)
Distributions from net realized gains
from investments and
foreign currency transactions......... -- -- -- -- (0.14) (0.18) (0.02)
Distributions in excess of net
investment income..................... (0.06) -- -- -- -- -- --
Distributions from paid-in-capital...... (0.10) -- -- (0.33) -- -- --
------- ------- ------- ------- ------- ------- -----------
Total dividends and distributions to
shareholders.......................... (0.72) (0.78) (0.74) (0.67) (0.96) (0.85) (0.26)
------- ------- ------- ------- ------- ------- -----------
Net asset value, end of period.......... $ 10.27 $ 10.49 $ 10.35 $ 9.99 $ 10.97 $ 10.64 $ 10.76
------- ------- ------- ------- ------- ------- -----------
------- ------- ------- ------- ------- ------- -----------
Total investment return (1)............. 5.20% 9.25% 11.39% (2.86)% 12.60% 6.98% 4.63%
------- ------- ------- ------- ------- ------- -----------
------- ------- ------- ------- ------- ------- -----------
Ratios/supplemental data:
Net assets, end of period (000's)....... $10,096 $13,077 $16,613 $12,975 $12,043 $ 7,252 $ 2,565
Expenses to average net assets.......... 0.94% 0.96% 0.95%(2) 0.88% 1.06%** 0.94% 1.09%*
Net investment income to average net
assets................................ 6.93% 7.19% 7.77%(2) 7.23% 7.00%** 8.15% 8.79%*
Portfolio turnover rate................. 172% 126% 113% 108% 90% 92% 53%
</TABLE>
- ------------------
@ Calculated using the average shares outstanding for the year.
* Annualized
** Includes 0.15% of interest expense related to the reverse repurchase
agreement transactions entered into during the fiscal year.
+ Commencement of issuance of shares.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. Total investment
return information for periods of less than one year is not annualized.
(2) These ratios include non-recurring acquisition reorganization expenses of
0.04%.
--------------------
Prospectus Page 20
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
INVESTMENT OBJECTIVES & POLICIES
- --------------------------------------------------------------------------------
The Funds' investment objectives may not be changed without shareholder
approval. Except where noted, the Funds' other investment policies are not
fundamental and may be changed by their boards.
ASIA PACIFIC GROWTH FUND
Asia Pacific Growth Fund's investment objective is long-term capital
appreciation. The Fund seeks to achieve its objective by investing primarily in
equity securities of Asia Pacific Region companies. The Fund considers the 'Asia
Pacific Region' to be the region located south of the former Soviet Union, east
of Afghanistan and Iran and west of the International Date Line, but excluding
Japan. The Asia Pacific Region countries that currently have established
securities markets and that Schroder Capital normally considers for investments
by the Fund include: Australia, China, Hong Kong, India, Indonesia, Malaysia,
New Zealand, Pakistan, the Philippines, Singapore, South Korea, Sri Lanka,
Taiwan and Thailand. The Fund may also invest in other Asia Pacific Region
countries whose securities markets become sufficiently established. Except under
unusual conditions, the Fund invests in a minimum of three, and generally in a
larger number of, Asia Pacific Region countries. The Fund invests across a broad
spectrum of industries, including trade, finance, real estate, transportation,
communications, energy, construction, manufacturing, services, food processing
and others. The mix of industries and countries changes over time as investment
opportunities change.
The Fund defines Asia Pacific Region companies as companies:
o that are organized under the laws of countries in the Asia Pacific Region that
now or in the future permit foreign investors to participate in their stock
markets,
o that regardless of where organized, and as determined by Schroder Capital,
either (A) derive at least 50% of their revenues from goods produced or sold,
investments made or services performed in Asia Pacific Region countries or (B)
maintain at least 50% of their assets in Asia Pacific Region countries, or
o for which the principal securities trading market is an exchange or
over-the-counter ('OTC') market in the Asia Pacific Region.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities of Asia Pacific Region companies. Most of the equity
securities purchased by the Fund are expected to be traded on a foreign stock
exchange or in a foreign OTC market. When Schroder Capital believes it is
consistent with the Fund's investment objective, the Fund may invest up to 10%
of its total assets in convertible and non-convertible bonds issued or
guaranteed by Asia Pacific Region issuers, including obligations of sovereign
governmental issuers ('sovereign debt').
EMERGING MARKETS EQUITY FUND
Emerging Markets Equity Fund's investment objective is long-term capital
appreciation. The Fund seeks to achieve its objective through investment in a
diversified portfolio consisting primarily of equity securities of issuers in
emerging markets. 'Emerging markets' are the markets in all the countries not
included in the Morgan Stanley Capital International ('MSCI') World Index, an
index of major world economies. Malaysia will be considered an emerging market.
Under normal market conditions, the Fund invests a minimum of 65% of its total
assets in equity securities of issuers located in emerging market countries and
maintains investments in at least three emerging market countries. The Fund
considers issuers to be located in an emerging market country if: (1) the
principal securities trading market for the issuer is in an emerging market
country; (2) the issuer derives 50% or more of its annual revenue or profit from
either goods produced, sales made, investments made or services performed in
emerging market countries; or (3) the issuer is organized under the laws of an
emerging market country.
Schroder Capital attempts to spread the Fund's investments over geographic as
well as economic sectors. Generally, Schroder Capital will not invest more than
35% of the Fund's total assets in any single country, and it will not invest 25%
or more of the Fund's total assets in any single industry. Within each emerging
market, the Fund is diversified through investments in a number of local
companies characterized by attractive valuation relative to expected growth.
There are currently over 60 newly industrializing and developing countries with
equity markets. A number of these emerging markets are not yet easily accessible
to foreign investors and have unattractive tax barriers
--------------------
Prospectus Page 21
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
or insufficient liquidity to make significant investments by the Fund feasible
or attractive. However, many of the largest of the emerging market countries
have liberalized access in recent years, and more are expected to do so in the
future.
In recent years, many emerging market countries have begun programs of economic
reform: removing import tariffs, dismantling trade barriers, deregulating
foreign investment, privatizing state owned industries, permitting the value of
their currencies to float against the dollar and other major currencies, and
generally reducing the level of state intervention in industry and commerce.
Important intra-regional economic integration also holds the promise of greater
trade and growth. At the same time, significant progress has been made in
restructuring the heavy external debt burden that certain emerging market
countries accumulated during the 1970s and 1980s. While there is no assurance
that these trends will continue, Schroder Capital will seek out attractive
investment opportunities in these countries.
GLOBAL EQUITY FUND
Global Equity Fund's investment objective is long-term growth of capital. The
Fund attempts to achieve this goal by investing primarily in equity securities
issued by companies in foreign countries, as well as in the United States. Under
normal circumstances, at least 80% of the Fund's total assets are invested in
securities of issuers in countries represented in the MSCI World Index. This is
a well-known index that reflects major world markets.
The International Equity Team at GE Investment Management selects equity
securities issued by companies located in developed and developing countries
throughout the world. The Fund normally invests in at least three countries, one
of which is typically the United States. The Fund considers an issuer to be
located in the country in which the issuer (a) is organized, (b) derives at
least 50% of its revenues or profits from goods produced or sold, investments
made or services performed, (c) has at least 50% of its assets situated or (d)
has the principal trading market for its securities. The Fund normally invests
at least 65% of its total assets in equity securities of foreign and U.S.
companies.
When the International Equity Team believes it is consistent with the Fund's
investment objective of long-term growth of capital, the Fund may invest up to
35% of its total assets in investment grade bonds that are issued by corporate
or governmental entities and that have maturities no longer than seven years.
The Fund may invest up to 10% of its net assets in convertible securities rated
below investment grade. When the International Equity Team considers market,
economic, political or currency conditions abroad to be unstable, the Fund may
assume a temporary defensive position by investing all or a significant portion
of its assets in securities of U.S. and Canadian issuers or by holding cash or
short-term money market investments. Global Equity Fund's investments in money
market instruments may be made indirectly through investments in a cash
management investment fund established and managed by GE Investment Management
at no additional cost to the Fund.
GLOBAL INCOME FUND
Global Income Fund's primary investment objective is high current income
consistent with prudent investment risk; capital appreciation is a secondary
objective. The Fund seeks to achieve these objectives by
investing principally in high-quality bonds issued or guaranteed by foreign
governments, by the U.S. government, by their respective agencies or
instrumentalities or by supranational organizations, or issued by U.S. or
foreign companies.
The Fund's portfolio consists primarily of bonds rated within one of the two
highest grades assigned by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ('S&P'), Moody's Investors Service, Inc. ('Moody's') or another
nationally recognized statistical rating organization ('NRSRO') or, if unrated,
determined by Mitchell Hutchins to be of comparable quality. Normally, at least
65% of the Fund's total assets consist of high-quality bonds (and receivables
from the sale of such bonds), denominated in foreign currencies or U.S. dollars,
of issuers located in at least three of the following countries: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, Thailand, the United Kingdom and the United States. No more
than 40% of the Fund's assets normally are invested in securities of issuers
located in any one country other than the United States. Up to 5% of the Fund's
total assets may be invested in bonds convertible into equity securities. At
least 65% of the Fund's total assets normally will be invested in income
producing securities.
The Fund may invest up to 35% of its total assets in bonds rated below the two
highest grades assigned by an NRSRO. Except as noted below, these securities
must be investment grade (that is, rated at least BBB by S&P, Baa by Moody's or
comparably rated by another NRSRO or, if unrated, determined by Mitchell
Hutchins to be of comparable quality). Within this
--------------------
Prospectus Page 22
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
35% limitation, the Fund may invest up to 20% of its total assets in bonds that
are below investment grade. These bonds may be rated as low as D by S&P, C by
Moody's or comparably rated by another NRSRO or, in the case of bonds assigned a
short-term debt rating, as low as D by S&P or comparably rated by another NRSRO
or, if not so rated, determined by Mitchell Hutchins to be of comparable
quality. Bonds rated D by S&P are in payment default or such rating is assigned
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized. Bonds rated C by Moody's are in the
lowest rated class and can be regarded as having extremely poor prospects of
attaining any real investment standing. Mitchell Hutchins will purchase such
securities for the Fund only when it concludes that the anticipated return to
the Fund on such investments warrants exposure to the additional level of risks.
Lower-rated bonds are often issued by businesses and governments in emerging
markets. Because the Fund may also invest in emerging market bonds that are
investment grade, the Fund's total investment in emerging market bonds may
exceed the 20% noted above.
In the event that, due to a downgrade of one or more bonds, an amount in excess
of 20% of the Fund's total assets is held in securities rated below investment
grade and comparable unrated securities, Mitchell Hutchins will engage in an
orderly disposition of such securities to the extent necessary to ensure that
the Fund's holdings of such securities do not exceed 20% of the Fund's total
assets.
The Fund may invest up to 35% of its total assets in mortgage-backed securities
of U.S. or foreign issuers that are rated in one of the two highest rating
categories by S&P, Moody's or another NRSRO or, if unrated, determined by
Mitchell Hutchins to be of comparable quality. Up to 20% of the Fund's total
assets may be invested in bonds that are not paying current income. The Fund may
purchase these bonds if Mitchell Hutchins believes that they have a potential
for capital appreciation.
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY & PROCESS
- --------------------------------------------------------------------------------
ASIA PACIFIC GROWTH FUND
Stock selection is at the heart of Schroder Capital's investment philosophy. Its
approach to selecting investments emphasizes fundamental company analysis.
Schroder Capital's stock selection focuses on Asia Pacific Region companies that
it believes have a sustainable competitive advantage and whose growth potential
is undervalued by other investors. In selecting companies for investment,
Schroder Capital considers historical growth rates and future growth prospects,
management capability, the ability of the company to access capital, government
regulation, market share, profit margins, competitive position in both domestic
and export markets and other factors. Schroder Capital allocates investments
among Asia Pacific Region countries based on its assessment of the likelihood
that those countries will have favorable long-term business environments.
Schroder Capital is committed to maximizing risk- adjusted returns for
investors through comprehensive research conducted by an extensive network of
locally based analysts. This investment approach is consistent with the Fund's
overall strategy of taking a long-term view to investment based upon its
assessment of growth potential. Schroder Capital is a wholly owned indirect
subsidiary of Schroders plc, the holding company parent of an international
group of banks and financial services companies ('Schroder Group'), with
associated companies and investment and representative offices located around
the world. Schroder Capital believes that one of its key strengths is the
Schroder Group's worldwide network of investment management affiliates and
access to its extensive network of research offices, many long established, in
the Asia Pacific Region, including, as of December 31, 1997, offices in Bangkok,
Beijing, Hong Kong, Singapore, Manila, Seoul, Sydney, Jakarta, Kuala Lumpur,
Shanghai, Taipei and Tokyo. As of that date, Schroder Capital's global research
network was staffed by over 50 investment professionals, including 10 Asia
Pacific Region specialists in Schroder Capital's London office.
Each year, the Schroder Group researches and conducts on-site visits with
approximately 1200 companies in the Asia Pacific Region countries. Of those
companies, the Schroder Group's investment professionals further develop
extensive management contacts with, and produce independent forecasts of
earnings estimates for, approximately 550 companies.
--------------------
Prospectus Page 23
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
Schroder Capital's analysis includes small and medium-sized companies, as well
as the larger capitalization companies.
Starting in mid-1997, some Asia Pacific Region countries began to experience
currency devaluations that resulted in high interest rate levels and sharp
reductions in economic activity. While the currency crisis diminished prospects
for short-term corporate earnings growth, International Monetary Fund
initiatives may persuade governments and corporations to restructure the
financial sector in a manner that would be a positive long-term factor for the
Asia Pacific Region. Such restructuring may provide for a return to high levels
of long-term economic activity and the return of economic conditions that have
supported economic growth in the Asia Pacific Region in the past. There can be
no assurance that economic growth in the Asia Pacific Region will occur, that
the growth rate will be as high on either an absolute or relative scale as in
the past or that market performance will reflect any actual economic growth in
the Asia Pacific Region overall. Many of the countries within the Asia Pacific
Region may experience political, social or economic instability.
EMERGING MARKETS EQUITY FUND
In selecting emerging market equity securities for Emerging Markets Equity Fund,
Schroder Capital combines rigorous, fundamental research with a quantitative
assessment of the economic potential of the various countries in which
investments might be made. Schroder Capital focuses on companies in emerging
market countries where it believes there is likely to be a favorable long-term
business environment and where it believes a company's growth is less likely to
be impeded by adverse macro-economic or political factors. Within those
countries, Schroder Capital selects stocks of companies that, based on its
analysis of fundamental corporate data, it believes have a sustainable
competitive advantage and whose growth potential is undervalued by other
investors.
Schroder Capital believes that one of its key strengths is the Schroder Group's
worldwide network of investment management affiliates and access to its network
of local research offices, many long established, in emerging market countries.
Each year, the Schroder Group researches and conducts on-site visits with
approximately 1,200 companies in emerging market countries. Of those companies,
the Schroder Group's investment professionals further develop extensive
management contacts with, and produce independent forecasts of earnings
estimates for, approximately 1,000 companies. Schroder Capital's analysis
includes small and medium-sized companies, as well as the larger capitalization
companies.
GLOBAL EQUITY FUND
In selecting equity securities for Global Equity Fund, the International Equity
Team ('Team') at GE Investment Management searches for growth companies selling
at reasonable prices, with an emphasis on undervalued medium- to large-size
growth companies with a global presence. The investment process employed by the
Team involves several steps.
First, the Team carefully screens a universe of thousands of global stocks by
comparing each company's price-to-cash flow ratio with its long-term growth.
This evaluation helps eliminate companies whose stock prices are too expensive,
typically resulting in a list of several hundred stocks. Next, this smaller
group of stocks is rigorously analyzed by the Team's experienced investment
professionals. This step, which is designed to determine whether a stock's price
reflects its true value and whether the market may eventually recognize the
stock's value, reduces the universe to fewer stocks.
Finally, the Team looks for a catalyst (such as new management, new products or
changing industry dynamics) that might cause the market to realize a stock is
undervalued. This process typically results in fewer than 100 stocks that the
Team will buy for the Fund's portfolio.
The strength of the Team's conviction about each company is part of what
determines the size of each holding.
The Team regularly reviews the equity securities held in the Fund's portfolio to
assess risks, such as stability in the political and economic conditions of
underlying countries, fluctuations in currency rates, liquidity, changes in
company earnings and other relevant
factors.
GLOBAL INCOME FUND
Global Income Fund's investment policies are designed to enable it to capitalize
on unique investment opportunities presented throughout the world and in
international financial markets influenced by the increasing interdependence of
economic cycles and currency exchange rates. Over the past decade, bonds offered
by certain foreign governments provided higher investment returns than U.S.
government debt securities. Such returns reflect interest rates and other market
conditions prevailing in those countries and the effect of gains and losses in
the denominated currencies, which have had a substantial impact on investment in
foreign bonds. The importance of global debt
--------------------
Prospectus Page 24
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
markets is illustrated by the Salomon Brothers World Government Bond Market
Index, a popular index used to assess both U.S. government and foreign
government debt markets. As of December 31, 1997, more than 65% of this index
was represented by securities denominated in currencies other than the U.S.
dollar.
The Global Fixed Income Management Team at Mitchell Hutchins relies on
fundamental economic strength, credit quality and currency and interest rate
trends as the principal determinants of the various country, geographic and
industry sector weightings within the Fund's portfolio. In addition, certain of
the Fund's assets are invested in bonds of U.S. governmental and corporate
issuers. The Global Fixed Income Management Team believes that over time
investment in a composite of foreign fixed income markets and in the U.S.
government and corporate bond markets is less risky than a portfolio comprised
exclusively of foreign securities and provides investors with the potential to
earn a higher return than a portfolio invested exclusively in U.S. debt
securities.
- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------
These charts show the total returns for the Funds. Sales charges have not been
deducted from total returns shown in the charts. Returns would be lower if sales
charges were deducted. Total returns both before and after deducting the maximum
sales charges are shown below in the tables that follow the performance charts.
Past results are not a guarantee of future results.
ASIA PACIFIC GROWTH FUND
3/25/97-12/31/97
Class A -33.92%
Class B -34.32%
Class C -34.32%
The inception date for Class A, Class B and Class C shares was March 25, 1997;
thus, the 1997 return represents the period from March 25, 1997 through December
31, 1997. As of December 31, 1997, no Class Y shares had been sold to the
public.
<TABLE>
<CAPTION>
TOTAL RETURN
As of October 31, 1997
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
------- -------- -------- --------
LIFE (3/25/97 - 10/31/97)
<S> <C> <C> <C> <C>
Before deducting maximum sales
charges....................... (28.32)% (28.64)% (28.64)% N/A
After deducting maximum sales
charges....................... (31.55)% (32.21)% (29.35)% N/A
</TABLE>
--------------------
Prospectus Page 25
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
EMERGING MARKETS EQUITY FUND
1/19/94-12/31/94 1995 1996 1997
Class A -12.58% -11.20% 4.86% -4.53%
Class B 0.55% 4.14% -4.52%
Class C -13.17% -11.87% 4.03% -5.34%
Class Y -12.33% -10.92% 5.05% -4.50%
The inception date for Class A, Class C and Class Y shares was January 19, 1994;
thus, the 1994 return represents the period from January 19, 1994 through
December 31, 1994. The inception date for the Class B shares was
December 5, 1995; thus the 1995 return represents the period from December 5,
1995 to December 31, 1995. Schroder Capital was appointed sub-adviser for
Emerging Markets Equity Fund effective February 25, 1997; thus, while past
performance is never a guarantee of future results, information for periods
prior to that date may be less relevant than would otherwise be the case.
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of October 31, 1997
CLASS A CLASS B CLASS C CLASS Y
--------- --------- --------- ---------
Inception Date..................... 1/19/94 12/5/95 1/19/94 1/19/94
<S> <C> <C> <C> <C>
ONE YEAR
Before deducting maximum sales
charges....................... (0.74)% (1.39)% (1.61)% (0.53)%
After deducting maximum sales
charges....................... (5.25)% (6.39)% (2.61)% (0.53)%
LIFE
Before deducting maximum sales
charges....................... (6.13)% 0.34% (6.85)% (5.90)%
After deducting maximum sales
charges....................... (7.27)% (1.76)% (6.85)% (5.90)%
</TABLE>
--------------------
Prospectus Page 26
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
11/14/91-12/31/91 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Class A 2.42% 3.26% 30.77% -2.53% 13.54% 14.80% 6.34%
Class B 1.29% 13.91% 5.49%
Class C 17.39% -3.12% 12.76% 13.91% 5.55%
Class Y 18.19% -2.16% 13.90% 15.12% 6.79%
</TABLE>
The inception date for Class A shares was November 14, 1991; thus, the 1991
return represents the period from November 14, 1991 through December 31, 1991.
As the inception date of Class B shares was August 25, 1995, the 1995 return for
Class B shares represents the period from August 25, 1995 through December 31,
1995. The inception date of Class C and Class Y shares was May 10, 1993; thus,
the 1993 returns for Class C and Class Y shares represent the period from May
10, 1993 through December 31, 1993.
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of October 31, 1997
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
Inception Date..................... 11/14/91 8/25/95 5/10/93 5/10/93
<S> <C> <C> <C> <C>
ONE YEAR
Before deducting maximum sales
charges....................... 8.87% 8.05% 8.05% 9.31%
After deducting maximum sales
charges....................... 3.98% 3.05% 7.05% 9.31%
FIVE YEARS
Before deducting maximum sales
charges....................... 12.04% N/A N/A N/A
After deducting maximum sales
charges....................... 11.00% N/A N/A N/A
LIFE
Before deducting maximum sales
charges....................... 10.76% 8.63% 9.74% 10.92%
After deducting maximum sales
charges....................... 9.90% 7.38% 9.74% 10.92%
</TABLE>
--------------------
Prospectus Page 27
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
GLOBAL INCOME FUND
<TABLE>
<CAPTION>
3/20/87-12/31/87 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A 11.11% 1.22% 14.16% -3.89% 13.20% 7.13% 3.84%
Class B 17.58% 12.15% 5.44% 17.72% 10.75% 0.38% 13.36% -4.77% 12.39% 6.34% 3.06%
Class C 0.10% 13.64% -4.43% 12.54% 6.70% 3.33%
Class Y 9.83% 1.51% 14.54% -3.74% 13.53% 7.54% 4.05%
</TABLE>
The inception date for Class A shares was July 1, 1991; thus, the 1991 return
for Class A shares represents the period from July 1, 1991 through December 31,
1991. The inception date of Class B shares was March 20, 1987; thus, the 1987
return represents the period from March 20, 1987 through December 31, 1987. The
inception date of Class C shares was July 2, 1992; thus, the 1992 return for
Class C shares represents the period from July 2, 1992 through December 31,
1992. The inception date for Class Y shares was August 26, 1991; thus, the 1991
return for Class Y shares represents the period from August 26, 1991 through
December 31, 1991.
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
As of October 31, 1997
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
Inception Date..................... 7/1/91 3/20/87 7/2/92 8/26/91
<S> <C> <C> <C> <C>
ONE YEAR
Before deducting maximum sales
charges....................... 4.99% 4.11% 4.48% 5.20%
After deducting maximum sales
charges....................... 0.75% (0.89)% 3.73% 5.20%
FIVE YEARS
Before deducting maximum sales
charges....................... 6.64% 5.81% 6.10% 6.91%
After deducting maximum sales
charges....................... 5.78% 5.49% 6.10% 6.91%
TEN YEARS (OR LIFE OF CLASS)
Before deducting maximum sales
charges....................... 7.23% 9.02% 5.82% 7.43%
After deducting maximum sales
charges....................... 6.55% 9.02% 5.82% 7.43%
</TABLE>
--------------------
Prospectus Page 28
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
PERFORMANCE INFORMATION
The Funds perform a standardized computation of annualized total return and may
show this return in advertisements or promotional materials. Standardized return
shows the change in value of an investment in a Fund as a steady compound annual
rate of return. Actual year-by-year returns fluctuate and may be higher or lower
than standardized return. Standardized returns for Class A shares of the Funds
reflect deduction of the Funds' maximum initial sales charge of 4.5% (4% in the
case of Global Income Fund) at the time of purchase, and standardized returns
for the Class B and Class C shares of the Funds reflect deduction of the
applicable contingent deferred sales charge imposed on the sale of shares held
for the period. One-, five-and ten-year periods will be shown, unless the Fund
or Class has been in existence for a shorter period. If so, returns will be
shown for the period since inception, known as 'Life.' Total return calculations
assume reinvestment of dividends and other distributions.
The Funds may use other total return presentations in conjunction with
standardized return. These may cover the same or different periods as those used
for standardized return and may include cumulative returns, average annual
rates, actual year-by-year rates or any combination thereof. Non-standardized
return does not reflect initial or contingent deferred sales charges and would
be lower if such charges were deducted.
Global Income Fund also may advertise its yield. Yield reflects investment
income net of expenses over a 30-day (or one month) period on a Fund share.
Yield is expressed as an annualized percentage of the maximum offering price for
a Fund share at the end of the period. For Class B, C and Y shares, the maximum
offering price is the same as the net asset value per share. Yield computations
differ from other accounting methods and may differ from dividends actually paid
or reported net income.
Total return information reflects past performance and does not indicate future
results. The investment return and principal value of shares of the Funds will
fluctuate. The amount investors receive when selling shares may be more or less
than what they paid. Further information about each Fund's performance is
contained in its Annual Report, which may be obtained without charge by
contacting the Fund, your PaineWebber investment executive or PaineWebber's
correspondent firms or by calling toll-free 1-800-647-1568.
- --------------------------------------------------------------------------------
THE FUNDS' INVESTMENTS
- --------------------------------------------------------------------------------
EQUITY SECURITIES include common stocks, most preferred stocks and securities
that are convertible into them, including common stock purchase warrants and
rights, equity interests in trusts, partnerships, joint ventures or similar
enterprises and depository receipts. Common stocks, the most familiar type,
represent an equity (ownership) interest in a corporation.
Preferred stock has certain fixed income features, like a bond, but is actually
equity in a company, like common stock. Convertible securities may include
debentures, notes and preferred equity securities, that may be converted into or
exchanged for a prescribed amount of common stock of the same or a different
issuer within a particular period of time at a specified price or formula.
Depository receipts typically are issued by banks or trust companies and
evidence ownership of underlying equity securities.
BONDS are fixed or variable rate debt obligations, including notes, debentures,
and similar instruments and securities. Mortgage- and asset-backed securities
are types of bonds, and income-producing, non-convertible preferred stocks may
be treated as bonds for investment purposes. Bonds are used by corporations and
governments to borrow money from investors. The issuer pays the investor a fixed
or variable rate of interest and normally must repay the amount borrowed on or
before maturity. Bonds have varying degrees of investment risk and varying
levels of sensitivity to changes in interest rates.
--------------------
Prospectus Page 29
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
RISKS
EQUITY SECURITIES. While past performance does not guarantee future results,
equity securities historically have provided the greatest long-term growth
potential in a company. However, their prices generally fluctuate more than
other securities, and reflect changes in a company's financial condition and in
overall market and economic conditions. Common stocks generally represent the
riskiest investment in a company. It is possible that a Fund may experience a
substantial or complete loss on an individual equity investment.
BONDS. Bonds are subject to interest rate risk and credit risk. Interest rate
risk is the risk that interest rates will rise and bond prices will fall,
lowering the value of a Fund's investments in bonds. Credit risk is the risk
that an issuer may be unable to pay interest and principal on the bond. In
addition, there is a risk that bonds will be downgraded by rating agencies,
which can be expected to lower value and liquidity. Credit ratings attempt to
evaluate the safety of principal and interest payments and do not evaluate the
volatility of the security's value or its liquidity and do not guarantee the
performance of the issuer. Rating agencies may fail to make timely changes in
credit ratings in response to subsequent events, so that an issuer's current
financial condition may be better or worse than the rating indicates.
Bonds rated below investment grade (that is, rated lower than BBB by S&P, Baa by
Moody's, comparably rated by another NRSRO or determined to be of similar
quality), generally offer a higher current yield than that available for higher
grade issues, but they involve higher risks. They are especially subject to
adverse changes in general economic conditions and in the industries in which
the issuers are engaged, to changes in the financial condition of the issuers
and to price fluctuations in response to changes in interest rates. Such
securities, commonly referred to as 'junk bonds,' are considered predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal and may involve major risk exposure to adverse conditions. These
securities may be rated in the lowest rating category by a ratings agency and
may be in default.
During periods of economic downturn or rising interest rates, highly leveraged
issuers may experience financial stress, which could adversely affect their
ability to make payments of interest and principal and increase the possibility
of default. In addition, such issuers may not have more traditional methods of
financing available to them and may be unable to repay debt at maturity by
refinancing. The risk of loss due to default by such issuers is significantly
greater because such securities frequently are unsecured and subordinated to the
prior payment of senior indebtedness.
CONVERTIBLE SECURITIES. Each Fund may invest in convertible securities. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest or dividends until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than common
stocks, but lower yields than comparable non-convertible securities, (2) are
less subject to fluctuation in value than the underlying stock because they have
fixed income characteristics and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases. While
no securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer's common stock. However,
the extent to which such risk is reduced depends in large measure upon the
degree to which the convertible security sells above its value as a fixed income
security.
FOREIGN INVESTING. Investing in foreign securities involves more risks than
investing in the United States. Their value is subject to economic and political
developments in the countries where the companies operate and to changes in
foreign currency values. Values may also be affected by foreign tax laws,
changes in foreign economic or monetary policies, exchange control regulations
and regulations involving prohibitions on the repatriation of foreign
currencies. Investments in foreign countries could be affected by other factors
not present in the United States, including expropriation, confiscatory
taxation, lack of uniform accounting and auditing standards and potential
difficulties in enforcing contractual obligations. Transactions in foreign
securities may be subject to less efficient settlement practices, including
extended clearance and settlement periods.
In general, less information may be available about foreign companies than about
U.S. companies, and foreign companies are generally not subject to the same
accounting, auditing and financial reporting standards as are U.S. companies.
Foreign securities markets may be less liquid and subject to less regulation
than the U.S. securities markets. The costs of investing outside the United
States frequently are
--------------------
Prospectus Page 30
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
higher than those in the United States. These costs include relatively higher
brokerage commissions and foreign custody expenses.
Investments in foreign government bonds involve special risks. The issuer of the
bond or the governmental authorities that control the repayment of the bond may
be unable or unwilling to pay interest or repay principal when due in accordance
with the terms of the bond, and a Fund may have limited legal recourse in the
event of default. Political conditions, especially a sovereign entity's
willingness to meet the terms of its debt obligations, are of considerable
significance.
INVESTING IN EMERGING MARKETS. Investing in securities issued by companies
located in emerging markets involves additional risks. These countries typically
have economic and political systems that are relatively less mature, and can be
expected to be less stable, than those of developed countries. Emerging market
countries may have policies that restrict investment by foreigners in those
countries, and there is a risk of government expropriation or nationalization of
private property. The possibility of low or nonexistent trading volume in the
securities of companies in emerging markets may also result in a lack of
liquidity and in price volatility. Issuers in emerging markets typically are
subject to a greater degree of change in earnings and business prospects than
are companies in developed markets.
The emerging markets in which the Funds may invest include formerly communist
countries of Eastern Europe, the Commonwealth of Independent States (formerly
the Soviet Union) and the People's Republic of China. Upon the accession to
power of communist regimes approximately 50 to 80 years ago, the governments of
a number of these countries expropriated a large amount of property. The claims
of many property owners against those governments were never finally settled.
There can be no assurance that a Fund's investments in these countries, if any,
would not also be expropriated, nationalized or otherwise confiscated, in which
case the Fund could lose its entire investment in the country involved. In
addition, any change in the leadership or policies of these countries may halt
the expansion of or reverse the liberalization of foreign investment policies
now occurring. The Funds may invest in Hong Kong, which reverted to Chinese
administration on July 1, 1997. The long-term effects of this reversion are not
known at this time. However, a Fund's investments in Hong Kong may now be
subject to the same or similar risks as any investment in China.
CURRENCY. Currency risk is the risk that changes in foreign exchange rates may
reduce the U.S. dollar value of a Fund's foreign investments. A Fund's share
value may change significantly when investments are denominated in foreign
currencies. Generally, currency exchange rates are determined by supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries. Currency exchange rates can also be affected by the
intervention of the U.S. and foreign governments or central banks, the
imposition of currency controls, speculation or other political or economic
developments inside and outside the United States.
CURRENCY-LINKED INVESTMENTS. The Funds may invest in securities that are indexed
to specific foreign currency exchange rates. The principal amount of these
securities may be adjusted up or down (but not below zero) at maturity to
reflect changes in the exchange rate between two currencies. A Fund may
experience loss of principal due to these adjustments.
DERIVATIVES. Some of the instruments in which the Funds may invest may be
referred to as 'derivatives,' because their value depends on (or 'derives' from)
the value of an underlying asset, reference rate or index. These instruments
include options, futures contracts, forward currency contracts, swap agreements
and similar instruments. There is limited consensus as to what constitutes a
'derivative' security. However, in Mitchell Hutchins' view, derivative
securities also include 'stripped' securities, specially structured types of
mortgage- and asset-backed securities and dollar denominated securities whose
value is linked to foreign currencies. The market value of derivative
instruments and securities sometimes is more volatile than that of other
investments, and each type of derivative instrument may pose its own special
risks. Mitchell Hutchins and the sub-advisers take these risks into account in
their management of the Funds.
COUNTERPARTIES. The Funds may be exposed to the risk of financial failure or
insolvency of another party. To help lessen those risks, Mitchell Hutchins and
the sub-advisers, subject to the supervision of the Funds' boards, monitor and
evaluate the creditworthiness of the parties with which each Fund does business.
U.S. GOVERNMENT SECURITIES. The U.S. government securities in which Global
Income Fund may invest include direct obligations of the U.S. government (such
as Treasury bills, notes and bonds) and obligations issued or guaranteed as to
principal and interest (but not as to market value) by U.S. government agencies
and instrumentalities, including U.S. government mortgage-backed securities.
--------------------
Prospectus Page 31
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
Global Income Fund may invest in 'zero coupon' Treasury securities, which are
Treasury bills, notes and bonds that have been stripped of their unmatured
interest coupons, and receipts or certificates representing interest in such
stripped debt obligations and coupons. A zero coupon security pays no cash
interest to its holder prior to maturity. Accordingly, these securities usually
are issued and traded at a deep discount from their face or par value and are
subject to greater fluctuations of market value in response to changing interest
rates than debt obligations of comparable maturities that make current income
payments. Federal tax law requires that the holder of a zero coupon security
include in gross income each year the original issue discount that accrues on
the security for the year, even though the holder receives no interest payment
on the security during the year. For additional discussion of the tax treatment
of zero coupon securities, see 'Taxes' in the Statement of Additional
Information.
Global Income Fund may also invest in Treasury Inflation-Protection Securities
('TIPS'), which are Treasury bonds on which the principal value is adjusted
daily in accordance with changes in the Consumer Price Index. Interest on TIPS
is payable semi-annually on the adjusted principal value. The principal value of
TIPS would decline during periods of deflation, but the principal amount payable
at maturity would not be less than the original par amount. If inflation is
lower than expected while the Fund holds TIPS, the Fund may earn less on the
TIPS than it would on conventional Treasury bonds. Any increase in the principal
value of TIPS is taxable in the year the increase occurs, even though holders do
not receive cash representing the increase at that time.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are bonds that represent
direct or indirect interests in pools of underlying mortgage loans that are
secured by real property. U.S. government mortgage-backed securities are issued
or guaranteed by Ginnie Mae (also known as the Government National Mortgage
Association), Fannie Mae (also known as the Federal National Mortgage
Association), Freddie Mac (also known as the Federal Home Loan Mortgage
Corporation) or other government sponsored enterprises. Other domestic mortgage-
backed securities are sponsored or issued by private entities, including
investment banking firms and mortgage originators. Foreign mortgage-backed
securities may be issued by mortgage banks and other private or governmental
entities outside the United States and are supported by interests in foreign
real estate.
Mortgage-backed securities may be composed of one or more classes and may be
structured either as pass-through securities or collateralized debt obligations.
Multiple-class mortgage-backed securities are referred to in this Prospectus as
'CMOs.' Some CMOs are directly supported by other CMOs, which in turn are
supported by mortgage pools. Investors typically receive payments out of the
interest and principal on the underlying mortgages. The portions of these
payments that investors receive, as well as the priority of their rights to
receive payments, are determined by the specific terms of the CMO class. CMOs
involve special risk, and evaluating them requires special knowledge.
A major difference between mortgage-backed securities and traditional bonds is
that interest and principal payments are made more frequently (usually monthly)
and that principal may be repaid at any time. When interest rates go down and
homeowners refinance their mortgages, mortgage-backed securities may be paid off
more quickly than investors expect. When interest rates rise, mortgage-backed
securities may be paid off more slowly than originally expected. Changes in the
rate or 'speed' of these prepayments can cause the value of mortgage-backed
securities to fluctuate rapidly.
Because of prepayments, mortgage-backed securities may benefit less than other
bonds from declining interest rates. Reinvestments of prepayments may occur at
lower interest rates than the original investment, thus adversely affecting a
Fund's yield. Actual prepayment experience may cause the yield of a
mortgage-backed security to differ from what was assumed when the Fund purchased
the security.
CMO classes may be specially structured in a manner that provides any of a wide
variety of investment characteristics, such as yield, effective maturity and
interest rate sensitivity. As market conditions change, however, and
particularly during periods of rapid or unanticipated changes in market interest
rates, the attractiveness of the CMO classes and the ability of the structure to
provide the anticipated investment characteristics may be significantly reduced.
These changes can result in volatility in the market value, and in some
instances reduced liquidity, of the CMO class.
Certain classes of CMOs and other mortgage-backed securities are structured in a
manner that makes them extremely sensitive to changes in prepayment rates.
Interest-only ('IO') and principal-only ('PO') classes are examples of this. IOs
are entitled to receive all or a portion of the interest, but none (or only a
nominal
--------------------
Prospectus Page 32
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
amount) of the principal payments, from the underlying mortgage assets. If the
mortgage assets underlying an IO experience greater than anticipated principal
prepayments, then the total amount of interest payments allocable to the IO
class, and therefore the yield to investors, generally will be reduced. In some
instances, an investor in an IO may fail to recoup all of his or her initial
investment, even if the security is government issued or guaranteed or is rated
AAA or the equivalent. Conversely, PO classes are entitled to receive all or a
portion of the principal payments, but none of the interest, from the underlying
mortgage assets. PO classes are purchased at substantial discounts from par, and
the yield to investors will be reduced if principal payments are slower than
expected. Some IOs and POs, as well as other CMO classes, are structured to have
special protections against the effects of prepayments. These structural
protections, however, normally are effective only within certan ranges of
prepayment rates and thus will not protect investors in all circumstances.
Inverse floating rate CMO classes also may be extremely volatile. These classes
pay interest at a rate that decreases when a specified index of market rates
increases.
The market for privately issued mortgage-backed securities is smaller and less
liquid than the market for U.S. government mortgage-backed securities. Foreign
mortgage-backed securities markets are substantially smaller than U.S. markets,
but have been established in several countries, including Germany, Denmark,
Sweden, Canada and Australia, and may be developed elsewhere. Foreign
mortgage-backed securities generally are structured differently than domestic
mortgage-backed securities, but they normally present substantially similar
investment risks as well as the other risks normally associated with foreign
securities.
During 1994, the value and liquidity of many mortgage-backed securities declined
sharply due primarily to increases in interest rates. There can be no assurace
that such declines will not recur. The market value of certain mortgage-backed
securities in which a Fund may invest, including IO and PO classes of
mortgage-backed securities, can be extremely volatile and these securities may
become illiquid. Mitchell Hutchins seeks to manage the Fund's investments in
mortgage-backed securities so that the volatility of the Fund's portfolio, taken
as a whole, is consistent with the Fund's investment objective. If market
interest rates or other factors that affect the volatility of securities held by
the Fund change in ways that Mitchell Hutchins does not anticipate, the Fund's
ability to meet its investment objective may be reduced.
LOAN PARTICIPATIONS AND ASSIGNMENTS. Global Income Fund may invest in fixed and
floating rate loans arranged through private negotiations with a U.S. or foreign
borrower. These investments normally are participations in or assignments of all
or a portion of loans made by banks. Participations typically will result in the
Fund's having a contractual relationship only with the lender, not with the
borrower. In a participation, the Fund is entitled to receive payments of
principal, interest and any loan fees by the lender only when and if they are
received. Also, the Fund may not directly benefit from any collateral supporting
the underlying loan. As a result, the Fund assumes the credit risk of both the
borrower and the lender that is selling the participation. If the lender becomes
insolvent, the Fund may be treated as a general creditor of the lender and may
not benefit from any set-off between the lender and the borrower. In a loan
assignment, the Fund is entitled to receive payments directly from the borrower
and, therefore, does not depend on the selling bank to pass these payments on to
the Fund.
NON-DIVERSIFIED STATUS. Global Income Fund is 'non-diversified,' as that term is
defined in the 1940 Act, but it intends to continue to qualify as a 'regulated
investment company' for federal income tax purposes. See 'Dividends & Taxes.'
This means, in general, that more than 5% of the total assets of the Fund may be
invested in securities of one issuer (including a foreign government), but only
if, at the close of each quarter of the Fund's taxable year, the aggregate
amount of such holdings does not exceed 50% of the value of its total assets and
no more than 25% of the value of its total assets is invested in the securities
of a single issuer. To the extent that the Fund's portfolio at times may include
the securities of a smaller number of issuers than if it were 'diversified' (as
defined in the 1940 Act), the Fund will at such times be subject to greater risk
with respect to its portfolio securities than an investment company that invests
in a broader range of securities, in that changes in the financial condition or
market assessment of a single issuer may cause greater fluctuation in the Fund's
total return and the price of Fund shares.
YEAR 2000 RISKS. Like other mutual funds, financial and business organizations
and individuals around the world, each of the Funds could be adversely affected
if the computer systems used by its investment adviser, sub-advisers and other
service providers and
--------------------
Prospectus Page 33
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
entities with computer systems that are linked to Fund records do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the 'Year 2000 Issue.' Mitchell Hutchins is
taking steps that it believes are reasonably designed to address the Year 2000
Issue with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Funds' other major service providers. However, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the Funds.
OTHER INVESTMENT TECHNIQUES AND STRATEGIES
HEDGING AND OTHER STRATEGIES USING DERIVATIVE INSTRUMENTS. Each Fund may use
certain instruments and strategies designed to adjust the overall risk of its
investment portfolio ('hedge') or, in the case of Global Income Fund, to enhance
income or realize gains. Use of derivative instruments solely to enhance income
or realize gains may be considered a form of speculation. These strategies
involve derivative instruments, including options (both exchange traded and
over-the-counter), futures contracts and forward currency contracts. In
addition, Asia Pacific Growth Fund and Global Income Fund may use interest rate
swaps and similar contracts to preserve a return or spread on a particular
investment or portion of its portfolio or to protect against an increase in the
price of securities that either Fund anticipates purchasing at a later date.
Asia Pacific Growth Fund may also engage in currency swaps. New financial
products and risk management techniques continue to be developed, and they may
be used by any Fund if consistent with its investment objective and policies.
The Funds' ability to use these strategies may be limited by market conditions,
regulatory limits and tax considerations. In addition, in some countries there
may not be a market for derivative instruments, or it may be too small to permit
effective hedging. The Statement of Additional Information contains further
information on these derivative instruments and related strategies.
The Funds might not use any derivative instruments or hedging strategies, and
there can be no assurance that using any strategy will succeed. If Schroder
Capital, GE Investment Management or Mitchell Hutchins, as applicable, is
incorrect in its judgment on market values, interest rates or other economic
factors in using a derivative instrument or strategy, a Fund may have lower net
income and a net loss on the investment. Each of these strategies involves
certain risks, which include:
o the fact that the skills needed to use derivative instruments are different
from those needed to select securities for the Funds;
o the possibility of imperfect correlation, or even no correlation, between
price movements of derivative instruments used in hedging strategies and price
movements of the securities or currencies being hedged;
o possible constraints placed on a Fund's ability to purchase or sell portfolio
investments at advantageous times due to the need for the Fund to maintain
'cover' or to segregate securities; and
o the possibility that a Fund is unable to close out or liquidate its hedged
position.
REPURCHASE AGREEMENTS. Each Fund may use repurchase agreements. Repurchase
agreements are transactions in which a Fund purchases securities from a bank or
recognized securities dealer and simultaneously commits to resell the securities
to the bank or dealer at an agreed-upon date or upon demand and at a price
reflecting a market rate of interest unrelated to the coupon rate or maturity of
the purchased securities. Repurchase agreements carry certain risks not
associated with direct investments in securities, including a possible decline
in the market value of the underlying securities and delays and costs to the
Fund if the other party to the repurchase agreement becomes insolvent. Each Fund
intends to enter into repurchase agreements only with banks and dealers in
transactions believed by Mitchell Hutchins or a sub-adviser to present minimum
credit risks in accordance with guidelines established by the Fund's board.
REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse repurchase
agreements with banks and securities dealers up to the percentages specified
below under 'Other Information.' Such agreements involve the sale of securities
held by the Fund subject to its agreement to repurchase the securities at an
agreed-upon date or upon demand and at a price reflecting a market rate of
interest. Such agreements are considered to be borrowings and may be entered
into only for temporary or emergency purposes.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. Each Fund may purchase securities
on a 'when-issued' basis or may purchase or sell securities for delayed
delivery, i.e., for issuance or delivery to the Funds later than the normal
settlement date for such securities at a stated price and yield. The Funds
--------------------
Prospectus Page 34
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
generally would not pay for such securities or start earning interest on them
until they are received. However, when a Fund undertakes a when-issued or
delayed-delivery obligation, it immediately assumes the risks of ownership,
including the risks of price fluctuation. Failure of the issuer to deliver a
security purchased by a Fund on a when-issued or delayed-delivery basis may
result in that Fund's incurring or missing an opportunity to make an alternative
investment. Depending on market conditions, a Fund's when-issued and
delayed-delivery purchase commitments could cause its net asset value per share
to be more volatile, because such securities may increase the amount by which
the Fund's total assets, including the value of when-issued and delayed-delivery
securities held by that Fund, exceeds its net assets. When-issued and
delayed-delivery securities will not exceed 10% of Global Equity Fund's net
assets.
LENDING PORTFOLIO SECURITIES. Each Fund may lend its securities to qualified
broker-dealers or institutional investors in an amount up to 33 1/3% of that
Fund's total assets. Lending securities enables a Fund to earn additional
income, but could result in a loss or delay in recovering these securities.
PORTFOLIO TURNOVER. Each Fund's portfolio turn-over rate may vary greatly from
year to year and will not be a limiting factor when Mitchell Hutchins or a
sub-adviser deems portfolio changes appropriate. A higher turnover rate (100% or
more) for a Fund will involve correspondingly greater transaction costs, which
will be borne directly by the Fund, and may increase the potential for
short-term capital gains.
TEMPORARY DEFENSIVE POSITIONS. When Mitchell Hutchins or a sub-adviser, as
applicable, believes that unusual circumstances warrant a defensive posture,
each Fund may temporarily commit all or any portion of its assets to cash (U.S.
dollars or foreign currencies) or investment grade money market instruments of
U.S. or foreign issuers, including repurchase agreements.
ILLIQUID SECURITIES. Global Equity Fund and Global Income Fund each may invest
up to 10% of its net assets, and Emerging Markets Equity Fund and Asia Pacific
Growth Fund up to 15% of its net assets, in illiquid securities, including
certain cover for over-the-counter options and securities whose disposition is
restricted under the federal securities laws other than those Mitchell Hutchins,
or a sub-adviser, as applicable, has determined to be liquid pursuant to
guidelines established by a Fund's board. To the extent that securities are
freely tradeable in the country in which they are principally traded, they are
not considered illiquid even if they are not freely tradeable in the United
States. Each Fund may invest in restricted securities that are eligible for
resale to qualified institutional buyers pursuant to SEC Rule 144A, but a Fund
will not consider those securities to be illiquid if Mitchell Hutchins or a
sub-adviser, as applicable, determines them to be liquid in accordance with
procedures approved by the Fund's board. The lack of a liquid secondary market
for illiquid securities may make it more difficult for a Fund to assign a value
to those securities for purposes of valuing its portfolio and calculating its
net asset value.
OTHER INFORMATION. Each Fund may borrow money from banks or through reverse
repurchase agreements for temporary or emergency purposes in the following
amounts of total assets: Asia Pacific Growth Fund-- 33 1/3%, Emerging Markets
Equity Fund--33 1/3%, Global Equity Fund--20%, and Global Income Fund--10%.
However, none of the Funds will purchase portfolio securities while borrowings
(including reverse repurchase agreements) in excess of 5% of the value of its
total assets are outstanding. Each Fund may sell securities short 'against the
box.' When a security is sold against the box, the seller owns the security. In
addition, each Fund may invest up to 10% of its total assets in the securities
of other investment companies. To the extent a Fund invests in other investment
companies, its shareholders incur duplicative fees and expenses, including
investment advisory fees. Each Fund may invest up to 35% of its total assets in
cash (U.S. dollars or foreign currencies) or investment grade money market
instruments of U.S. or foreign issuers for liquidity purposes, pending
investment in other securities, to reinvest cash collateral from securities
lending or, in the case of Global Income Fund, as part of its ordinary
investment activities. Global Income Fund's investment of cash collateral from
securities lending in such money market instruments is not subject to this 35%
limitation.
--------------------
Prospectus Page 35
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
FLEXIBLE PRICING(SM)
- --------------------------------------------------------------------------------
Each Fund offers through this Prospectus four classes of shares that differ in
terms of sales charges and expenses. An investor can select the class that is
best suited to his or her investment needs, based upon the holding period and
the amount of investment.
CLASS A SHARES
HOW PRICE IS CALCULATED: The price is the net asset value plus the initial sales
charge (the maximum is 4.5% of the public offering price or, in the case of
Global Income Fund, 4% of the public offering price) next calculated after
PaineWebber's New York City headquarters or PFPC Inc., the Funds' transfer agent
('Transfer Agent'), receives the purchase order. Although investors pay an
initial sales charge when they buy Class A shares, the ongoing expenses for this
class are lower than the ongoing expenses of Class B and Class C shares. Class A
shares sales charges are calculated as follows:
ASIA PACIFIC GROWTH FUND, EMERGING MARKETS
EQUITY FUND AND GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF DISCOUNT TO
------------------------- SELECTED DEALERS
OFFERING NET AMOUNT AS PERCENTAGE
AMOUNT OF INVESTMENT PRICE INVESTED OF OFFERING PRICE
- ----------------------------------- -------- ---------- -----------------
<S> <C> <C> <C>
Less than $50,000.................. 4.50% 4.71% 4.25%
$50,000 to $99,999................. 4.00 4.17 3.75
$100,000 to $249,999............... 3.50 3.63 3.25
$250,000 to $499,999............... 2.50 2.56 2.25
$500,000 to $999,999............... 1.75 1.78 1.50
$1,000,000 and over (1)............ None None 1.00(2)
</TABLE>
GLOBAL INCOME FUND
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF DISCOUNT TO
------------------------- SELECTED DEALERS
OFFERING NET AMOUNT AS PERCENTAGE
AMOUNT OF PURCHASE PRICE INVESTED OF OFFERING PRICE
- ----------------------------------- -------- ---------- -----------------
<S> <C> <C> <C>
Less than $100,000................. 4.00% 4.17% 3.75%
$100,000 to $249,999............... 3.00 3.09 2.75
$250,000 to $499,999............... 2.25 2.30 2.00
$500,000 to $999,999............... 1.75 1.78 1.50
$1,000,000 and over (1)............ None None 1.00(2)
</TABLE>
- ------------------
(1) A contingent deferred sales charge of 1% of the shares' offering price or
the net asset value at the time of sale by the shareholder, whichever is
less, is charged on sales of shares made within one year of the purchase
date. Class A shares representing reinvestment of any dividends or other
distributions are not subject to the 1% charge. Withdrawals under the
Systematic Withdrawal Plan are not subject to this charge. However,
investors may withdraw annually no more than 12% of the value of the Fund
account under the Plan in the first year after purchase.
(2) Mitchell Hutchins pays 1% to PaineWebber.
SALES CHARGE REDUCTIONS & WAIVERS
Investors who are purchasing Class A shares in more than one PaineWebber mutual
fund may combine those purchases to get a reduced sales charge. Investors who
already own Class A shares in one or more PaineWebber mutual funds may combine
the amount they are currently purchasing with the value of such previously owned
shares to qualify for a reduced sales charge. To determine the sales charge
reduction in either case, please refer to the charts above.
Investors may also qualify for a lower sales charge when they combine their
purchases with those of:
o their spouses, parents or children under age 21;
o their Individual Retirement Accounts (IRAs);
o certain employee benefit plans, including 401(k) plans;
o any company controlled by the investor;
o trusts created by the investor;
o Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts created
by the investor or group
--------------------
Prospectus Page 36
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
of investors for the benefit of the investors' children; or
o accounts with the same adviser.
Employers who own Class A shares for one or more of their qualified retirement
plans may also qualify for the reduced sales charge.
The sales charge will not apply when the investor:
o is an employee, director, trustee or officer of PaineWebber, its affiliates or
any PaineWebber mutual fund;
o is the spouse, parent or child of any of the above;
o buys these shares through a PaineWebber investment executive who was formerly
employed as a broker with a competing brokerage firm that was registered as a
broker-dealer with the SEC; and
o was the investment executive's client at the competing brokerage firm;
o within 90 days of buying Class A shares in a Fund, the investor sells
shares of one or more mutual funds that (a) were principally underwritten
by the competing brokerage firm or its affiliates and (b) the investor
either paid a sales charge to buy those shares, paid a contingent
deferred sales charge when selling them or held those shares until the
contingent deferred sales charge was waived; and
o the amount that the investor purchases does not exceed the total amount
of money the investor received from the sale of the other mutual fund;
o is a certificate holder of unit investment trusts sponsored by PaineWebber and
has elected to have dividends and other distributions from that investment
automatically invested in Class A shares;
o is an employer establishing an employee benefit plan qualified under section
401, including a salary reduction plan qualified under section 401(k), or
section 403(b) of the Internal Revenue Code ('Code') (each a 'qualified
pension plan'). (This waiver is subject to minimum requirements, with respect
to the number of employees and amount of plan assets, established by Mitchell
Hutchins. Currently, the plan must have 50 or more eligible employees and at
least $1 million in plan assets.) For investments made pursuant to this
waiver, Mitchell Hutchins may make a payment to PaineWebber out of its own
resources in an amount not to exceed 1% of the amount invested;
o is a participant in the PaineWebber Members Only Program(Trademark). For
investments made pursuant to this waiver, Mitchell Hutchins may make payments
out of its own resources to PaineWebber and to participating membership
organizations in a total amount not to exceed 1% of the amount invested;
o is a variable annuity offered only to qualified pension plans. For investments
made pursuant to this waiver, Mitchell Hutchins may make payments out of its
own resources to PaineWebber and to the variable annuity's sponsor, adviser or
distributor in a total amount not to exceed 1% of the amount invested;
o acquires Class A shares through an investment program that is not sponsored by
PaineWebber or its affiliates and that charges participants a fee for program
services, provided that the program sponsor has entered into a written
agreement with PaineWebber permitting the sale of Class A shares at net asset
value to that program. For investments made pursuant to this waiver, Mitchell
Hutchins may make a payment to PaineWebber out of its own resources in an
amount not to exceed 1% of the amount invested. For subsequent investments or
exchanges made to implement a rebalancing feature of such an investment
program, the minimum subsequent investment requirement is also waived; or
o acquires Class A shares in connection with a reorganization pursuant to which
a Fund acquires substantially all of the assets and liabilities of another
investment company in exchange solely for shares of the Fund.
For more information on how to get any reduced sales charge, investors should
contact their investment executive at PaineWebber or one of its correspondent
firms or call 1-800-647-1568. Investors must provide satisfactory information to
PaineWebber or the Fund if they seek any of these waivers.
CLASS B SHARES
HOW PRICE IS CALCULATED: The price is the net asset value next calculated after
PaineWebber's New York City headquarters or the Transfer Agent receives the
purchase order. The ongoing expenses investors pay for Class B shares are higher
than those of Class A shares. Because investors do not pay an initial sales
charge when they buy Class B shares, 100% of their purchase is immediately
invested.
Depending on how long they own their Fund investment, investors may have to pay
a sales charge when they sell their Fund shares. This sales charge is called a
'contingent deferred sales charge.' The amount
--------------------
Prospectus Page 37
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
of the charge depends on how long the investor owned the shares. The sales
charge is calculated by multiplying the offering price (the net asset value of
the shares at the time of purchase) or the net asset value of the shares at the
time of sale by the shareholder, whichever is less, by the percentage shown on
the following table. Investors who own shares for more than six years do not
have to pay a sales charge when selling those shares.
<TABLE>
<CAPTION>
PERCENTAGE BY WHICH
THE SHARES' NET
ASSET
IF THE INVESTOR VALUE IS
SELLS SHARES WITHIN: MULTIPLIED:
- ----------------------------------- -------------------
<S> <C>
1st year since purchase 5%
2nd year since purchase 4
3rd year since purchase 3
4th year since purchase 2
5th year since purchase 2
6th year since purchase 1
7th year since purchase None
</TABLE>
CONVERSION OF CLASS B SHARES
Class B shares automatically convert to the appropriate number of Class A shares
of equal dollar value after the investor has owned them for six years. Dividends
and other distributions paid to the investor by the Fund in the form of
additional Class B shares will also convert to Class A shares on a pro-rata
basis. This benefits shareholders because Class A shares have lower ongoing
expenses than Class B shares. If the investor has exchanged Class B shares
between PaineWebber funds, the Fund uses the purchase date at which the initial
investment was made to determine the conversion date.
MINIMIZING THE CONTINGENT DEFERRED
SALES CHARGE
When investors sell Class B shares they have owned for less than six years, the
Fund automatically will minimize the sales charge by assuming the investors are
selling:
o First, Class B shares owned through reinvested dividends and capital gain
distributions; and
o Second, Class B shares held in the portfolio the longest.
WAIVERS OF THE CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge will not apply to:
o sales of shares under the Fund's 'Systematic Withdrawal Plan' (investors may
withdraw annually no more than 12% of the value of the Fund account under the
Plan);
o a distribution from an IRA, a self-employed individual retirement plan ('Keogh
Plan') or a custodial account under Section 403(b) of the Code (after the
investor reaches age 59 1/2);
o a tax-free return of an excess IRA contribution;
o a tax-qualified retirement plan distribution following retirement; or
o Class B shares sold within one year of an investor's death if the investor
owned the shares at the time of death either as the sole shareholder or with
his or her spouse as a joint tenant with the right of survivorship.
Investors must provide satisfactory information to PaineWebber or the Fund to
seek any of these waivers.
CLASS C SHARES
HOW PRICE IS CALCULATED: The price of Class C shares is the net asset value next
calculated after PaineWebber's New York City headquarters or the Transfer Agent
receives the purchase order. Investors do not pay an initial sales charge when
they buy Class C shares, but the ongoing expenses of Class C shares are higher
than those of Class A shares. Because investors do not pay an initial sales
charge when they buy Class C shares, 100% of their purchase is immediately
invested. Class C shares never convert to any other class of shares.
A contingent deferred sales charge of 1% (0.75% in the case of Global Income
Fund) of the offering price (the net asset value at the time of purchase) or the
net asset value of the shares at the time of sale by the shareholder, whichever
is less, is charged on sales of shares made within one year of the purchase
date. Other PaineWebber mutual funds may impose a different contingent deferred
sales charge on Class C shares sold within one year of the purchase date. A sale
of Class C shares acquired through an exchange and held less than one year will
be subject to the same contingent deferred sales charge that would have been
imposed on Class C shares of the PaineWebber mutual fund originally purchased.
Class C shares representing reinvestment of any dividends or capital gain
distributions will not be subject to the 1% charge. Withdrawals under the
Systematic Withdrawal Plan also will not be subject to this charge. However,
investors may withdraw no more than 12% of the value of the Fund account under
the Plan in the first year after purchase.
CLASS Y SHARES
HOW PRICE IS CALCULATED: Eligible investors may purchase Class Y shares at the
net asset value next calculated after PaineWebber's New York City
--------------------
Prospectus Page 38
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
headquarters or the Transfer Agent receives the purchase order. Because
investors do not pay an initial sales charge when they buy Class Y shares, 100%
of their purchase is immediately invested. No contingent deferred sales charge
is imposed on Class Y shares, and the ongoing expenses for Class Y shares are
lower than for the other classes because Class Y shares are not subject to Rule
12b-1 distribution or service fees.
LIMITED GROUPS OF INVESTORS. Only the following investors are eligible to buy
Class Y shares:
o a participant in one of the PW Programs listed below when Class Y shares are
purchased through that PW Program;
o an investor who buys $10 million or more at any one time in any combination of
PaineWebber mutual funds in the Flexible Pricing(Service Mark) System;
o a qualified pension plan that has either 5,000 or more eligible employees or
$50 million or more in assets;
o an investment company advised by PaineWebber or an affiliate of PaineWebber;
and
o for Global Equity Fund and Global Income Fund, the trustee of the PaineWebber
Savings Investment Plan ('PW SIP').
PACE MULTI-ADVISOR PROGRAM. An investor who participates in the PACE
Multi-Advisor Program is eligible to purchase Class Y shares. The PACE Multi-
Advisor Program is an advisory program sponsored by PaineWebber that provides
comprehensive investment services, including investor profiling, a personalized
asset allocation strategy using an appropriate combination of funds, and a
quarterly investment performance review. Participation in the PACE Multi-Advisor
Program is subject to payment of an advisory fee at the maximum annual rate of
1.5% of assets. Employees of PaineWebber and its affiliates are entitled to a
waiver of this fee.
Please contact your PaineWebber investment executive or PaineWebber's
correspondent firms for more information concerning mutual funds that are
available through the PACE Multi-Advisor Program.
INSIGHT. An investor who participates in the INSIGHT Advisory Program
('INSIGHT'), a total portfolio asset allocation program sponsored by
PaineWebber, is eligible to purchase Class Y shares. Participation in INSIGHT is
subject to payment of an advisory fee to PaineWebber at the maximum annual rate
of 1.5% of assets held through the program. Employees of PaineWebber and its
affiliates are entitled to a 50% reduction in the fee otherwise payable for
participation in INSIGHT.
PURCHASES BY THE TRUSTEE OF THE PW SIP. The Class Y shares of Global Equity Fund
and Global Income Fund also are offered for sale to the trustee of the PW SIP, a
defined contribution plan sponsored by Paine Webber Group Inc. ('PW Group'). The
trustee of the PW SIP purchases and redeems these Class Y shares to implement
the investment choices of individual plan participants with respect to their PW
SIP contributions. Individual plan participants should consult the Summary Plan
Description and other plan material of the PW SIP (collectively the 'Plan
Documents') for a description of the procedures and limitations applicable to
making and changing investment choices.
Copies of the Plan Documents are available from the Benefits Connection, 100
Halfday Road, Lincoln- shire, IL 60069 or by calling 1-888-PWebber
(1-888-793-2237).
As described in the Plan Documents, the average net asset value per share at
which Class Y shares of Global Equity Fund and Global Income Fund are purchased
or redeemed by the trustee of the PW SIP for the accounts of individual
participants might be more or less than the net asset value per share prevailing
at the time that such participants made their investment choices or made their
contributions to the PW SIP.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
Prices are calculated for each class of a Fund's shares once each Business Day,
at the close of regular trading on the New York Stock Exchange (currently 4:00
p.m., Eastern time). A 'Business Day' is any day, Monday through Friday, on
which the New York Stock Exchange is open for business. The Funds and Mitchell
Hutchins reserve the right to reject any purchase order and to suspend the
offering of Fund shares for a period of time.
--------------------
Prospectus Page 39
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
When placing an order to buy shares, investors should specify which class of
shares they want to buy. If investors fail to specify the class, they will
automatically receive Class A shares, which include an initial sales charge.
Investors in Class Y shares must provide satisfactory information to PaineWebber
or an individual Fund that they are eligible to purchase Class Y shares.
PAINEWEBBER CLIENTS
Investors who are PaineWebber clients may buy shares through PaineWebber
investment executives or its correspondent firms. Investors may buy shares in
person, by mail, by telephone or by wire (the minimum wire purchase is $1
million). PaineWebber investment executives and correspondent firms are
responsible for promptly sending investors' purchase orders to PaineWebber's New
York City headquarters.
Investors may pay for their purchases with checks drawn on U.S. banks or with
funds they have in their brokerage accounts at PaineWebber or its correspondent
firms.
OTHER INVESTORS
Investors who are not PaineWebber clients may purchase Fund shares and set up an
account through the Transfer Agent (PFPC Inc.) by completing an account
application, which you may obtain by calling 1-800-647-1568. The application and
check must be mailed to PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box
8950, Wilmington, DE 19899.
Investors who are new to PaineWebber may complete and sign an account
application and mail it along with a check. Investors may also open an account
in person.
Investors who already have money invested in a PaineWebber mutual fund, and want
to invest in another PaineWebber mutual fund, can:
o mail an application with a check; or
o open an account by exchanging from another PaineWebber mutual fund.
Investors do not have to send an application when making additional investments
in the Fund.
MINIMUM INVESTMENTS
<TABLE>
<S> <C>
To open an account................. $1,000
To add to an account............... $ 100
</TABLE>
A Fund may waive or reduce these minimums for:
o employees of PaineWebber or its affiliates;
o participants in certain pension plans, retirement accounts, unaffiliated
investment programs or the Fund's automatic investment plan; or
o transactions in Class A and Class Y shares made in certain investment
programs.
HOW TO EXCHANGE SHARES
As shareholders, investors have the privilege of exchanging Class A, B and C
shares for the same class of other PaineWebber mutual fund shares. Class Y
shares are not exchangeable. For classes of shares where no initial sales charge
is imposed, a contingent deferred sales charge may apply if the investor sells
the shares acquired through the exchange.
Exchanges may be subject to minimum investment requirements of the fund into
which exchanges are made.
o Investors who purchased their shares through an investment executive at
PaineWebber or one of its correspondent firms may exchange their shares by
contacting their investment executive in person or by telephone, mail or wire.
o Investors who do not have an account with an investment executive at
PaineWebber or one of its correspondent firms may exchange their shares by
writing a 'letter of instruction' to the Transfer Agent. The letter of
instruction must include:
o the investor's name and address;
o the Fund's name;
o the Fund account number;
o the dollar amount or number of shares to be sold; and
o a guarantee of each registered owner's signature by an eligible
institution, such as a commercial bank, trust company or stock exchange
member.
The letter must be mailed to PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box
8950, Wilmington, DE 19899.
No contingent deferred sales charge is imposed when Class A, B or C shares are
exchanged for the corresponding class of shares of other PaineWebber mutual
funds. A Fund will use the purchase date of the initial investment to determine
any contingent deferred sales charge due when the acquired shares are sold. Fund
shares may be exchanged only after the settlement date has passed and payment
for the shares has been made. The exchange privilege is available only in those
jurisdictions where the sale of the Fund shares to be
--------------------
Prospectus Page 40
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
acquired is authorized. This exchange privilege may be modified or terminated at
any time and, when required by SEC rules, upon 60 days' notice. See the back
cover of this Prospectus for a list of other PaineWebber mutual funds.
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
Investors can sell (redeem) shares at any time. Shares will be sold at the share
price for that class as next calculated after the order is received and accepted
(less any applicable contingent deferred sales charge). Share prices are
normally calculated at the close of regular trading on the New York Stock
Exchange (currently 4:00 p.m., Eastern time).
Investors who own more than one class of shares should specify which class they
are selling. If they do not, the Fund will assume they are first selling their
Class A shares, then Class C, then Class B and last, Class Y.
If a shareholder wants to sell shares that were purchased recently, the Fund may
delay payment until it verifies that good payment was received. In the case of
purchases by check, this can take up to 15 days.
Investors who have an account with PaineWebber or one of PaineWebber's
correspondent firms can sell their shares by contacting their investment
executive. Investors who do not have an account and have bought their shares
through the Fund's Transfer Agent (PFPC Inc.) may sell shares by writing a
'letter of instruction,' as detailed in 'How to Exchange Shares.'
Because the Funds incur certain fixed costs in maintaining shareholder accounts,
each Fund reserves the right to purchase back all Fund shares in any shareholder
account with a net asset value of less than $500.
If a Fund elects to do so, it will notify the shareholder of the opportunity to
increase the amount invested to $500 or more within 60 days of the notice. A
Fund will not purchase back accounts that fall below $500 solely due to a
reduction in net asset value per share.
SALES BY PARTICIPANTS IN PW SIP
The trustee of the PW SIP sells Class Y shares of Global Equity Fund and Global
Income Fund to implement the investment choices of individual plan participants
with respect to their PW SIP contributions, as described in the Plan Documents
referenced under 'How to Buy Shares' above. The price at which Class Y shares
are sold by the trustee of PW SIP might be more or less than the price per share
at the time the participants made their investment choices.
REINSTATEMENT PRIVILEGE
Shareholders who sell their Class A shares may reinstate their Fund account
without a sales charge up to the dollar amount sold by purchasing the Fund's
Class A shares within 365 days after the sale. To take advantage of this
reinstatement privilege, shareholders must notify their investment executive at
PaineWebber or one of its correspondent firms at the time of purchase.
- --------------------------------------------------------------------------------
OTHER SERVICES
- --------------------------------------------------------------------------------
Investors should consult their investment executives at PaineWebber or one of
its correspondent firms to learn more about the following services available
with respect to the Funds' Class A, B and C shares:
AUTOMATIC INVESTMENT PLAN
Investing on a regular basis helps investors meet their financial goals.
PaineWebber offers an Automatic Investment Plan with a minimum initial
investment of $1,000 through which a Fund will deduct $50 or more monthly,
quarterly, semi-annually or annually from the investor's bank account to invest
directly in the
--------------------
Prospectus Page 41
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
Fund. In addition to providing a convenient and disciplined manner of investing,
participation in the Automatic Investment Plan enables the investor to use the
technique of 'dollar cost averaging.'
SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan allows investors to set up monthly, quarterly
(March, June, September and December) or semiannual (June and December) or
annual (December) withdrawals from their PaineWebber Mutual Fund accounts.
Minimum balances and withdrawals vary according to the class of shares:
o CLASS A AND CLASS C SHARES. Minimum value of Fund shares is $5,000; minimum
withdrawals of $100.
o CLASS B SHARES. Minimum value of Fund shares
is $20,000; minimum monthly, quarterly, and semi-
annual and annual withdrawals of $200, $400, $600 and $800, respectively.
Withdrawals under the Systematic Withdrawal Plan will not be subject to a
contingent deferred sales charge. An investor may withdraw no more than 12% of
the value of the Fund account when the investor signed up for the Plan (for
Class B shares, annually; for Class A and Class C shares, during the first year
under the Plan). Shareholders who elect to receive dividends or other
distributions in cash may not participate in this Plan.
INDIVIDUAL RETIREMENT ACCOUNTS
Self-directed IRAs are available through PaineWebber in which purchases of
PaineWebber mutual funds and other investments may be made. Investors
considering establishing an IRA should review applicable tax laws and should
consult their tax advisers.
TRANSFER OF ACCOUNTS
If investors holding shares of a Fund in a Paine-
Webber brokerage account transfer their brokerage accounts to another firm, the
Fund shares will be moved to an account with the Transfer Agent. However, if the
other firm has entered into a selected dealer agreement with Mitchell Hutchins
relating to the Fund, the shareholder may be able to hold Fund shares in an
account with the other firm.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
Each Fund is governed by a board of trustees, which oversees the Fund's
operations. Each board has appointed Mitchell Hutchins as investment adviser and
administrator responsible for the Fund's operations (subject to the authority of
the board). Mitchell Hutchins is responsible for the day-to-day management of
Global Income Fund's investments and has appointed the sub-advisers to be
responsible for the day-to-day management of the other Funds' investments, as
described below.
In accordance with procedures adopted by each Fund's board, brokerage
transactions for each Fund may be conducted through PaineWebber or its
affiliates or the affiliates of a sub-adviser, and each Fund may pay fees to
PaineWebber for its services as lending agent in its portfolio securities
lending program. Personnel of Mitchell Hutchins and each sub-adviser may engage
in securities transactions for their own accounts pursuant to each firm's code
of ethics that establishes procedures for personal investing and restricts
certain transactions.
ASIA PACIFIC GROWTH FUND. Schroder Capital is the Fund's sub-adviser. Since its
founding in 1980, Schroder Capital has developed an expertise in Asia Pacific
Region investments. Louise Croset and Heather Crighton, with the assistance of
Schroder Capital's Asia Pacific Region investment committee, are primarily
responsible for the day-to-day management of the Fund. Mesdames Croset and
Crighton have served in this capacity since the Fund's inception. Ms. Croset, a
first vice president and director of Schroder Capital, has been with the firm
since 1993. Previously, she was a Vice President of Wellington Management Co.
Ms. Croset has managed Asia Pacific Region equity investments for the past 14
years. Ms. Crighton, a first vice president of Schroder Capital, has also been
with the firm since 1993. Previously, she was fund manager at Mercantile &
General Reinsurance Co. She has managed Asia Pacific Region equity investments
for the past nine years.
EMERGING MARKETS EQUITY FUND. Schroder Capital is the Fund's sub-adviser.
Schroder Group companies
--------------------
Prospectus Page 42
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
have invested internationally for over 50 years. Schroder Capital has developed
an expertise in emerging markets investments and has 54 investment professionals
located in 13 offices in emerging market countries around the world. John A.
Troiano, with the assistance of an emerging markets investment committee, has
been primarily responsible for the day-to-day management of Emerging Markets
Equity Fund since Schroder Capital was appointed sub-adviser on February 25,
1997; recently, Ms. Crighton and Mark Bridgeman began sharing primary
responsibility for the day-to-day management of the Fund with Mr. Troiano. Mr.
Troiano has been chief executive of Schroder Capital since July 1997, and has
been employed by various Schroder Group companies in the portfolio management
area since 1988. He is currently chairman of Schroder Capital's emerging markets
investment committee. Mr. Bridgeman has been a vice president and international
fund manager of Schroder Capital since 1995. After joining Schroders in 1990, he
worked in the Schroders U.K. Research Department as an Investment Analyst and
then from 1992 until 1995 served in Schroders Australia as an Industrial Analyst
and Fund Manager.
GLOBAL EQUITY FUND. GE Investment Management is the Fund's sub-adviser. Ralph R.
Layman is the head of the International Equity Team at GE Investment Management
and serves as portfolio manager of the Fund, primarily responsible for the
day-to-day management of the Fund's portfolio. Mr. Layman has served in this
capacity since the Fund's inception in 1991. He is a Chartered Financial Analyst
and an Executive Vice President and senior investment manager of GE Investment
Management and General Electric Investment Corporation.
From 1989 to 1991, Mr. Layman served as Executive Vice President, partner and
portfolio manager of Northern Capital Management Co. Prior to 1989 when he
joined Northern, he served as Vice President and portfolio manager of Templeton
Investment Counsel, Inc., and Vice President of the Templeton Emerging Markets
Fund.
Directly assisting Mr. Layman are Michael J. Solecki, vice president of
international equities at GE Investment Management, and the rest of the
International Equity Team. Mr. Solecki is a Chartered Financial Analyst and has
been with GE Investment Management for seven years. From 1992 to 1995, Mr.
Solecki was a senior European analyst at GE Investment Management's London,
England office. Prior to 1992, he was an international analyst with GE
Investment Management. The International Equity Team is comprised of twelve
analysts, eight of whom manage portfolios.
GLOBAL INCOME FUND. Mitchell Hutchins is responsible for the day-to-day
management of the Fund's investments. Stuart Waugh and William King are
primarily responsible for the day-to-day portfolio management of the Fund. Mr.
Waugh has been involved with the Fund since its inception, first as an analyst
and then as portfolio manager since 1993. Mr. Waugh is a vice president of
PaineWebber Investment Series and a managing director of global fixed income
investments and currency trading of Mitchell Hutchins. Mr. Waugh has been with
Mitchell Hutchins since 1983. Mr. King joined Mitchell Hutchins in November 1995
and assumed his present responsibilities with respect to the Fund in March 1996.
Previously, he was at IBM Corporation where he was responsible for the
management of IBM Pension Fund's global bond portfolio. Both Mr. Waugh and Mr.
King are Chartered Financial Analysts.
Other members of Mitchell Hutchins' international fixed income group provide
input on market outlook, interest rate forecasts and other considerations
pertaining to global fixed income investments.
ABOUT THE INVESTMENT ADVISER
Mitchell Hutchins, located at 1285 Avenue of the Americas, New York, New York
10019, is an asset management subsidiary of PaineWebber, which is wholly owned
by Paine Webber Group Inc., a publicly owned financial services holding company.
On January 31, 1998, Mitchell Hutchins was adviser or sub-adviser of 30
investment companies with 65 separate portfolios and aggregate assets of over
$37.4 billion.
ABOUT THE SUB-ADVISERS
Schroder Capital, the sub-adviser to Asia Pacific Growth Fund and Emerging
Markets Equity Fund, is located at 787 Seventh Avenue, New York, New York 10019.
It is a wholly owned U.S. subsidiary of Schroders Incorporated, the wholly owned
U.S. holding company subsidiary of Schroders plc. Schroders plc, which is listed
on the London Stock Exchange, is the holding company parent of a large worldwide
group of banks and financial services companies (referred to as the 'Schroder
Group'), with associated companies, branch and representative offices located in
23 countries worldwide. As of December 31, 1997, the investment management
subsidiaries of the Schroder Group had approximately $175 billion in client
--------------------
Prospectus Page 43
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
assets under management. Schroder Capital, together with its United Kingdom
affiliate Schroder Capital Management International Limited, had over $25
billion under management as of that date.
GE Investment Management, the sub-adviser to Global Equity Fund, is located at
3003 Summer Street, Stamford, Connecticut 06905 and is a wholly owned subsidiary
of General Electric Company. GE Investment Management is a registered investment
adviser, and its principal officers and directors serve in similar capacities
with respect to General Electric Investment Corporation ('GEIC') also a
registered investment adviser and a wholly owned subsidiary of General Electric
Company. As of December 31, 1997, GE Investment Management and GEIC together
provided investment management services to various institutional accounts with
total assets in excess of $69 billion, of which more than $15.6 billion is
invested in mutual funds.
MANAGEMENT FEES & OTHER EXPENSES
ASIA PACIFIC GROWTH FUND. The Fund pays Mitchell Hutchins a monthly fee for its
services at the annual rate of 1.20% of its average daily net assets up to $100
million and 1.10% of its average daily net assets over $100 million.
Mitchell Hutchins (not the Fund) pays Schroder Capital a monthly fee for
sub-advisory services at an annual rate of 0.65% of the Fund's average daily net
assets up to $100 million and 0.55% of the Fund's average daily net assets over
$100 million.
EMERGING MARKETS EQUITY FUND. The Fund is obligated to pay Mitchell Hutchins a
monthly fee for its services at an annual rate of 1.20% of the Fund's average
daily net assets. However, after giving effect to fee waivers, the effective
annual rate actually paid by the Fund during the fiscal year ended October 31,
1997, was 0.78%. During that year, Mitchell Hutchins (not the Fund) paid
Schroder Capital a fee for sub-advisory services at the annual rate of 0.70% of
the Fund's average daily net assets.
GLOBAL EQUITY FUND. For the fiscal year ended October 31, 1997, Global Equity
Fund paid advisory fees to Mitchell Hutchins at the annual rate of 0.85% of its
average daily net assets. During that year, Mitchell Hutchins (not the Fund)
paid GE Investment Management sub-advisory fees at the annual rate of 0.31% of
the Fund's average daily net assets.
GLOBAL INCOME FUND. For the fiscal year ended October 31, 1997, Global Income
Fund paid advisory fees to Mitchell Hutchins at the effective annual rate of
0.74% of its average daily net assets.
Each Fund incurs various other expenses in its operations, such as custody and
transfer agency fees, brokerage commissions, professional fees, expenses of
board and shareholder meetings, fees and expenses relating to registration of
its shares, taxes and governmental fees, fees and expenses of trustees, costs of
obtaining insurance, expenses of printing and distributing shareholder
materials, organizational expenses and extraordinary expenses, including costs
or losses in any litigation.
DISTRIBUTION ARRANGEMENTS
Mitchell Hutchins is the distributor of each Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. There is no
distribution plan with respect to the Funds' Class Y shares. Under distribution
plans for Class A, Class B and Class C shares ('Class A Plan,' 'Class B Plan'
and 'Class C Plan,' collectively, 'Plans'), each Fund pays Mitchell Hutchins:
o Monthly service fees at the annual rate of 0.25% of the average daily net
assets of each class of shares.
o Monthly distribution fees at the annual rate of 0.75% of the average daily net
assets of Class B and Class C shares (0.50% for Class C shares of Global
Income Fund).
Mitchell Hutchins uses the service fees under the Plans for Class A, B and C
shares primarily to pay PaineWebber for shareholder servicing, currently at the
annual rate of 0.25% of the aggregate investment amounts maintained in each Fund
by PaineWebber clients. PaineWebber then compensates its investment executives
for shareholder servicing that they perform and offsets its own expenses in
servicing and maintaining shareholder accounts.
Mitchell Hutchins uses the distribution fees under the Class B and Class C Plans
to:
o Offset the commissions it pays to PaineWebber for selling each Fund's Class B
and Class C shares, respectively.
o Offset each Fund's marketing costs attributable to such classes, such as
preparation, printing and distribution of sales literature, advertising and
prospectuses to prospective investors and related overhead expenses, such as
employee salaries and bonuses.
PaineWebber compensates investment executives when Class B and Class C shares
are bought by
--------------------
Prospectus Page 44
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
investors, as well as on an ongoing basis. Mitchell Hutchins receives no special
compensation from any of the Funds or investors at the time Class B or C shares
are bought.
Mitchell Hutchins receives the proceeds of the initial sales charge paid when
Class A shares are bought and of the contingent deferred sales charge paid upon
sales of shares. These proceeds may be used to cover distribution expenses.
The Plans and the related distribution contracts for each class of shares
('Distribution Contracts') specify that each Fund must pay service and
distribution fees to Mitchell Hutchins for its activities, not as reimbursement
for specific expenses incurred. Therefore, even if Mitchell Hutchins' expenses
exceed the service or distribution fees it receives, the Funds will not be
obligated to pay more than those fees. On the other hand, if Mitchell Hutchins'
expenses are less than such fees, it will retain its full fees and realize a
profit. Expenses in excess of service and distribution fees received or accrued
through the termination date of any Plan will be Mitchell Hutchins' sole
responsibility and not that of the Funds. Annually, the board of each Fund
reviews the Plans and Mitchell Hutchins' corresponding expenses for each class
separately from the Plans and expenses of the other classes.
- --------------------------------------------------------------------------------
DETERMINING THE SHARES'
NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value of each Fund's shares fluctuates and is determined
separately for each class as of the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time) each Business Day. Each
Fund's net asset value per share is determined by dividing the value of the
securities held by the Fund, plus any cash or other assets, minus all
liabilities, by the total number of Fund shares outstanding.
Each Fund values its assets based on their current market value when market
quotations are readily available. If market quotations are not readily
available, assets are valued at fair value as determined in good faith by or
under the direction of each Fund's board. The amortized cost method of valuation
generally is used to value debt obligations with 60 days or less remaining to
maturity, unless the board determines that this does not represent fair value.
Investments denominated in foreign currencies are valued daily in U.S. dollars
based on the then-prevailing exchange rates. It should be recognized that
judgment plays a greater role in valuing thinly traded securities and
lower-rated debt securities in which a Fund may invest, because there is less
reliable, objective data available.
- --------------------------------------------------------------------------------
DIVIDENDS & TAXES
- --------------------------------------------------------------------------------
DIVIDENDS
Asia Pacific Growth Fund, Emerging Markets Equity Fund and Global Equity Fund
each pays an annual dividend from its net investment income, net short-term
capital gains and net realized gains from foreign currency transactions, if any.
Global Income Fund declares monthly dividends from its net investment income,
which may be accompanied by distributions of net realized short-term capital
gains and foreign currency gains. Although Global Income Fund will not, in any
month, distribute more than the amount of such income and gains then available
for distribution, capital losses and/or foreign currency losses realized later
in the same fiscal year may convert a portion of such a distribution to a
nontaxable return of capital. Each Fund also distributes annually substantially
all of its net capital gain (the excess of net long-term capital gain over net
short-term capital loss), if any. In the case of Global Income Fund, that
distribution is accompanied by any undistributed net realized short-term capital
gains and foreign currency gains. The
--------------------
Prospectus Page 45
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
Funds may make additional distributions, if necessary, to avoid a 4% excise tax
on certain undistributed income and capital gains.
Dividends and other distributions paid on each class of shares of a Fund are
calculated at the same time and in the same manner. Dividends on Class A, Class
B and Class C shares of a Fund are expected to be lower than those on its Class
Y shares because the other shares have higher expenses resulting from their
service fees and, in the case of Class B and Class C shares, their distribution
fees. Dividends on Class B and Class C shares of a Fund are expected to be lower
than those on its Class A shares because Class B and Class C shares have higher
expenses resulting from their distribution fees. Dividends on each class also
might be affected differently by the allocation of other class-specific
expenses. See 'General Information.'
The Funds' dividends and other distributions are paid in additional Fund shares
of the same class at net asset value, unless the shareholder has requested cash
payments. Shareholders who wish to receive dividends and other distributions in
cash, either mailed to them by check or credited to their PaineWebber accounts,
should contact their investment executives at PaineWebber or one of its
correspondent firms or complete the appropriate section of the account
application. For PW SIP participants, each Fund's Class Y dividends and other
distributions are paid in additional Class Y shares at net asset value unless
the Transfer Agent is instructed otherwise.
TAXES
Each Fund intends to continue to qualify for treatment as a regulated investment
company under the Internal Revenue Code so that it will not have to pay federal
income tax on that part of its investment company taxable income (generally
consisting of net investment income, net short-term capital gains and net gains
from certain foreign currency transactions)
and net capital gain that it distributes to its share-
holders.
Dividends from each Fund's investment company taxable income (whether paid in
cash or additional shares) are generally taxable to its shareholders as ordinary
income. Distributions of each Fund's net capital gain (whether paid in cash or
additional shares) are taxable to its shareholders as long-term capital gain,
regardless of how long they have held their Fund shares. Under the Taxpayer
Relief Act of 1997, different maximum tax rates apply to a non-corporate
taxpayer's net capital gain depending on the taxpayer's holding period and
marginal rate of federal income tax -- generally, 28% for gain recognized on
securities held for more than one year but not more than 18 months and 20% (10%
for taxpayers in the 15% marginal tax bracket) for gain recognized on securities
held for more than 18 months. Pursuant to an Internal Revenue Service notice,
each Fund may divide each net capital gain distribution into a 28% rate gain
distribution and a 20% rate gain distribution (in accordance with the Fund's
holding periods for the securities it sold that generated the distributed gain)
and its shareholders must treat those portions accordingly. Shareholders not
subject to tax on their income generally will not be required to pay tax on
distributions.
YEAR-END TAX REPORTING
Following the end of each calendar year, each Fund notifies its shareholders of
the amounts of dividends and capital gain distributions paid (or deemed paid)
for that year, their share of any foreign taxes paid by the Fund that year and
any portion of those dividends that qualifies for special treatment. The
information regarding capital gain distributions designates the portions thereof
subject to the different maximum rates of tax applicable to non-corporate
taxpayers' net capital gain indicated above.
BACKUP WITHHOLDING
Each Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
and capital gain distributions payable to those shareholders who otherwise are
subject to backup withholding.
TAXES ON THE SALE OR EXCHANGE OF FUND SHARES
A shareholder's sale (redemption) of shares may result in a taxable gain or
loss. This depends upon whether the shareholder receives more or less than his
or her adjusted basis for the shares (which normally includes any initial sales
charge paid on Class A shares). An exchange of any Fund's shares for shares of
another PaineWebber mutual fund generally will have similar tax consequences. In
addition, if a Fund's shares are bought within 30 days before or after selling
other shares of the Fund (regardless of class) at a loss, all or a portion of
that loss will not be deductible and will increase the basis of the newly
purchased shares.
--------------------
Prospectus Page 46
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
SPECIAL TAX RULES
FOR CLASS A SHAREHOLDERS
Special tax rules apply when a shareholder sells or exchanges Class A shares
within 90 days of purchase and subsequently acquires Class A shares of a
PaineWebber mutual fund without paying a sales charge due to the 365-day
reinstatement privilege or the exchange privilege. In these cases, any gain on
the sale or exchange of the original Class A shares would be increased, or any
loss would be decreased, by the amount of the sales charge paid when those
shares were bought, and that amount will increase the basis of the PaineWebber
mutual fund shares subsequently acquired.
No gain or loss will be recognized by a shareholder as a result of a conversion
from Class B shares into Class A shares.
* * * *
The foregoing only summarizes some of the important federal income tax
considerations affecting the Funds and their shareholders; see the Statement of
Additional Information for a further discussion. Prospective shareholders are
urged to consult their tax advisers.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ORGANIZATION
ASIA PACIFIC GROWTH FUND
Asia Pacific Growth Fund is a diversified series of PaineWebber Managed
Investments Trust ('Managed Trust'), an open-end management investment company
that was organized on November 21, 1986 as a business trust under the laws of
the Commonwealth of Massachusetts. The trustees have authority to issue an
unlimited number of shares of beneficial interest of separate series, par value
of $0.001 per share. Shares of five other series have been authorized.
EMERGING MARKETS EQUITY FUND
Emerging Markets Equity Fund is a diversified series of PaineWebber Investment
Trust II, an open-end management investment company that was organized on August
10, 1992 as a business trust under the laws of the Commonwealth of
Massachusetts. The trustees have authority to issue an unlimited number of
shares of beneficial interest of separate series, par value of $0.001 per share.
GLOBAL EQUITY FUND
Global Equity Fund is a diversified series of PaineWebber Investment Trust
('Investment Trust'), an open-end management investment company that was
organized on March 28, 1991 as a business trust under the laws of the
Commonwealth of Massachusetts. The trustees have authority to issue an unlimited
number of shares of beneficial interest of separate series, par value of $0.001
per share. Shares of one other series have been authorized.
GLOBAL INCOME FUND
Global Income Fund is a non-diversified series of PaineWebber Investment Series,
an open-end management investment company that was organized on December 22,
1986 as a business trust under the laws of the Commonwealth of Massachusetts.
The trustees have authority to issue an unlimited number of shares of beneficial
interest of separate series, with a par value of $0.001 per share.
SHARES
The shares of each Fund are divided into four classes, designated Class A, Class
B, Class C and Class Y shares. A share of each class represents an identical
interest in the respective Fund's investment portfolio and has the same rights,
privileges and preferences. However, each class may differ with respect to sales
charges, if any, distribution and/or service fees, if any, other expenses
allocable exclusively to each class, voting rights on matters exclusively
affecting that class, and its exchange privilege, if any. The different sales
charges and other expenses applicable to the different classes of shares of the
Funds will affect the performance of those classes.
Each share of each Fund is entitled to participate equally in dividends, other
distributions and the proceeds of any liquidation of that Fund. However, due to
the differing expenses of the classes, dividends on Class A, B, C and Y shares
will differ.
--------------------
Prospectus Page 47
<PAGE>
------------------------------
PaineWebber
Asia Pacific Growth Fund Global Equity Fund
Emerging Markets Equity Fund Global Income Fund
Although each Fund is offering only its own shares, it is possible that a Fund
might become liable for a misstatement in this Prospectus about another Fund.
The board of each Fund has considered this factor in approving the use of a
single, combined Prospectus.
VOTING RIGHTS
Shareholders of each Fund are entitled to one vote for each full share held and
fractional votes for fractional shares held. Voting rights are not cumulative
and, as a result, the holders of more than 50% of all the shares of any Fund (or
Investment Trust or Managed Trust, which each have more than one series) may
elect all of the board members of that Fund or of Investment Trust or Managed
Trust. The shares of a Fund will be voted together, except that only the
shareholders of a particular class of a Fund may vote on matters affecting only
that class, such as the terms of a Plan as it relates to the class. The shares
of each series of Investment Trust and Managed Trust will be voted separately,
except when an aggregate vote of all the series is required by law.
SHAREHOLDER MEETINGS
The Funds do not intend to hold annual meetings.
Shareholders of record of no less than two-thirds of the outstanding shares of
Investment Trust, Managed Trust or a Fund, as applicable, may remove a board
member through a declaration in writing or by vote cast in person or by proxy at
a meeting called for that purpose. A meeting will be called to vote on the
removal of a board member at the written request of holders of 10% of the
outstanding shares of Investment Trust, Managed Trust or a Fund.
REPORTS TO SHAREHOLDERS
Each Fund sends its shareholders audited annual and unaudited semiannual
reports, each of which includes a list of the investment securities held by the
Fund as of the end of the period covered by the report. The Statement of
Additional Information, which is incorporated herein by reference, is available
to shareholders upon request.
CUSTODIAN & RECORDKEEPING AGENT; TRANSFER & DIVIDEND AGENT
State Street Bank and Trust Company, located at One Heritage Drive, North
Quincy, Massachusetts 02171, serves as custodian and recordkeeping agent for
Asia Pacific Growth Fund, Emerging Markets Equity Fund and Global Equity Fund
and employs foreign sub-custodians approved by the respective boards in
accordance with applicable requirements under the 1940 Act to provide custody of
the Funds' foreign assets. Brown Brothers Harriman & Co., 40 Water Street,
Boston, Massachusetts 02109, serves as custodian for Global Income Fund and
employs foreign sub-custodians approved by the Fund's board in accordance with
those same requirements to provide custody of the Fund's foreign assets. PFPC
Inc., a subsidiary of PNC Bank, N.A., serves as each Fund's transfer and
dividend disbursing agent. It is located at 400 Bellevue Parkway, Wilmington, DE
19809.
--------------------
Prospectus Page 48
<PAGE>
------------------------------
PAINEWEBBER ASIA PACIFIC GROWTH FUND
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
PROSPECTUS -- MARCH 1, 1998
/ / PAINEWEBBER BOND FUNDS
High Income Fund
Investment Grade Income Fund
Low Duration U.S. Government
Income Fund
Strategic Income Fund
U.S. Government Income Fund
/ / PAINEWEBBER TAX-FREE BOND FUNDS
California Tax-Free Income Fund
Municipal High Income Fund
National Tax-Free Income Fund
New York Tax-Free Income Fund
/ / PAINEWEBBER ASSET
ALLOCATION FUNDS
Balanced Fund
Tactical Allocation Fund
/ / PAINEWEBBER STOCK FUNDS
Capital Appreciation Fund
Financial Services Growth Fund
Growth Fund
Growth and Income Fund
Small Cap Fund
Utility Income Fund
/ / PAINEWEBBER GLOBAL FUNDS
Asia Pacific Growth Fund
Emerging Markets Equity Fund
Global Equity Fund
Global Income Fund
/ / PAINEWEBBER MONEY MARKET FUND
/ / MITCHELL HUTCHINS PORTFOLIOS
Aggressive Portfolio
Moderate Portfolio
Conservative Portfolio
A prospectus containing more complete information for any of these funds,
including charges and expenses, can be obtained from a PaineWebber investment
executive or correspondent firm. Please read it carefully before investing. It
is important you have all the information you need to make a sound investment
decision.
(Copyright) 1998 PaineWebber Incorporated
--------------------
<PAGE>
PAINEWEBBER ASIA PACIFIC GROWTH FUND
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
STATEMENT OF ADDITIONAL INFORMATION
The four funds named above (each a 'Fund' and, collectively, 'Funds') are
series of professionally managed open-end management investment companies
organized as Massachusetts business trusts (each a 'Trust' and, collectively,
'Trusts'). PaineWebber Asia Pacific Growth Fund ('Asia Pacific Growth Fund'), a
diversified series of PaineWebber Managed Investments Trust ('Managed Trust'),
seeks long-term capital appreciation by investing primarily in equity securities
of companies in the Asia Pacific region, excluding Japan. PaineWebber Emerging
Markets Equity Fund ('Emerging Markets Equity Fund'), a diversified series of
PaineWebber Investment Trust II ('Investment Trust II'), seeks long-term capital
appreciation by investing primarily in equity securities of companies in newly
industrializing countries. PaineWebber Global Equity Fund ('Global Equity
Fund'), a diversified series of PaineWebber Investment Trust ('Investment
Trust'), seeks long-term growth of capital by investing primarily in U.S. and
foreign equity securities. PaineWebber Global Income Fund ('Global Income
Fund'), a non-diversified series of PaineWebber Investment Series ('Investment
Series'), seeks high current income and, secondarily, capital appreciation by
investing primarily in high-quality bonds of foreign and U.S. issuers.
The investment adviser, administrator and distributor for each Fund is
Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), an asset
management subsidiary of PaineWebber Incorporated ('PaineWebber'). As
distributor for the Funds, Mitchell Hutchins has appointed PaineWebber to serve
as the exclusive dealer for the sale of Fund shares. Schroder Capital Management
International Inc. ('Schroder Capital') serves as investment sub-adviser for
Asia Pacific Growth Fund and Emerging Markets Equity Fund. GE Investment
Management Incorporated ('GE Investment Management') serves as investment
sub-adviser for Global Equity Fund. Schroder Capital and GE Investment
Management are each sometimes referred to as a 'Sub-Adviser.'
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Funds' current Prospectus, dated March 1,
1998. A copy of the Prospectus may be obtained by calling any PaineWebber
investment executive or correspondent firm or by calling toll-free
1-800-647-1568. This Statement of Additional Information is dated March 1, 1998.
INVESTMENT POLICIES AND RESTRICTIONS
The following supplements the information contained in the Prospectus
concerning the Funds' investment policies and limitations. Except as otherwise
indicated in the Prospectus or the Statement of Additional Information, there
are no policy limitations on a Fund's ability to use the investments or
techniques discussed in these documents.
YIELD FACTORS AND RATINGS. Moody's Investors Service, Inc. ('Moody's'),
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ('S&P'), and
other nationally recognized statistical rating organizations ('NRSROs') are
private services that provide ratings of the credit quality of debt obligations
(bonds) and certain other securities. A description of the ratings assigned to
corporate bonds by Moody's and S&P is included in the Appendix to this Statement
of Additional Information. The process by which S&P and Moody's determine
ratings for mortgage-backed securities includes consideration of the likelihood
of the receipt by security holders of all distributions, the nature of the
underlying securities, the credit quality of the guarantor, if any, and the
structural, legal and tax aspects associated with such securities. Not even the
highest such ratings represents an assessment of the likelihood that principal
prepayments will be made by mortgagors or the degree to which such prepayments
may differ from that originally anticipated, nor do such ratings
<PAGE>
address the possibility that investors may suffer a lower than anticipated yield
or that investors in such securities may fail to recoup fully their initial
investment due to prepayments.
The Funds may use these ratings in determining whether to purchase, sell or
hold a security. It should be emphasized, however, that ratings are general and
are not absolute standards of quality. Consequently, securities with the same
maturity, interest rate and rating may have different market prices.
In addition to ratings assigned to individual bond issues, Mitchell
Hutchins or a Sub-Adviser will analyze interest rate trends and developments
that may affect individual issuers, including factors such as liquidity,
profitability and asset quality. The yields on bonds are dependent on a variety
of factors, including general money market conditions, general conditions in the
bond market, the financial condition of the issuer, the size of the offering,
the maturity of the obligation and its rating. There is a wide variation in the
quality of bonds, both within a particular classification and between
classifications. An issuer's obligations under its bonds are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of bond holders or other creditors of an issuer; litigation or other
conditions may also adversely affect the power or ability of issuers to meet
their obligations for the payment of interest and principal on their bonds.
Asia Pacific Growth Fund is authorized to invest up to 10% of its net
assets in non-investment grade debt securities. Global Income Fund is authorized
to invest up to 20% of its total assets in non-investment grade debt securities.
Global Equity Fund may invest up to 10% of its net assets in convertible
securities rated below investment grade. Non-investment grade debt securities
are debt securities that are not rated at the time of purchase within one of the
four highest grades assigned by S&P or Moody's, comparably rated by another
NRSRO or determined by Mitchell Hutchins or a Sub-Adviser, as appropriate, to be
of comparable quality. Non-investment grade debt securities are commonly refered
to as 'junk bonds'; they are deemed by the NRSROs to be predominantly
speculative and may involve significant risk exposure to adverse conditions.
Non-investment grade debt securities generally offer a higher current yield than
that available for investment grade issues; however, they involve higher risks,
in that they are especially sensitive to adverse changes in general economic
conditions and in the industries in which the issuers are engaged, to changes in
the financial condition of the issuers and to price fluctuations in response to
changes in interest rates. During periods of economic downturn or rising
interest rates, highly leveraged issuers may experience financial stress which
could adversely affect their ability to make payments of interest and principal
and increase the possibility of default. In addition, such issuers may not have
more traditional methods of financing available to them and may be unable to
repay debt at maturity by refinancing. The risk of loss due to default by such
issuers is significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior indebtedness.
The market for non-investment grade debt securities, especially those of
foreign issuers, has expanded rapidly in recent years, which has been a period
of generally expanding growth and lower inflation. These securities will be
susceptible to greater risk when economic growth slows or reverses and when
inflation increases or deflation occurs. This has been reflected in recent
volatility in emerging market securities, particularly in Asia. In the past,
many lower rated debt securities experienced substantial price declines
reflecting an expectation that many issuers of such securities might experience
financial difficulties. As a result, the yields on lower rated debt securities
rose dramatically. However, such higher yields did not reflect the value of the
income stream that holders of such securities expected, but rather the risk that
holders of such securities could lose a substantial portion of their value as a
result of the issuers' financial restructurings or defaults. There can be no
assurance that such declines will not recur. The market for non-investment grade
debt issues generally is thinner and less active than that for higher quality
securities, which may limit a Fund's ability to sell such securities at fair
value in response to changes in the economy or financial markets. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of non-investment grade
securities, especially in a thinly traded market.
RISK CONSIDERATIONS RELATING TO FOREIGN SECURITIES. Investors should
recognize that investing in non-U.S. securities involves certain risks and
special considerations, including those set forth below, which are not typically
associated with investing in securities of U.S. companies. Investments in
foreign securities involve risks relating to political, social and economic
developments abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject. These
risks
2
<PAGE>
may include expropriation, confiscatory taxation, withholding taxes on interest
and/or dividends, limitations on the use of or transfer of Fund assets and
political or social instability or diplomatic developments. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Securities of many foreign companies may be less liquid and their prices more
volatile than securities of comparable U.S. companies. While the Funds generally
invest only in securities that are traded on recognized exchanges or in
over-the-counter markets ('OTC'), from time to time foreign securities may be
difficult to liquidate rapidly without significantly depressing the price of
such securities. There may be less publicly available information concerning
foreign issuers of securities held by the Funds than is available concerning
U.S. companies. Transactions in foreign securities may be subject to less
efficient settlement practices. Foreign securities trading practices, including
those involving securities settlement where Fund assets may be released prior to
receipt of payment, may expose the Funds to increased risk in the event of a
failed trade or the insolvency of a foreign broker-dealer. Legal remedies for
defaults and disputes may have to be pursued in foreign courts, whose procedures
differ substantially from those of U.S. courts.
Securities of foreign issuers may not be registered with the Securities and
Exchange Commission ('SEC'), and the issuers thereof may not be subject to its
reporting requirements. Accordingly, there may be less publicly available
information concerning foreign issuers of securities held by the Funds than is
available concerning U.S. companies. Foreign companies are not generally subject
to uniform accounting, auditing and financial reporting standards or to other
regulatory requirements comparable to those applicable to U.S. companies.
The Funds may invest in foreign securities by purchasing depository
receipts, including American Depository Receipts ('ADRs'), European Depository
Receipts ('EDRs') and Global Depository Receipts ('GDRs'), or other securities
convertible into securities of issuers based in foreign countries. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a U.S. bank or trust company evidencing ownership of the underlying
securities. They generally are in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities markets. EDRs are
European receipts evidencing a similar arrangement, may be denominated in other
currencies and are designed for use in European securities markets. GDRs are
similar to EDRs and are designed for use in several international financial
markets. For purposes of each Fund's investment policies, ADRs, EDRs and GDRs
are deemed to have the same classification as the underlying securities they
represent. Thus, an ADR, EDR or GDR representing ownership of common stock will
be treated as common stock.
ADRs are publicy traded on exchanges or OTC in the United States and are
issued through 'sponsored' or 'unsponsored' arrangements. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary's transaction fees, whereas under an unsponsored arrangement, the
foreign issuer assumes no obligations and the depositary's transaction fees are
paid directly by the ADR holders. In addition, less information is available in
the United States about an unsponsored ADR than about a sponsored ADR.
The Funds anticipate that their brokerage transactions involving foreign
securities of companies headquartered in countries other than the United States
will be conducted primarily on the principal exchanges of such countries.
Although each Fund will endeavor to achieve the best net results in effecting
its portfolio transactions, transactions on foreign exchanges are usually
subject to fixed commissions that are generally higher than negotiated
commissions on U.S. transactions. There is generally less government supervision
and regulation of exchanges and brokers in foreign countries than in the United
States.
Investment income on certain foreign securities in which the Funds may
invest may be subject to foreign withholding or other taxes that could reduce
the return on these securities. Tax treaties between the United States and
foreign countries, however, may reduce or eliminate the amount of foreign taxes
to which the Funds would be subject. In addition, substantial limitations may
exist in certain countries with respect to the Funds' ability to repatriate
investment capital or the proceeds of sales of securities.
3
<PAGE>
FOREIGN SOVEREIGN DEBT. Investment by the Funds in debt securities issued
by foreign governments and their political subdivisions or agencies ('Sovereign
Debt') involves special risks. The issuer of the debt or the governmental
authorities that control the repayment of the debt may be unable or unwilling to
repay principal and/or interest when due in accordance with the terms of such
debt, and the Funds may have limited legal recourse in the event of a default.
Sovereign Debt differs from debt obligations issued by private entities in
that, generally, remedies for defaults must be pursued in the courts of the
defaulting party. Legal recourse is therefore somewhat diminished. Political
conditions, especially a sovereign entity's willingness to meet the terms of its
debt obligations, are of considerable significance. Also, there can be no
assurance that the holders of commercial bank debt issued by the same sovereign
entity may not contest payments to the holders of Sovereign Debt in the event of
default under commercial bank loan agreements.
A sovereign debtor's willingness or ability to repay principal and interest
due in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which a
sovereign debtor may be subject. Increased protectionism on the part of a
country's trading partners, or political changes in those countries, could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any, or the credit standing of a particular local government
or agency.
The occurrence of political, social or diplomatic changes in one or more of
the countries issuing Sovereign Debt could adversely affect the Funds'
investments. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their Sovereign Debt. While Mitchell Hutchins and the Sub-Advisers manage the
Funds' portfolios in a manner that is intended to minimize the exposure to such
risks, there can be no assurance that adverse political changes will not cause
the Funds to suffer a loss of interest or principal on any of its holdings.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. From time to time, investments
in other investment companies may be the most effective available means by which
a Fund may invest in securities of issuers in certain countries. Investment in
such investment companies may involve the payment of management expenses and, in
connection with some purchases, sales loads and payment of substantial premiums
above the value of such companies' portfolio securities. At the same time, a
Fund would continue to pay its own management fees and other expenses. Each Fund
may invest in such investment companies when, in the judgment of Mitchell
Hutchins or a Sub-Adviser, the potential benefits of such investment outweigh
the payment of any applicable premium, sales load and expenses. In addition, the
Funds' investments in such investment companies are subject to limitations under
the Investment Company Act of 1940 ('1940 Act') and market availability, and may
result in special federal income tax consequences.
FOREIGN CURRENCY TRANSACTIONS. A significant portion of each Fund's assets
may be invested in foreign securities, and substantially all related income may
be received by a Fund in foreign currencies. Each Fund values its assets daily
in U.S. dollars and does not intend to convert its holdings of foreign
currencies to U.S. dollars on a daily basis. From time to time a Fund's foreign
currencies may be held as 'foreign currency call accounts' at foreign branches
of foreign or domestic banks. These accounts bear interest at negotiated rates
and are payable upon relatively short demand periods. If a bank became
insolvent, a Fund could suffer a loss of some or all of the amounts deposited.
Each Fund may convert foreign currency to U.S. dollars from time to time.
The value of the assets of a Fund as measured in U.S. dollars may be
affected favorably or unfavorably by fluctuations in currency rates and exchange
control regulations. Further, a Fund may incur costs in connection with
conversions between various currencies. Currency exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a foreign
currency to a Fund at one rate, while offering a lesser rate of exchange should
a Fund desire immediately to resell that currency to the dealer. Each Fund
conducts its currency exchange transactions either on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign currency exchange market, or through
entering into forward, futures or options contracts to purchase or sell foreign
currencies.
4
<PAGE>
SPECIAL CONSIDERATIONS RELATING TO ASIA PACIFIC REGION AND OTHER EMERGING
MARKET INVESTMENTS. Certain of the risks associated with international
investments are heightened for investments in emerging markets, including many
Asia Pacific Region countries (as defined in the Prospectus). For example, many
of the currencies of Asia Pacific Region countries recently have experienced
significant devaluations relative to the U.S. dollar, and major adjustments have
been made periodically in various emerging market currencies.
Investment and Repatriation Restrictions. Foreign investment in the
securities markets of several emerging market countries is restricted or
controlled to varying degrees. These restrictions may limit a Fund's investment
in these countries and may increase its expenses. For example, certain countries
may require governmental approval prior to investments by foreign persons in a
particular company or industry sector or limit investment by foreign persons to
only a specific class of securities of a company, which may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. Certain countries may restrict or prohibit investment
opportunities in issuers or industries deemed important to national interests.
In addition, the repatriation of both investment income and capital from some
emerging market countries is subject to restrictions, such as the need for
certain government consents. Even where there is no outright restriction on
repatriation of capital, the mechanics of repatriation may affect certain
aspects of a Fund's operations. These restrictions may in the future make it
undesirable to invest in the countries to which they apply. In addition, if
there is a deterioration in a country's balance of payments or for other
reasons, a country may impose restrictions on foreign capital remittances
abroad. A Fund could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation, as well as by the
application to it of other restrictions on investments.
For example, in China, India, Indonesia, Malaysia, the Philippines,
Singapore, South Korea and Thailand, government regulation or a company's
charter may limit the maximum foreign aggregate ownership of equity in any one
company. South Korea generally prohibits foreign investment in Won-denominated
debt securities and Sri Lanka prohibits foreign investment in government debt
securities. South Korea prohibits foreign investment in specified
telecommunications companies and the Philippines prohibits foreign investment in
mass media companies and companies providing certain professional services. In
the Philippines, a Fund may generally invest in 'B' shares of Philippine issuers
engaged in partly nationalized business activities, the market prices, liquidity
and rights of which may vary from shares owned by nationals. Similarly, in
China, a Fund may only invest in 'B' shares of securities traded on The Shanghai
Securities Exchange and The Shenzhen Stock Exchange, currently the two
officially recognized securities exchanges in China. 'B' shares traded on The
Shanghai Securities Exchange are settled in U.S. dollars, and those traded on
The Shenzhen Stock Exchange are generally settled in Hong Kong dollars.
If, because of restrictions on repatriation or conversion, a Fund were
unable to distribute substantially all of its net investment income, including
net short-term capital gains and net long-term capital gains within applicable
time periods, the Fund could be subject to federal income and excise taxes that
would not otherwise be incurred and could cease to qualify for the favorable tax
treatment afforded to regulated investment companies ('RICs') under the Internal
Revenue Code ('Code'). In such case, it would become subject to federal income
tax on all of its income and net gains.
Differences Between the U.S. and Emerging Market Securities Markets. Most
of the securities markets of emerging market countries have substantially less
volume than the New York Stock Exchange, and equity securities of most companies
in emerging market countries are less liquid and more volatile than equity
securities of U.S. companies of comparable size. Some of the stock exchanges in
emerging market countries, such as those in China, are in the earliest stages of
their development. As a result, security settlements may in some instances be
subject to delays and related administrative uncertainties. Many companies
traded on securities markets in emerging market countries are smaller, newer and
less seasoned than companies whose securities are traded on securities markets
in the United States. Investments in smaller companies involve greater risk than
is customarily associated with investing in larger companies. Smaller companies
may have limited product lines, markets or financial or managerial resources and
may be more susceptible to losses and risks of bankruptcy. Additionally,
market-making and arbitrage activities are generally less extensive in such
markets, which may contribute to increased volatility and reduced liquidity of
such markets. Accordingly, each of these markets may be subject to greater
influence by adverse events generally affecting the market, and by
5
<PAGE>
large investors trading significant blocks of securities, than is usual in the
United States. To the extent that an emerging market country experiences rapid
increases in its money supply and investment in equity securities for
speculative purposes, the equity securities traded in that country may trade at
price-earnings multiples higher than those of comparable companies trading on
securities markets in the United States, which may not be sustainable.
Government Supervision of Emerging Market Securities Markets; Legal
Systems. There is also less government supervision and regulation of securities
exchanges, listed companies and brokers in emerging market countries than exists
in the United States. Therefore, less information may be available to a Fund
than with respect to investments in the United States. Further, in certain
countries, less information may be available to a Fund than to local market
participants. Brokers in other countries may not be as well capitalized as those
in the United States, so that they are more susceptible to financial failure in
times of market, political or economic stress. In addition, existing laws and
regulations are often inconsistently applied. As legal systems in some of the
emerging market countries develop, foreign investors may be adversely affected
by new laws and regulations, changes to existing laws and regulations and
preemption of local laws and regulations by national laws. In circumstances
where adequate laws exist, it may not be possible to obtain swift and equitable
enforcement of the law.
Financial Information and Standards. Issuers in emerging market countries
generally are subject to accounting, auditing and financial standards and
requirements that differ, in some cases significantly, from those applicable to
U.S. issuers. In particular, the assets and profits appearing on the financial
statements of an emerging market issuer may not reflect its financial position
or results of operations in the way they would be reflected had the financial
statements been prepared in accordance with U.S. generally accepted accounting
principles. In addition, for an issuer that keeps accounting records in local
currency, inflation accounting rules may require, for both tax and accounting
purposes, that certain assets and liabilities be restated on the issuer's
balance sheet in order to express items in terms of currency of constant
purchasing power. Inflation accounting may indirectly generate losses or
profits. Consequently, financial data may be materially affected by restatements
for inflation and may not accurately reflect the real condition of those issuers
and securities markets.
Social, Political and Economic Factors. Many emerging market countries may
be subject to a greater degree of social, political and economic instability
than is the case in the United States. Such instability may result from, among
other things, the following: (i) authoritarian governments or military
involvement in political and economic decision making, and changes in government
through extra-constitutional means; (ii) popular unrest associated with demands
for improved political, economic and social conditions; (iii) internal
insurgencies; (iv) hostile relations with neighboring countries; and (v) ethnic,
religious and racial disaffection. Such social, political and economic
instability could significantly disrupt the financial markets in those countries
and elsewhere and could adversely affect the value of a Fund's assets. In
addition, there may be the possibility of asset expropriations or future
confiscatory levels of taxation affecting a Fund.
Few of the Asia Pacific Region countries have Western-style or fully
democratic governments. Some governments in the region are authoritarian in
nature and influenced by security forces. For example, during the course of the
last 25 years, governments in the region have been installed or removed as a
result of military coups, while others have periodically demonstrated repressive
police state characteristics. In several Asia Pacific Region countries, the
leadership ability of the government has suffered as a result of recent
corruption scandals. Disparities of wealth, among other factors, have also led
to social unrest in some of the Asia Pacific Region countries, accompanied, in
certain cases, by violence and labor unrest. Ethnic, religious and racial
disaffection, as evidenced in India, Pakistan and Sri Lanka, for example, have
created social, economic and political problems. Such problems also have
occurred in other regions.
As in some other regions, several Asia Pacific Region countries have or in
the past have had hostile relationships with neighboring nations or have
experienced internal insurgency. For example, Thailand has experienced border
conflicts with Laos and Cambodia, and India is engaged in border disputes with
several of its neighbors, including China and Pakistan. Tension between the
Tamil and Sinhalese communities in Sri Lanka has resulted in periodic outbreaks
of violence. An uneasy truce exists between North Korea and South Korea, and the
recurrence of hostilities remains possible. Reunification of North Korea and
South Korea could
6
<PAGE>
have a detrimental effect on the economy of South Korea. Also, China continues
to claim sovereignty over Taiwan and has conducted military maneuvers near
Taiwan. China is acknowledged to possess nuclear weapons capability; North Korea
is alleged to possess or be in the process of developing such a capability.
China assumed sovereignty over Hong Kong on July 1, 1997. Although China
has committed by treaty to preserve the economic and social freedoms enjoyed in
Hong Kong for 50 years after regaining control, there can be no assurance that
China will not renege, and in fact China has announced its intent to repeal
certain laws. Business confidence and market and business performance in Hong
Kong, therefore, can be significantly affected by political developments.
The reversion of Hong Kong also presents a risk that the Hong Kong dollar
will be devalued and a risk of possible loss of investor confidence in the Hong
Kong markets and dollar. However, factors exist that may mitigate this risk.
First, China has stated its intention to implement a 'one country, two systems'
policy, which would preserve monetary sovereignty and leave control in the hands
of the Hong Kong Monetary Authority ('HKMA'). Second, fixed rate parity with the
U.S. dollar is seen as critical to maintaining investors' confidence in the
transition to Chinese rule. Therefore, it is generally anticipated that, in the
event international investors lose confidence in Hong Kong dollar assets, the
HKMA would intervene to support the currency, though such intervention cannot be
assured. Third, Hong Kong's and China's sizable combined foreign exchange
reserve may be used to support the value of the Hong Kong dollar, provided that
China does not appropriate such reserves for other uses, which is not
anticipated, but cannot be assured. Finally, China would be likely to experience
significant adverse political and economic consequences if confidence in the
Hong Kong dollar and the territory's assets were to be endangered.
As is the case in many other emerging markets, the economies of most of the
Asia Pacific Region countries are heavily dependent upon international trade and
are accordingly affected by protective trade barriers and the economic
conditions of their trading partners, principally the United States, Japan,
China and the European Community. The enactment by the United States or other
principal trading partners of protectionist trade legislation, reduction of
foreign investment in the local economies and general declines in the
international securities markets could have a significant adverse effect upon
the securities markets of these countries. In addition, the economies of some
countries are vulnerable to weakness in world prices for their commodity
exports, including crude oil.
U.S. GOVERNMENT SECURITIES. The Funds may invest in various direct
obligations of the U.S. Treasury and obligations issued or guaranteed by the
U.S. government or one of it agencies or instrumentalities (collectively, 'U.S.
government securities'). Among the U.S. government securities that may be held
by the Funds are securities that are supported by the full faith and credit of
the United States; securities that are supported primarily or solely by the
creditworthiness of the government-related issuer; and securities, such as
mortgage-backed securities, that are supported in part by pools of assets.
CONVERTIBLE SECURITIES. Each Fund is permitted to invest in convertible
securities. Before conversion, convertible securities have characteristics
similar to non-convertible debt securities in that they ordinarily provide a
stable stream of income with generally higher yields than those of common stocks
of the same or similar issuers. Convertible securities rank senior to common
stock in a corporation's capital structure but are usually subordinated to
comparable non-convertible securities.
The value of a convertible security is a function of its 'investment value'
(determined by its yield comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
'conversion value' (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value. Generally,
the conversion value decreases as the convertible security approaches maturity.
To the extent the market price of the underlying common stock approaches or
exceeds the conversion price, the price of the convertible security will be
increasingly influenced by its conversion value. In addition, a convertible
security generally will sell at a premium over its
7
<PAGE>
conversion value determined by the extent to which investors place value on the
right to acquire the underlying common stock while holding a fixed income
security.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities represent direct or
indirect participations in, or are secured by and payable from, mortgage loans
secured by real property and include single- and multi-class pass-through
securities and collateralized mortgage obligations. The U.S. government
mortgage-backed securities in which Global Income Fund may invest include
mortgage-backed securities issued or guaranteed as to the payment of principal
and interest (but not as to market value) by the Ginnie Mae (also known as
Government National Mortgage Association), Fannie Mae (also known as the Federal
National Mortgage Association) or Freddie Mac (also known as the Federal Home
Loan Mortgage Corporation) or other government-sponsored enterprises. Other
mortgage-backed securities are issued by private issuers, generally originators
of and investors in mortgage loans, including savings associations, mortgage
bankers, commercial banks, investment bankers and special purpose entities
(collectively 'Private Mortgage Lenders'). Payments of principal and interest
(but not the market value) of such private mortgage-backed securities may be
supported by pools of mortgage loans or other mortgage-backed securities that
are guaranteed, directly or indirectly, by the U.S. government or one of its
agencies or instrumentalities, or they may be issued without any government
guarantee of the underlying mortgage assets but with some form of non-government
credit enhancement.
New types of mortgage-backed securities are developed and marketed from
time to time and, consistent with their investment limitations, the Funds expect
to invest in those new types of mortgage-backed securities that Mitchell
Hutchins or the Sub-Advisers believe may assist the Funds in achieving their
investment objectives. Similarly, the Funds may invest in mortgage-backed
securities issued by new or existing governmental or private issuers other than
those identified herein. The Funds also may invest in foreign mortgage-backed
securities which may be structured differently than domestic mortgage-backed
securities.
Ginnie Mae Certificates--Ginnie Mae guarantees certain mortgage
pass-through certificates ('Ginnie Mae certificates') that are issued by Private
Mortgage Lenders and that represent ownership interests in individual pools of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. Timely payment of interest
and principal is backed by the full faith and credit of the U.S. government.
Each mortgagor's monthly payments to his lending institution on his residential
mortgage are 'passed through' to certificateholders such as Global Income Fund.
Mortgage pools consist of whole mortgage loans or participations in loans. The
terms and characteristics of the mortgage instruments are generally uniform
within a pool but may vary among pools. Lending institutions that originate
mortgages for the pools are subject to certain standards, including credit and
other underwriting criteria for individual mortgages included in the pools.
Fannie Mae Certificates--Fannie Mae facilitates a national secondary
market in residential mortgage loans insured or guaranteed by U.S. government
agencies and in privately insured or uninsured residential mortgage loans
(sometimes referred to as 'conventional mortgage loans' or 'conventional loans')
through its mortgage purchase and mortgage-backed securities sales activities.
Fannie Mae issues guaranteed mortgage pass-through certificates ('Fannie Mae
certificates'), which represent pro rata shares of all interest and principal
payments made and owed on the underlying pools. Fannie Mae guarantees timely
payment of interest and principal on Fannie Mae certificates. The Fannie Mae
guarantee is not backed by the full faith and credit of the U.S. government.
Freddie Mac Certificates--Freddie Mac also facilitates a national secondary
market for conventional residential and U.S. government-insured mortgage loans
through its mortgage purchase and mortgage-backed securities sales activities.
Freddie Mac issues two types of mortgage pass-through securities: mortgage
participation certificates ('PCs') and guaranteed mortgage certificates
('GMCs'). Each PC represents a pro rata share of all interest and principal
payments made and owed on the underlying pool. Freddie Mac generally guarantees
timely monthly payment of interest on PCs and the ultimate payment of principal,
but it also has a PC program under which it guarantees timely payment of both
principal and interest. GMCs also represent a pro rata interest in a pool of
mortgages. These instruments, however, pay interest semi-annually and return
principal once a year in guaranteed minimum payments. The Freddie Mac guarantee
is not backed by the full faith and credit of the U.S. government.
8
<PAGE>
Private Mortgage-Backed Securities--Mortgage-backed securities issued by
Private Mortgage Lenders are structured similarly to CMOs issued or guaranteed
by Ginnie Mae, Fannie Mae and Freddie Mac. Such mortgage-backed securities may
be supported by pools of U.S. government or agency insured or guaranteed
mortgage loans or by other mortgage-backed securities issued by a government
agency or instrumentality, but they generally are supported by pools of
conventional (i.e., non-government guaranteed or insured) mortgage loans. Since
such mortgage-backed securities normally are not guaranteed by an entity having
the credit standing of Ginnie Mae, Fannie Mae and Freddie Mac, they normally are
structured with one or more types of credit enhancement. See '--Types of Credit
Enhancement.' These credit enhancements do not protect investors from changes in
market value.
Collateralized Mortgage Obligations and Multi-Class Mortgage
Pass-Throughs--CMOs are debt obligations that are collateralized by mortgage
loans or mortgage pass-through securities (such collateral collectively being
called 'Mortgage Assets'). CMOs may be issued by Private Mortgage Lenders or by
government entities such as Fannie Mae or Freddie Mac. Multi-class mortgage
pass-through securities are interests in trusts that are comprised of Mortgage
Assets and that have multiple classes similar to those in CMOs. Unless the
context indicates otherwise, references herein to CMOs include multi-class
mortgage pass-through securities. Payments of principal of, and interest on, the
Mortgage Assets (and in the case of CMOs, any reinvestment income thereon)
provide the funds to pay debt services on the CMOs or to make scheduled
distributions on the multi-class mortgage pass-through securities.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMO, also referred to as a 'tranche,' is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrued on all classes of a CMO (other than any
principal-only or 'PO' class) on a monthly, quarterly or semi-annual basis. The
principal and interest on the Mortgage Assets may be allocated among the several
classes of a CMO in many ways. In one structure, payments of principal,
including any principal prepayments, on the Mortgage Assets are applied to the
classes of a CMO in the order of their respective stated maturities or final
distribution dates so that no payment of principal will be made on any class of
the CMO until all other classes having an earlier stated maturity or final
distribution date have been paid in full. In some CMO structures, all or a
portion of the interest attributable to one or more of the CMO classes may be
added to the principal amounts attributable to such classes, rather than passed
through to certificateholders on a current basis, until other classes of the CMO
are paid in full.
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous payments are taken into
account in calculating the stated maturity date or final distribution date of
each class, which, as with other CMO structures, must be retired by its stated
maturity date or final distribution date but may be retired earlier.
Some CMO classes are structured to pay interest at rates that are adjusted
in accordance with a formula, such as a multiple or fraction of the change in a
specified interest rate index, so as to pay at a rate that will be attractive in
certain interest rate environments but not in others. For example, an inverse
floating rate CMO class pays interest at a rate that increases as a specified
interest rate index decreases but decreases as that index increases. For other
CMO classes, the yield may move in the same direction as market interest rates--
i.e., the yield may increase as rates increase and decrease as rates
decrease--but may do so more rapidly or to a greater degree. The market value of
such securities generally is more volatile than that of a fixed rate obligation.
Such interest rate formulas may be combined with other CMO characteristics. For
example, a CMO class may be an 'inverse IO,' on which the holders are entitled
to receive no payments of principal and are entitled to receive interest at a
rate that will vary inversely with a specified index or a multiple thereof.
Types of Credit Enhancement--To lessen the effect of failures by obligors
on Mortgage Assets to make payments, mortgage-backed securities may contain
elements of credit enhancement. Such credit enhancement falls into two
categories: (1) liquidity protection and (2) protection against losses resulting
after default by an obligor on the underlying assets and collection of all
amounts recoverable directly from the obligor and through liquidation of the
collateral. Liquidity protection refers to the provision of advances, generally
by the entity administering the pool of assets (usually the bank, savings
association or mortgage banker that
9
<PAGE>
transferred the underlying loans to the issuer of the security), to ensure that
the receipt of payments on the underlying pool occurs in a timely fashion.
Protection against losses resulting after default and liquidation ensures
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor, from third parties, through
various means of structuring the transaction or through a combination of such
approaches. A Fund will not pay any additional fees for such credit enhancement,
although the existence of credit enhancement may increase the price of a
security. Credit enhancements do not provide protection against changes in the
market value of the security. Examples of credit enhancement arising out of the
structure of the transaction include 'senior-subordinated securities' (multiple
class securities with one or more classes subordinate to other classes as to the
payment of principal thereof and interest thereon, with the result that defaults
on the underlying assets are borne first by the holders of the subordinated
class), creation of 'spread accounts' or 'reserve funds' (where cash or
investments, sometimes funded from a portion of the payments on the underlying
assets, are held in reserve against future losses) and 'over-collateralization'
(where the scheduled payments on, or the principal amount of, the underlying
assets exceed that required to make payment of the securities and pay any
servicing or other fees). The degree of credit enhancement provided for each
issue generally is based on historical information regarding the level of credit
risk associated with the underlying assets. Delinquency or loss in excess of
that anticipated could adversely affect the return on an investment in such a
security.
Special Characteristics of Mortgage-Backed Securities--The yield
characteristics of mortgage-backed securities differ from those of traditiona1
debt securities. Among the major differences are that interest and principal
payments are made more frequently, usually monthly, and that principal may be
prepaid at any time because the underlying mortgage loans generally may be
prepaid at any time. Prepayments on a pool of mortgage loans are influenced by a
variety of economic, geographic, social and other factors, including changes in
mortgagors' housing needs, job transfers, unemployment, mortgagors' net equity
in the mortgaged properties and servicing decisions. Generally, however,
prepayments on fixed-rate mortgage loans will increase during a period of
falling interest rates and decrease during a period of rising interest rates.
Mortgage-backed securities may decrease in value as a result of increases in
interest rates and may benefit less than other fixed-income securities from
declining interest rates because of the risk of prepayment.
The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificateholders and to any guarantor, and due to any
yield retained by the issuer. Actual yield to the holder may vary from the
coupon rate, even if adjustable, if the mortgage-backed securities are purchased
or traded in the secondary market at a premium or discount. In addition, there
is normally some delay between the time the issuer receives mortgage payments
from the servicer and the time the issuer makes the payments on the
mortgage-backed securities, and this delay reduces the effective yield to the
holder of such securities.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. Because prepayment rates of individual pools vary widely, it is not
possible to predict accurately the average life of a particular pool. In the
past, a common industry practice was to assume that prepayments on pools of
fixed rate 30-year mortgages would result in a 12-year average life for the
pool. At present, mortgage pools, particularly those with loans with other
maturities or different characteristics, are priced on an assumption of average
life determined for each pool. In periods of declining interest rates, the rate
of prepayment tends to increase, thereby shortening the actual average life of a
pool of mortgage-related securities. Conversely, in periods of rising interest
rates, the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. However, these effects may not be present, or may
differ in degree, if the mortgage loans in the pools have adjustable interest
rates or other special payment terms, such as a prepayment charge. Actual
prepayment experience may cause the yield of mortgage-backed securities to
differ from the assumed average life yield. Reinvestment of prepayments may
occur at lower interest rates than the original investment, thus adversely
affecting the yield of a Fund.
10
<PAGE>
Adjustable Rate Mortgage and Floating Rate Mortgage-Backed
Securities--Adjustable Rate Mortgage ('ARM') mortgage-backed securities are
mortgage-backed securities that represent a right to receive interest payments
at a rate that is adjusted to reflect the interest earned on a pool of mortgage
loans bearing variable or adjustable rates of interest (such mortgage loans are
referred to as 'ARMs'). Floating rate mortgage-backed securities are classes of
mortgage-backed securities that have been structured to represent the right to
receive interest payments at rates that fluctuate in accordance with an index
but that generally are supported by pools comprised of fixed-rate mortgage
loans. Because the interest rates on ARM and floating rate mortgage-backed
securities are reset in response to changes in a specified market index, the
values of such securities tend to be less sensitive to interest rate
fluctuations than the values of fixed-rate securities. As a result, during
periods of rising interest rates, ARMs generally do not decrease in value as
much as fixed rate securities. Conversely, during periods of declining rates,
ARMs generally do not increase in value as much as fixed rate securities. ARM
mortgage-backed securities represent a right to receive interest payments at a
rate that is adjusted to reflect the interest earned on a pool of ARMs. ARMs
generally specify that the borrower's mortgage interest rate may not be adjusted
above a specified lifetime maximum rate or, in some cases, below a minimum
lifetime rate. In addition, certain ARMs specify limitations on the maximum
amount by which the mortgage interest rate may adjust for any single adjustment
period. ARMs also may limit changes in the maximum amount by which the
borrower's monthly payment may adjust for any single adjustment period. In the
event that a monthly payment is not sufficient to pay the interest accruing on
the ARM, any such excess interest is added to the mortgage loan ('negative
amortization'), which is repaid through future payments. If the monthly payment
exceeds the sum of the interest accrued at the applicable mortgage interest rate
and the principal payment that would have been necessary to amortize the
oustanding principal balance over the remaining term of the loan, the excess
reduces the principal balance of the ARM. Borrowers under ARMs experiencing
negative amortization may take longer to build up their equity in the underlying
property and may be more likely to default.
ARMs also may be subject to a greater rate of prepayments in a declining
interest rate environment. For example, during a period of declining interest
rates, prepayments on ARMs could increase because the availability of fixed
mortgage loans at competitive interest rates may encourage mortgagors to
'lock-in' at a lower interest rate. Conversely, during a period of rising
interest rates, prepayments on ARMs might decrease. The rate of prepayments with
respect to ARMs has fluctuated in recent years.
The rates of interest payable on certain ARMs, and therefore on certain ARM
mortgage-backed securities, are based on indices, such as the one-year constant
maturity Treasury rate, that reflect changes in market interest rates. Others
are based on indices, such as the 11th District Federal Home Loan Bank Cost of
Funds Index ('COFI'), that tend to lag behind changes in market interest rates.
The values of ARM mortgage-backed securities supported by ARMs that adjust based
on lagging indices tend to be somewhat more sensitive to interest rate
fluctuations than those reflecting current interest rate levels, although the
values of such ARM mortgage-backed securities still tend to be less sensitive to
interest rate fluctuations than fixed-rate securities.
Floating rate mortgage-backed securities are classes of mortgage-backed
securities that have been structured to represent the right to receive interest
payments at rates that fluctuate in accordance with an index but that generally
are supported by pools comprised of fixed-rate mortgage loans. As with ARM
mortgage-backed securities, interest rate adjustments on floating rate
mortgage-backed securities may be based on indices that lag behind market
interest rates. Interest rates on floating rate mortgage-backed securities
generally are adjusted monthly. Floating rate mortgage-backed securities are
subject to lifetime interest rate caps, but they generally are not subject to
limitations on monthly or other periodic changes in interest rates or monthly
payments.
LOAN PARTICIPATIONS AND ASSIGNMENTS. Global Income Fund may invest in
secured or unsecured fixed or floating rate loans ('Loans') arranged through
private negotiations between a borrowing corporation, government or other entity
and one or more financial institutions ('Lenders'). The Fund's investments in
Loans may be in the form of participations ('Participations') in Loans or
assignments ('Assignments') of all or a portion of Loans from third parties.
Participations typically result in the Fund having a contractual relationship
only with the Lender, not with the borrower. The Fund has the right to receive
payments of principal, interest and any fees to which it is entitled only from
the Lender selling the Participation and only upon receipt by the Lender of the
payments from the borrower. In connection with purchasing Participations,
11
<PAGE>
the Fund generally has no direct right to enforce compliance by the borrower
with the terms of the loan agreement relating to the Loan, nor any rights of
set-off against the borrower, and the Fund may not directly benefit from any
collateral supporting the Loan in which it has purchased the Participation. As a
result, the Fund assumes the credit risk of both the borrower and the Lender
that is selling the Participation. In the event of the insolvency of the selling
Lender, the Fund may be treated as a general creditor of that Lender and may not
benefit from any set-off between the Lender and the borrower. Global Income Fund
will acquire Participations only if Mitchell Hutchins determines that the
selling Lender is creditworthy.
When Global Income Fund purchases Assignments from Lenders, it acquires
direct rights against the borrower on the Loan. However, because Assignments are
arranged through private negotiations between potential assignees and assignors,
the rights and obligations acquired by the Fund as the purchaser of an
Assignment may differ from, and be more limited than, those held by the
assigning Lender.
Assignments and Participations are generally not registered under the 1933
Act and thus may be subject to the Fund's limitation on investment in illiquid
securities. Because there may be no liquid market for such securities, the Fund
anticipates that such securities may be sold only to a limited number of
institutional investors. The lack of a liquid secondary market could have an
adverse impact on the value of such securities and on the Fund's ability to
dispose of particular Assignments or Participations when necessary to meet the
Fund's liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower.
MONEY MARKET INVESTMENTS. Each Fund may invest up to 35% of its total
assets in money market investments. Such investments include, among other
things, (i) securities issued or guaranteed by the U.S. government or one of its
agencies or instrumentalities, (ii) debt obligations of banks, savings and loan
institutions, insurance companies and mortgage bankers, (iii) commercial paper
and notes, including those with variable and floating rates of interest, (iv)
debt obligations of foreign branches of U.S. banks, U.S. branches of foreign
banks and foreign branches of foreign banks, (v) debt obligations issued or
guaranteed by one or more foreign governments or any of their political
subdivisions, agencies or instrumentalities, including obligations of
supranational entities, (vi) debt securities issued by foreign issuers, (vii)
repurchase agreements and (viii) other investment companies that invest
exclusively in money market instruments.
Global Equity Fund may invest up to 25% of its assets in the GEIM
Short-Term Investment Fund (the 'Investment Fund'), an investment fund created
specifically to serve as a vehicle for the collective investment of cash
balances of the Fund and other accounts advised by either GE Investment
Management, or its affiliate, General Electric Investment Corporation. The
Investment Fund invests exclusively in the money market instruments described in
(i) through (vii) above. The Investment Fund is advised by GE Investment
Management. No advisory fee is charged by GE Investment Management to the
Investment Fund, nor will the Fund incur any sales charge, redemption fee,
distribution fee or service fee in connection with its investments in the
Investment Fund.
WARRANTS. Warrants are securities permitting, but not obligating, holders
to subscribe for other securities. Warrants do not carry with them the right to
dividends or voting rights with respect to the securities that they entitle
their holder to purchase, and they do not represent any rights in the assets of
the issuer. As a result, warrants may be considered more speculative than
certain other types of investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities, and a warrant
ceases to have value if it is not exercised prior to its expiration date.
ILLIQUID SECURITIES. Global Equity Fund and Global Income Fund each may
invest up to 10% of its net assets, and Asia Pacific Growth Fund and Emerging
Markets Equity Fund each may invest up to 15% of its net assets, in illiquid
securities. The term 'illiquid securities' for this purpose means securities
that cannot be disposed of within seven days in the ordinary course of business
at approximately the amount at which a Fund has valued the securities and
includes, among other things, purchased OTC options, repurchase agreements
maturing in more than seven days and restricted securities other than those
Mitchell Hutchins or a Sub-Adviser, as applicable, has determined are liquid
pursuant to guidelines established by each Fund's board. The assets used as
cover for OTC options written by the Funds will be considered illiquid unless
the OTC options are sold to qualified dealers who agree that the Funds may
repurchase any OTC options they write at a maximum price to be calculated by a
formula set forth in the option agreements. The cover for an OTC option written
subject to this procedure would be considered illiquid only to the extent that
the maximum repurchase
12
<PAGE>
price under the formula exceeds the intrinsic value of the option. Under current
SEC guidelines, interest-only ('IO') and principal-only ('PO') classes of
mortgage-backed securities are considered illiquid. However, IO and PO classes
of fixed-rate mortgage-backed securities issued by the U.S. government or one of
its agencies or instrumentalities will not be considered illiquid if Mitchell
Hutchins or a Sub-Adviser has determined that they are liquid pursuant to
guidelines established by each Fund's board. To the extent a Fund invests in
illiquid securities, it may not be able to readily liquidate such investments
and may have to sell other investments if necessary to raise cash to meet its
obligations.
Restricted securities are not registered under the Securities Act of 1933
('1933 Act') and may be sold only in privately negotiated or other exempted
transactions or after a 1933 Act registration statement has become effective.
Where registration is required, a Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the time
of the decision to sell and the time a Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, a Fund might obtain a less favorable price
than prevailed when it decided to sell.
However, not all restricted securities are illiquid. To the extent that
foreign securities are freely tradeable in the country in which they are
principally traded, they are not considered illiquid, even if they are
restricted in the United States. A large institutional market has developed for
many U.S. and foreign securities that are not registered under the 1933 Act.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Institutional markets for restricted securities also have developed as a
result of Rule 144A, which establishes a 'safe harbor' from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a Fund, however, could affect adversely the marketability of such portfolio
securities, and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
Each board has delegated the function of making day-to-day determinations
of liquidity to Mitchell Hutchins or a Sub-Adviser, as applicable, pursuant to
guidelines approved by the board. Mitchell Hutchins or the Sub-Adviser takes
into account a number of factors in reaching liquidity decisions, including (1)
the frequency of trades for the security, (2) the number of dealers that make
quotes for the security, (3) the number of dealers that have undertaken to make
a market in the security, (4) the number of other potential purchasers and (5)
the nature of the security and how trading is effected (e.g., the time needed to
sell the security, how bids are solicited and the mechanics of transfer).
Mitchell Hutchins or a Sub-Adviser monitors the liquidity of restricted
securities in each Fund's portfolio and reports periodically on such decisions
to the applicable board.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a
Fund purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer at an
agreed-upon date or upon demand and at a price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased securities.
The Fund maintains custody of the underlying securities prior to their
repurchase; thus, the obligation of the bank or dealer to pay the repurchase
price on the date agreed to or upon demand is, in effect, secured by such
securities. If the value of these securities is less than the repurchase price,
plus any agreed-upon additional amount, the other party to the agreement must
provide additional collateral so that at all times the collateral is at least
equal to the repurchase price, plus any agreed-upon additional amount. The
difference between the total amount to be received upon repurchase of the
securities and the price that was paid by a Fund upon acquisition is accrued as
interest and included in its net investment income. Repurchase agreements carry
certain risks not associated with direct investments in securities, including
possible declines in the market value of the underlying securities and delays
and costs to a Fund if the other party to a repurchase agreement becomes
insolvent.
13
<PAGE>
The Funds intend to enter into repurchase agreements only with banks and
dealers in transactions believed by Mitchell Hutchins or a Sub-Adviser to
present minimal credit risks in accordance with guidelines established by each
board. Mitchell Hutchins reviews and monitors the creditworthiness of those
institutions under each board's general supervision.
REVERSE REPURCHASE AGREEMENTS. As indicated in the Prospectus, each Fund
may enter into reverse repurchase agreements with banks and securities dealers.
While a reverse repurchase agreement is outstanding, a Fund will maintain, in a
segregated account with its custodian, cash or liquid securities, marked to
market daily, in an amount at least equal to its obligations under the reverse
repurchase agreement.
Reverse repurchase agreements involve the risk that the buyer of the
securities sold by a Fund might be unable to deliver them when that Fund seeks
to repurchase. In the event that the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
trustee or receiver may receive an extension of time to determine whether to
enforce that Fund's obligation to repurchase the securities, and the Fund's use
of the proceeds of the reverse repurchase agreement may effectively be
restricted pending such decision.
LENDING OF PORTFOLIO SECURITIES. Each Fund is authorized to lend up to
33 1/3% of its total assets to broker-dealers or institutional investors that
Mitchell Hutchins deems qualified, but only when the borrower maintains
acceptable collateral with that Fund's custodian in an amount, marked to market
daily, at least equal to the market value of the securities loaned, plus accrued
interest and dividends. Acceptable collateral is limited to cash, U.S.
government securities and irrevocable letters of credit that meet certain
guidelines established by Mitchell Hutchins. Each Fund may reinvest any cash
collateral in money market investments or other short-term liquid investments.
In determining whether to lend securities to a particular broker-dealer or
institutional investor, Mitchell Hutchins will consider, and during the period
of the loan will monitor, all relevant facts and circumstances, including the
creditworthiness of the borrower. Each Fund will retain authority to terminate
any of its loans at any time. Each Fund may pay reasonable fees in connection
with a loan and may pay the borrower or placing broker a negotiated portion of
the interest earned on the reinvestment of cash held as collateral. A Fund will
receive amounts equivalent to any dividends, interest or other distributions on
the securities loaned. Each Fund will regain record ownership of loaned
securities to exercise beneficial rights, such as voting and subscription
rights, when regaining such rights is considered to be in the Fund's interest.
Pursuant to procedures adopted by the boards governing each Fund's
securities lending program, PaineWebber has been retained to serve as lending
agent for each Fund. The boards also have authorized the payment of fees
(including fees calculated as a percentage of invested cash collateral) to
PaineWebber for these services. Each board periodically reviews all portfolio
securities loan transactions for which PaineWebber acted as lending agent.
SHORT SALES 'AGAINST THE BOX.' Each Fund may engage in short sales of
securities it owns or has the right to acquire at no added cost through
conversion or exchange of other securities it owns (short sales 'against the
box'). To make delivery to the purchaser in a short sale, the executing broker
borrows the securities being sold short on behalf of a Fund, and that Fund is
obligated to replace the securities borrowed at a date in the future. When a
Fund sells short, it establishes a margin account with the broker effecting the
short sale and deposits collateral with the broker. In addition, the Fund
maintains, in a segregated account with its custodian, the securities that could
be used to cover the short sale. Each Fund incurs transaction costs, including
interest expense, in connection with opening, maintaining and closing short
sales 'against the box.'
A Fund might make a short sale 'against the box' in order to hedge against
market risks when Mitchell Hutchins or a Sub-Adviser believes that the price of
a security may decline, thereby causing a decline in the value of a security
owned by the Fund or a security convertible into or exchangeable for a security
owned by the Fund. In such case, any loss in the Fund's long position after the
short sale should be reduced by a corresponding gain in the short position.
Conversely, any gain in the long position after the short sale should be reduced
by a corresponding loss in the short position. The extent to which gains or
losses in the long position are reduced will depend upon the amount of the
securities sold short relative to the amount of the securities a Fund owns,
either directly or indirectly, and in the case where the Fund owns convertible
securities, changes in the investment values or conversion premiums of such
securities.
14
<PAGE>
SEGREGATED ACCOUNTS. When a Fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis, or reverse
repurchase agreements, it will maintain with an approved custodian in a
segregated account cash or liquid securities, marked to market daily, in an
amount at least equal to the Fund's obligation or commitment under such
transactions. As described below under 'Hedging and Other Strategies Using
Derivative Instruments,' segregated accounts may also be required in connection
with certain transactions involving options, futures or forward currency
contracts (and, for Asia Pacific Growth Fund and Global Income Fund, swaps).
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Fund may purchase
securities on a 'when-issued' basis or may purchase or sell for delayed
delivery. A security purchased on a when-issued or delayed delivery basis is
recorded as an asset on the commitment date and is subject to changes in market
value, generally based upon changes in the level of interest rates. Thus,
fluctuation in the value of the security from the time of the commitment date
will affect a Fund's net asset value. When a Fund commits to purchase securities
on a when-issued or delayed delivery basis, its custodian segregates assets to
cover the amount of the commitment. See 'Investment Policies and
Restrictions--Segregated Accounts.' A Fund purchases when-issued securities only
with the intention of taking delivery, but may sell the right to acquire the
security prior to delivery if Mitchell Hutchins or a Sub-Adviser, as applicable,
deems it advantageous to do so, which may result in a gain or loss to the Fund.
INVESTMENT LIMITATIONS OF THE FUNDS
FUNDAMENTAL LIMITATIONS. The following fundamental investment limitations
cannot be changed for a Fund without the affirmative vote of the lesser of (a)
more than 50% of the outstanding shares of the Fund or (b) 67% or more of the
shares of the Fund present at a shareholders' meeting if more than 50% of the
outstanding shares are represented at the meeting in person or by proxy. If a
percentage restriction is adhered to at the time of an investment or
transaction, later changes in percentage resulting from a change in values of
portfolio securities or amount of total assets will not be considered a
violation of any of the following limitations.
Each Fund will not:
(1) purchase any security if, as a result of that purchase, 25% or more of
the Fund's total assets would be invested in securities of issuers having their
principal business activities in the same industry, except that this limitation
does not apply to securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities or to municipal securities.
(2) issue senior securities or borrow money, except as permitted under the
1940 Act and then not in excess of 33 1/3% of the Fund's total assets (including
the amount of the senior securities issued but reduced by any liabilities not
constituting senior securities) at the time of the issuance or borrowing, except
that the Fund may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes.
(3) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this restriction, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances or
similar instruments will not be considered the making of a loan.
(4) engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under the
federal securities laws in connection with its disposition of portfolio
securities.
(5) purchase or sell real estate, except that investments in securities of
issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by interests
in real estate are not subject to this limitation, and except that the Fund may
exercise rights under agreements relating to such securities, including the
right to enforce security interests and to hold real estate acquired by reason
of such enforcement until that real estate can be liquidated in an orderly
manner.
15
<PAGE>
(6) purchase or sell physical commodities unless acquired as a result of
owning securities or other instruments, but the Fund may purchase, sell or enter
into financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.
In addition, Asia Pacific Growth Fund, Emerging Markets Equity Fund and
Global Equity Fund will not:
(7) purchase securities of any one issuer if, as a result, more than 5% of
the Fund's total assets would be invested in securities of that issuer or the
Fund would own or hold more than 10% of the outstanding voting securities of
that issuer, except that up to 25% of the Fund's total assets may be invested
without regard to this limitation, and except that this limitation does not
apply to securities issued or guaranteed by the U.S. government, its agencies
and instrumentalities or to securities issued by other investment companies.
The following interpretation applies to, but is not a part of, this
fundamental restriction: Mortgage- and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the securities
having the same sponsor, and mortgage- and asset-backed securities issued by a
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the appropriate board without
shareholder approval.
Each Fund will not:
(1) invest more than 10% of its net assets (15% of net assets for Asia
Pacific Growth Fund and Emerging Markets Equity Fund) in illiquid securities;
(2) purchase portfolio securities while borrowings in excess of 5% of its
total assets are outstanding;
(3) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may make margin
deposits in connection with its use of financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts or
derivative instruments;
(4) engage in short sales of securities or maintain a short position,
except that the Fund may (a) sell short 'against the box' and (b) maintain short
positions in connection with its use of financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(5) purchase securities of other investment companies, except to the extent
permitted by the 1940 Act and except that this limitation does not apply to
securities received or acquired as dividends, through offers of exchange, or as
a result of reorganization, consolidation, or merger (and except that a Fund
will not purchase securities of registered open-end investment companies or
registered unit investment trusts in reliance on Sections 12(d)(1)(F) or
12(d)(1)(G) of the 1940 Act).
16
<PAGE>
HEDGING AND OTHER STRATEGIES USING DERIVATIVE INSTRUMENTS
GENERAL DESCRIPTION OF DERIVATIVE INSTRUMENTS. Mitchell Hutchins and the
Sub-Advisers may use a variety of financial instruments ('Derivative
Instruments'), including certain options, futures contracts (sometimes referred
to as 'futures'), options on futures contracts and forward currency contracts,
to attempt to hedge each Fund's portfolio. Global Income Fund also may use these
Derivative Instruments to attempt to enhance income or realize gains. Asia
Pacific Growth Fund and Global Income Fund may enter into interest rate swaps,
and Asia Pacific Growth Fund may engage in currency swaps, as also described
below. A Fund may enter into transactions involving one or more types of
Derivative Instruments under which the full value of its portfolio is at risk.
Under normal circumstances, however, each Fund's use of these instruments will
place at risk a much smaller portion of its assets. In particular, each Fund may
use the Derivative Instruments described below.
OPTIONS ON EQUITY AND DEBT SECURITIES AND FOREIGN CURRENCIES--A call option
is a short-term contract pursuant to which the purchaser of the option, in
return for a premium, has the right to buy the security or currency underlying
the option at a specified price at any time during the term of the option. The
writer of the call option, who receives the premium, has the obligation, upon
exercise of the option during the option term, to deliver the underlying
security or currency against payment of the exercise price. A put option is a
similar contract that gives its purchaser, in return for a premium, the right to
sell the underlying security or currency at a specified price during the option
term. The writer of the put option, who receives the premium, has the
obligation, upon exercise of the option during the option term, to buy the
underlying security or currency at the exercise price.
OPTIONS ON SECURITIES INDICES--A securities index assigns relative values
to the securities included in the index and fluctuates with changes in the
market values of those securities. A securities index option operates in the
same way as a more traditional securities option, except that exercise of a
securities index option is effected with cash payment and does not involve
delivery of securities. Thus, upon exercise of a securities index option, the
purchaser will realize, and the writer will pay, an amount based on the
difference between the exercise price and the closing price of the securities
index.
SECURITIES INDEX FUTURES CONTRACTS--A securities index futures contract is
a bilateral agreement pursuant to which one party agrees to accept, and the
other party agrees to make, delivery of an amount of cash equal to a specified
dollar amount times the difference between the securities index value at the
close of trading of the contract and the price at which the futures contract is
originally struck. No physical delivery of the securities comprising the index
is made. Generally, contracts are closed out prior to the expiration date of the
contract.
INTEREST RATE AND FOREIGN CURRENCY FUTURES CONTRACTS--Interest rate and
foreign currency futures contracts are bilateral agreements pursuant to which
one party agrees to make, and the other party agrees to accept, delivery of a
specified type of debt security or currency at a specified future time and at a
specified price. Although such futures contracts by their terms call for actual
delivery or acceptance of debt securities or currency, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery.
OPTIONS ON FUTURES CONTRACTS--Options on futures contracts are similar to
options on securities or currency, except that an option on a futures contract
gives the purchaser the right, in return for the premium, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put), rather than to purchase or sell a security or
currency, at a specified price at any time during the option term. Upon exercise
of the option, the delivery of the futures position to the holder of the option
will be accompanied by delivery of the accumulated balance that represents the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the future. The writer of an option, upon exercise, will assume a short
position in the case of a call and a long position in the case of a put.
FORWARD CURRENCY CONTRACTS--A forward currency contract involves an
obligation to purchase or sell a specific currency at a specified future date,
which may be any fixed number of days from the contract date agreed upon by the
parties, at a price set at the time the contract is entered into.
GENERAL DESCRIPTION OF STRATEGIES USING DERIVATIVE INSTRUMENTS. Hedging
strategies can be broadly categorized as 'short hedges' and 'long hedges.' A
short hedge is a purchase or sale of a Derivative
17
<PAGE>
Instrument intended partially or fully to offset potential declines in the value
of one or more investments held in a Fund's portfolio. Thus, in a short hedge a
Fund takes a position in a Derivative Instrument whose price is expected to move
in the opposite direction of the price of the investment being hedged. For
example, a Fund might purchase a put option on a security to hedge against a
potential decline in the value of that security. If the price of the security
declined below the exercise price of the put, a Fund could exercise the put and
thus limit its loss below the exercise price to the premium paid plus
transaction costs. In the alternative, because the value of the put option can
be expected to increase as the value of the underlying security declines, a Fund
might be able to close out the put option and realize a gain to offset the
decline in the value of the security.
Conversely, a long hedge is a purchase or sale of a Derivative Instrument
intended partially or fully to offset potential increases in the acquisition
cost of one or more investments that a Fund intends to acquire. Thus, in a long
hedge, a Fund takes a position in a Derivative Instrument whose price is
expected to move in the same direction as the price of the prospective
investment being hedged. For example, a Fund might purchase a call option on a
security it intends to purchase in order to hedge against an increase in the
cost of the security. If the price of the security increased above the exercise
price of the call, a Fund could exercise the call and thus limit its acquisition
cost to the exercise price plus the premium paid and transactions costs.
Alternatively, a Fund might be able to offset the price increase by closing out
an appreciated call option and realizing a gain.
A Fund may purchase and write (sell) straddles on securities or indices of
securities. A long straddle is a combination of a call and a put option
purchased on the same security or on the same futures contract, where the
exercise price of the put is less than or equal to the exercise price of the
call. A Fund might enter into a long straddle when Mitchell Hutchins or a
Sub-Adviser believes it likely that the prices of the securities will be more
volatile during the term of the option than the option pricing implies. A short
straddle is a combination of a call and a put written on the same security where
the exercise price of the put is less than or equal to the exercise price of the
call. A Fund might enter into a short straddle when Mitchell Hutchins or a
Sub-Adviser believes it unlikely that the prices of the securities will be as
volatile during the term of the option as the option pricing implies.
Derivative Instruments on securities generally are used to hedge against
price movements in one or more particular securities positions that a Fund owns
or intends to acquire. Derivative Instruments on stock indices, in contrast,
generally are used to hedge against price movements in broad equity market
sectors in which a Fund has invested or expects to invest. Derivative
Instruments on debt securities may be used to hedge either individual securities
or broad fixed income market sectors.
The use of Derivative Instruments is subject to applicable regulations of
the SEC, the several options and futures exchanges upon which they are traded
and the Commodity Futures Trading Commission ('CFTC'). In addition, a Fund's
ability to use Derivative Instruments will be limited by tax considerations. See
'Taxes.'
Income strategies that Global Income Fund may use include the writing of
covered options to obtain the related option premiums. Gain strategies that
Global Income Fund may use include the use of Derivative Instruments to increase
or reduce the Fund's exposure to an asset class without buying or selling the
underlying instruments.
In addition to the products, strategies and risks described below and in
the Prospectus, Mitchell Hutchins and the Sub-Advisers may discover additional
opportunities in connection with Derivative Instruments and with hedging, income
and gain strategies. These new opportunities may become available as regulatory
authorities broaden the range of permitted transactions and as new Derivative
Instruments and techniques are developed. Mitchell Hutchins or a Sub-Adviser may
utilize these opportunities for a Fund to the extent that they are consistent
with the Fund's investment objective and permitted by its investment limitations
and applicable regulatory authorities. The Funds' Prospectus or Statement of
Additional Information will be supplemented to the extent that new products or
techniques involve materially different risks than those described below or in
the Prospectus.
SPECIAL RISKS OF STRATEGIES USING DERIVATIVE INSTRUMENTS. The use of
Derivative Instruments involves special considerations and risks, as described
below. Risks pertaining to particular Derivative Instruments are described in
the sections that follow.
(1) Successful use of most Derivative Instruments depends upon the ability
of Mitchell Hutchins or a Sub-Adviser to predict movements of the overall
securities, interest rate or currency exchange markets, which
18
<PAGE>
requires different skills than predicting changes in the prices of individual
securities. While Mitchell Hutchins and the Sub-Advisers are experienced in the
use of Derivative Instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation, between
price movements of a Derivative Instrument and price movements of the
investments that are being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value of
the hedged investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors affecting the markets in which Derivative
Instruments are traded, rather than the value of the investments being hedged.
The effectiveness of hedges using Derivative Instruments on indices will depend
on the degree of correlation between price movements in the index and price
movements in the securities being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or
partially offsetting the negative effect of unfavorable price movements in the
investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund entered into a short
hedge because Mitchell Hutchins or a Sub-Adviser projected a decline in the
price of a security in that Fund's portfolio, and the price of that security
increased instead, the gain from that increase might be wholly or partially
offset by a decline in the price of the Derivative Instrument. Moreover, if the
price of the Derivative Instrument declined by more than the increase in the
price of the security, that Fund could suffer a loss. In either such case, the
Fund would have been in a better position had it not hedged at all.
(4) As described below, a Fund might be required to maintain assets as
'cover,' maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(i.e., Derivative Instruments other than purchased options). If the Fund was
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the positions expired or matured. These requirements might impair a Fund's
ability to sell a portfolio security or make an investment at a time when it
would otherwise be favorable to do so, or require that the Fund sell a portfolio
security at a disadvantageous time. A Fund's ability to close out a position in
a Derivative Instrument prior to expiration or maturity depends on the existence
of a liquid secondary market or, in the absence of such a market, the ability
and willingness of a contra party to enter into a transaction closing out the
position. Therefore, there is no assurance that any hedging position can be
closed out at a time and price that is favorable to a Fund.
COVER FOR STRATEGIES USING DERIVATIVE INSTRUMENTS. Transactions using
Derivative Instruments, other than purchased options, expose the Funds to an
obligation to another party. A Fund will not enter into any such transactions
unless it owns either (1) an offsetting ('covered') position in securities,
currencies or other options or futures contracts or (2) cash and liquid
securities, with a value sufficient at all times to cover its potential
obligations to the extent not covered as provided in (1) above. Each Fund will
comply with SEC guidelines regarding cover for such transactions and will, if
the guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Derivative Instrument is open, unless they are
replaced with similar assets. As a result, committing a large portion of a
Fund's assets to cover positions or to segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
OPTIONS. The Funds may purchase put and call options, and write (sell)
covered put or call options, in the case of Asia Pacific Growth Fund, Emerging
Markets Equity Fund and Global Equity Fund, on equity and debt securities, stock
and bond indices and foreign currencies, or in the case of Global Income Fund,
on debt securities, bond indices and foreign currencies. The purchase of call
options may serve as a long hedge, and the purchase of put options may serve as
a short hedge. In addition, Global Income Fund may purchase options to realize
gains by increasing or reducing its exposure to an asset class without
purchasing or selling the underlying securities. Writing covered put or call
options can enable a Fund to enhance income by reason of the premiums paid by
the purchasers of such options. Writing covered call options serves as a limited
short hedge, because declines in the value of the hedged investment would be
offset to the extent of the premium received for writing the option. However, if
the security appreciates to a price higher than the exercise price of
19
<PAGE>
the call option, it can be expected that the option will be exercised and the
affected Fund will be obligated to sell the security at less than its market
value. Writing covered put options serves as a limited long hedge because
increases in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be obligated
to purchase the security at more than its market value. The securities or other
assets used as cover for OTC options written by a Fund would be considered
illiquid to the extent described under 'Investment Policies and Restrictions--
Illiquid Securities.'
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options normally have expiration dates
of up to nine months. Options that expire unexercised have no value.
A Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, a Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, a Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit a Fund to realize profits or limit
losses on an option position prior to its exercise or expiration.
The Funds may purchase and write both exchange-traded and OTC options.
Exchange markets for options on debt securities and foreign currencies exist but
are relatively new, and these instruments are primarily traded on the OTC
market. Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed which,
in effect, guarantees completion of every exchange-traded option transaction. In
contrast, OTC options are contracts between a Fund and its contra party (usually
a securities dealer or a bank) with no clearing organization guarantee. Thus,
when a Fund purchases or writes an OTC option, it relies on the contra party to
make or take delivery of the underlying investment upon exercise of the option.
Failure by the contra party to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Funds will enter into OTC option transactions only with contra parties that
have a net worth of at least $20 million.
Generally, the OTC debt options or foreign currency options used by the
Funds are European-style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American-style
options, which are exercisable at any time prior to the expiration date of the
option.
The Funds' ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Funds intend to
purchase or write only those exchange-traded options for which there appears to
be a liquid secondary market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the contra party, or by a
transaction in the secondary market if any such market exists. Although the
Funds will enter into OTC options only with contra parties that are expected to
be capable of entering into closing transactions with the Funds, there is no
assurance that a Fund will in fact be able to close out an OTC option position
at a favorable price prior to expiration. In the event of insolvency of the
contra party, a Fund might be unable to close out an OTC option position at any
time prior to its expiration.
If a Fund were unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered put or call
option written by the Fund could cause material losses because the Fund would be
unable to sell the investment used as cover for the written option until the
option expires or is exercised.
A Fund may purchase and write put and call options on indices in much the
same manner as the more traditional options discussed above, except the index
options may serve as a hedge against overall fluctuations in a securities market
(or market sector) rather than anticipated increases or decreases in the value
of a particular security.
LIMITATIONS ON THE USE OF OPTIONS. The use of options is governed by the
following guidelines, which can be changed by each respective Fund's board
without shareholder vote:
20
<PAGE>
(1) Each Fund may purchase a put or call option, including any
straddle or spread, only if the value of its premium, when aggregated with
the premiums on all other options held by the Fund, does not exceed 5% of
its total assets.
(2) The aggregate value of securities underlying put options written
by each Fund, determined as of the date the put options are written will
not exceed 50% of its net assets.
(3) The aggregate premiums paid on all options (including options on
securities, foreign currencies and stock and bond indices and options on
futures contracts) purchased by each Fund that are held at any time will
not exceed 20% of its net assets.
FUTURES. The Funds may purchase and sell securities index futures
contracts, interest rate futures contracts, bond index future contracts and
foreign currency futures contracts. A Fund may also purchase put and call
options, and write covered put and call options, on futures in which it is
allowed to invest. The purchase of futures or call options thereon can serve as
a long hedge, and the sale of futures or the purchase of put options thereon can
serve as a short hedge. Writing covered call options on futures contracts can
serve as a limited short hedge, and writing covered put options on futures
contracts can serve as a limited long hedge, using a strategy similar to that
used for writing covered options on securities or indices. In addition, Global
Income Fund may purchase or sell futures contracts or purchase options thereon
to realize gains by increasing or reducing its exposure to an asset class
without purchasing or selling the underlying securities.
Futures strategies also can be used to manage the average duration of
Global Income Fund's portfolio. If Mitchell Hutchins wishes to shorten the
average duration of this Fund's portfolio, the Fund may sell a futures contract
or a call option thereon, or purchase a put option on that futures contract. If
Mitchell Hutchins wishes to lengthen the average duration of the Fund's
portfolio, the Fund may buy a futures contract or a call option thereon, or sell
a put option thereon.
A Fund may also write put options on futures contracts while at the same
time purchasing call options on the same futures contracts in order
synthetically to create a long futures contract position. Such options would
have the same strike prices and expiration dates. A Fund will engage in this
strategy only when it is more advantageous to a Fund than is purchasing the
futures contract.
No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract a Fund is required to deposit in a segregated
account with its custodian, in the name of the futures broker through whom the
transaction was effected, 'initial margin' consisting of cash, obligations of
the United States or obligations fully guaranteed as to principal and interest
by the United States, in an amount generally equal to 10% or less of the
contract value. Margin must also be deposited when writing a call option on a
futures contract, in accordance with applicable exchange rules. Unlike margin in
securities transactions, initial margin on futures contracts does not represent
a borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to a Fund at the termination of the transaction if all
contractual obligations have been satisfied. Under certain circumstances, such
as periods of high volatility, a Fund may be required by an exchange to increase
the level of its initial margin payment, and initial margin requirements might
be increased generally in the future by regulatory action.
Subsequent 'variation margin' payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
'marking to market.' Variation margin does not involve borrowing, but rather
represents a daily settlement of each Fund's obligations to or from a futures
broker. When a Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when a Fund purchases or
sells a futures contract or writes a call option thereon, it is subject to daily
variation margin calls that could be substantial in the event of adverse price
movements. If a Fund has insufficient cash to meet daily variation margin
requirements, it might need to sell securities at a time when such sales are
disadvantageous.
Holders and writers of futures positions and options on futures can enter
into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument held or written. Positions in futures and options on futures may be
closed only on an exchange or board of trade that provides a secondary market.
The Funds intend to enter into futures transactions only on exchanges or boards
of trade where there appears to be a liquid secondary market. However, there can
be no assurance that such a market will exist for a particular contract at a
particular time.
21
<PAGE>
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a future or related option can vary from the
previous day's settlement price; once that limit is reached, no trades may be
made that day at a price beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily limit for several
consecutive days with little or no trading, thereby preventing liquidation of
unfavorable positions.
If a Fund were unable to liquidate a futures or related options position
due to the absence of a liquid secondary market or the imposition of price
limits, it could incur substantial losses. A Fund would continue to be subject
to market risk with respect to the position. In addition, except in the case of
purchased options, a Fund would continue to be required to make daily variation
margin payments and might be required to maintain the position being hedged by
the future or option or to maintain cash or securities in a segregated account.
Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or related options might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the futures and related options markets
are subject to daily variation margin calls and might be compelled to liquidate
futures or related options positions whose prices are moving unfavorably to
avoid being subject to further calls. These liquidations could increase price
volatility of the instruments and distort the normal price relationship between
the futures or options and the investments being hedged. Also, because initial
margin deposit requirements in the futures market are less onerous than margin
requirements in the securities markets, there might be increased participation
by speculators in the futures markets. This participation also might cause
temporary price distortions. In addition, activities of large traders in both
the futures and securities markets involving arbitrage, 'program trading' and
other investment strategies might result in temporary price distortions.
LIMITATIONS ON THE USE OF FUTURES AND RELATED OPTIONS. The use of futures
and related options is governed by the following guidelines, which can be
changed by a Fund's board without shareholder vote:
(1) To the extent a Fund enters into futures contracts and options on
futures positions that are not for bona fide hedging purposes (as defined
by the CFTC), the aggregate initial margin and premiums on those positions
(excluding the amount by which options are 'in-the-money') may not exceed
5% of its net assets.
(2) The aggregate premiums paid on all options (including options on
securities, foreign currencies and stock or bond indices and options on
futures contracts) purchased by each Fund that are held at any time will
not exceed 20% of its net assets.
(3) The aggregate margin deposits on all futures contracts and options
thereon held at any time by each Fund will not exceed 5% of its total
assets.
FOREIGN CURRENCY HEDGING STRATEGIES--SPECIAL CONSIDERATIONS. Each Fund may
use options and futures on foreign currencies, as described above, and forward
currency contracts, as described below, to hedge against movements in the values
of the foreign currencies in which the Fund's securities are denominated. Such
currency hedges can protect against price movements in a security a Fund owns or
intends to acquire that are attributable to changes in the value of the currency
in which it is denominated. Such hedges do not, however, protect against price
movements in the securities that are attributable to other causes.
A Fund might seek to hedge against changes in the value of a particular
currency when no Derivative Instruments on that currency are available or such
Derivative Instruments are considered expensive. In such cases, the Fund may
hedge against price movements in that currency by entering into transactions
using Derivative Instruments on another currency or a basket of currencies, the
value of which Mitchell Hutchins or a Sub-Adviser believes will have a positive
correlation to the value of the currency being hedged. For example, if a Fund
owned securities denominated in a foreign currency and Mitchell Hutchins or the
Sub-Adviser believed that currency would decline relative to another currency,
it might enter into a forward contract to sell an appropriate amount of the
first foreign currency, with payment to be made in the second foreign currency.
Transactions that use two foreign currencies are sometimes referred to as 'cross
hedging.' The risk that movements in the price of the Derivative Instrument will
not correlate perfectly with movements in the price of the currency being hedged
is magnified when this strategy is used.
22
<PAGE>
The value of Derivative Instruments on foreign currencies depends on the
value of the underlying currency relative to the U.S. dollar. Because foreign
currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of such Derivative
Instruments, a Fund could be disadvantaged by having to deal in the odd-lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Derivative Instruments until they reopen.
Settlement of Derivative Instruments involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
the Funds might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.
FORWARD CURRENCY CONTRACTS. Each Fund may enter into forward currency
contracts to purchase or sell foreign currencies for a fixed amount of U.S.
dollars or another foreign currency. Such transactions may serve as long
hedges--for example, a Fund may purchase a forward currency contract to lock in
the U.S. dollar price of a security denominated in a foreign currency that the
Fund intends to acquire. Forward currency contract transactions may also serve
as short hedges--for example, a Fund may sell a forward currency contract to
lock in the U.S. dollar equivalent of the proceeds from the anticipated sale of
a security denominated in a foreign currency. Global Income Fund may use forward
currency contracts to realize gains from favorable changes in exchange rates.
A Fund may seek to hedge against changes in the value of a particular
currency by using forward contracts on another foreign currency or a basket of
currencies, the value of which Mitchell Hutchins or a Sub-Adviser believes will
have a positive correlation to the values of the currency being hedged. In
addition, a Fund may use forward currency contracts to shift exposure to foreign
currency fluctuations from one country to another. For example, if a Fund owned
securities denominated in a foreign currency and Mitchell Hutchins or a
Sub-Adviser believes that currency would decline relative to another currency,
it might enter into a forward contract to sell an appropriate amount of the
first foreign currency, with payment to be made in the second foreign currency.
Transactions that use two foreign currencies are sometimes referred to as 'cross
hedging.' Use of a different foreign currency magnifies the risk that movements
in the price of a hedging instrument will not correlate or will correlate
unfavorably with the foreign currency being hedged.
The cost to a Fund of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
When a Fund enters into a forward currency contract, it relies on the contra
party to make or take delivery of the underlying currency at the maturity of the
contract. Failure by the contra party to do so would result in the loss of any
expected benefit of the transaction.
As is the case with futures contracts, holders and writers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures, by selling or purchasing, respectively, an
instrument identical to the instrument purchased or sold. Secondary markets
generally do not exist for forward currency contracts, with the result that
closing transactions generally can be made for forward currency contracts only
by negotiating directly with the contra party. Thus, there can be no assurance
that a Fund will in fact be able to close out a forward currency contract at a
favorable price prior to maturity. In addition, in the event of insolvency of
the contra party, a Fund might be unable to close out a forward currency
contract at any time prior to maturity. In either event, the Fund would continue
to be subject to market risk with respect to the position, and would continue to
be required to maintain a position in the
23
<PAGE>
securities or currencies that are the subject of the hedge or to maintain cash
or securities in a segregated account.
The precise matching of forward currency contract amounts and the value of
the securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, a Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.
LIMITATIONS ON THE USE OF FORWARD CURRENCY CONTRACTS. Each Fund may enter
into forward currency contracts or maintain a net exposure to such contracts
only if (1) the consummation of the contracts would not obligate the Fund to
deliver an amount of foreign currency in excess of the value of the position
being hedged by such contracts or (2) the Fund segregates with its custodian
cash or liquid securities in an amount not less than the value of its total
assets committed to the consummation of the contract and not covered as provided
in (1) above, as marked to market daily.
SWAP TRANSACTIONS. Asia Pacific Growth Fund and Global Income Fund each
may enter into interest rate swap transactions. Asia Pacific Growth Fund also
may enter into currency swap transactions. Swap transactions include swaps,
caps, floors and collars. Interest rate swaps involve an agreement between two
parties to exchange payments that are based, for example, on variable and fixed
rates of interest and that are calculated on the basis of a specified amount of
principal (the 'notional principal amount') for a specified period of time.
Interest rate cap and floor transactions involve an agreement between two
parties in which the first party agrees to make payments to the contra party
when a designated market interest rate goes above (in the case of a cap) or
below (in the case of a floor) a designated level on predetermined dates or
during a specified time period. Interest rate collar transactions involve an
agreement between two parties in which payments are made when a designated
market interest rate either goes above a designated ceiling level or goes below
a designated floor level on predetermined dates or during a specified time
period. Currency swaps, caps, floors and collars are similar to interest rate
swaps, caps, floors and collars but they are based on currency exchange rates
rather than interest rates.
Asia Pacific Growth Fund and Global Income Fund each may enter into
interest rate swap transactions to preserve a return or spread on a particular
investment or portion of its portfolio or to protect against any increase in the
price of securities it anticipates purchasing at a later date. Each of these
Funds intends to use these transactions as a hedge and not as a speculative
investment. Interest rate swap transactions are subject to risks comparable to
those described above with respect to other hedging strategies.
Asia Pacific Growth Fund and Global Income Fund each may enter into
interest rate swaps, caps, floors and collars on either an asset-based or
liability-based basis, depending on whether it is hedging its assets or its
liabilities, and will usually enter into interest rate swaps on a net basis,
i.e., the two payment streams are netted out, with a Fund receiving or paying,
as the case may be, only the net amount of the two payments. Inasmuch as these
interest rate swap transactions are entered into for good faith hedging
purposes, and inasmuch as segregated accounts will be established with respect
to such transactions, Mitchell Hutchins and Schroder Capital believe such
obligations do not constitute senior securities and, accordingly, will not treat
them as being subject to either Fund's borrowing restrictions. The net amount of
the excess, if any, of a Fund's obligations over its entitlements with respect
to each interest rate swap will be accrued on a daily basis, and appropriate
Fund assets having an aggregate net asset value at least equal to the accrued
excess will be maintained in a segregated account as described above in
'Investment Policies and Restrictions--Segregated Accounts.' Each Fund also will
establish and maintain such segregated accounts with respect to its total
obligations under any swaps that are not entered into on a net basis and with
respect to any caps, floors and collars that are written by the Fund.
Asia Pacific Growth Fund and Global Income Fund each will enter into swap
transactions only with banks and recognized securities dealers believed by
Mitchell Hutchins or, in the case of Asia Pacific Growth Fund, Schroder Capital
to present minimal credit risk in accordance with guidelines established by the
Fund's board. If there is a default by the other party to such a transaction, a
Fund will have to rely on its contractual remedies (which may be limited by
bankruptcy, insolvency or similar laws) pursuant to the agreements related to
the transaction.
24
<PAGE>
TRUSTEES AND OFFICERS; PRINCIPAL HOLDERS OF SECURITIES
The trustees and executive officers of each Trust, their ages, business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
Margo N. Alexander**; 51 Trustee and President Mrs. Alexander is president, chief executive
officer and a director of Mitchell Hutch-
ins (since January 1995), and also an ex-
ecutive vice president and a director of
PaineWebber. Mrs. Alexander is president
and a director or trustee of 30 investment
companies for which Mitchell Hutchins or
PaineWebber serves as
investment adviser.
Richard Q. Armstrong; 62 Trustee Mr. Armstrong is chairman and principal of
78 West Brother Drive RQA Enterprises (management consulting
Greenwich, CT 06830 firm) (since April 1991 and principal
occupation since March 1995). Mr. Arm-
strong is also a director of Hi Lo Auto-
motive, Inc. He was chairman of the board,
chief executive officer and co-owner of
Adirondack Beverages (producer and
distributor of soft drinks and spar-
kling/still waters) (October 1993-March
1995). Mr. Armstrong was a partner of The
New England Consulting Group (management
consulting firm) (December 1992-September
1993). He was managing director of LVMH
U.S. Corporation (U.S. subsidiary of the
French luxury goods conglomerate, Luis
Vuitton Moet Hennessey Corporation)
(1987-1991) and chairman of its wine and
spirits subsidiary, Schieffelin &
Somerset Company (1987-1991). Mr.
Armstrong is a director or trustee of 29
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
E. Garrett Bewkes, Jr.**; 71 Trustee and Chairman of the Mr. Bewkes is a director of Paine Webber
Board of Trustees Group Inc. ('PW Group') (holding company of
PaineWebber and Mitchell Hutchins). Prior
to December 1995, he was a consultant to PW
Group. Prior to 1988, he was chairman of
the board, president and chief executive
officer of American Bakeries Company. Mr.
Bewkes is also a director of Interstate
Bakeries Corporation and NaPro BioTherapeu-
tics, Inc. Mr. Bewkes is a director or
trustee of 30 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
Richard R. Burt; 51 Trustee Mr. Burt is chairman of IEP Advisors, Inc.
1101 Connecticut Avenue, N.W. (international investments and consulting
Washington, D.C. 20036 firm) (since March 1994) and a
partner of McKinsey & Company (management
consulting firm) (since 1991). He is also a
director of American Publishing Company and
Archer-Daniels-Midland Co. (agricultural
commodities). He was the chief negotiator
in the Strategic Arms Reduction Talks with
the former Soviet Union (1989-1991) and the
U.S. Ambassador to the Federal Republic of
Germany (1985-1989). Mr. Burt is a director
or trustee of 29 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment
adviser.
Mary C. Farrell**; 48 Trustee Ms. Farrell is a managing director, senior
investment strategist and member of
the Investment Policy Committee
of PaineWebber. Ms. Farrell joined
PaineWebber in 1982. She is a member of the
Financial Women's Association and Women's
Economic Roundtable and appears as a
regular panelist on Wall $treet Week with
Louis Rukeyser. She also serves on the
Board of Overseers of New York University's
Stern School of Business. Ms. Farrell is a
director or trustee of 29 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Meyer Feldberg; 55 Trustee Mr. Feldberg is Dean and Professor of
Columbia University Management of the Graduate School of
101 Uris Hall Business, Columbia University. Prior to
New York, New York 10027 1989, he was president of the Illinois
Institute of Technology. Dean Feldberg is
also a director of K-III Communications
Corporation, Federated Department Stores,
Inc. and Revlon, Inc. Dean Feldberg is a
director or trustee of 29 investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
George W. Gowen; 68 Trustee Mr. Gowen is a partner in the law firm of
666 Third Avenue Dunnington, Bartholow & Miller. Prior to
New York, New York 10017 May 1994, he was a partner in the law firm
of Fryer, Ross & Gowen. Mr. Gowen is a
director of Columbia Real Estate Invest-
ments, Inc. Mr. Gowen is a director or
trustee of 29 investment companies for
which Mitchell Hutchins or PaineWebber
serves as investment adviser.
Frederic V. Malek; 61 Trustee Mr. Malek is chairman of Thayer Capital
1455 Pennsylvania Avenue, N.W. Partners (merchant bank). From January 1992
Suite 350 to November 1992, he was campaign manager
Washington, D.C. 20004 of Bush-Quayle '92. From 1990 to 1992, he
was vice chairman and, from 1989 to 1990,
he was president of Northwest Airlines
Inc., NWA Inc. (holding company of North-
west Airlines Inc.) and Wings Holdings Inc.
(holding company of NWA Inc.). Prior to
1989, he was employed by the Marriott
Corporation (hotels, restaurants, airline
catering and contract feeding), where he
most recently was an
executive vice president and president of
Marriott Hotels and Resorts. Mr. Malek is
also a director of American Management
Systems, Inc. (management consulting and
computer related services), Automatic Data
Processing, Inc., CB Commercial Group, Inc.
(real estate services), Choice Hotels
International (hotel and hotel
franchising), FPL Group, Inc. (electric
services), Integra, Inc. (bio-medical),
Manor Care, Inc. (health care), National
Education Corporation and Northwest
Airlines Inc. Mr. Malek is a director or
trustee of
29 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
Carl W. Schafer; 62 Trustee Mr. Schafer is president of the Atlantic
P.O. Box 1164 Foundation (charitable foundation sup-
Princeton, NJ 08542 porting mainly oceanographic exploration
and research). He is a director of Roadway
Express, Inc. (trucking), The Guardian
Group of Mutual Funds, Evans Systems, Inc.
(motor fuels, convenience store and
diversified company), Electronic Clearing
House, Inc., (financial transactions
processing), Wainoco Oil Corporation and
Nutraceutix, Inc. (biotechnology company).
Prior to January 1993, he was chairman of
the Investment Advisory Committee of the
Howard Hughes Medical Institute. Mr. Scha-
fer is a director or trustee of 29
investment companies for which Mitchell
Hutchins or PaineWebber serves as an
investment adviser.
T. Kirkham Barneby; 51 Vice President Mr. Barneby is a managing director and chief
(Investment Trust only) investment officer--quantitative investment
of Mitchell Hutchins. Prior to September
1994, he was a senior vice president at
Vantage Global Management. Prior to June
1993, he was a senior vice president at
Mitchell Hutchins. Mr. Barneby is a vice
president of six investment companies for
which Mitchell Hutchins or PaineWebber
serves as
investment adviser.
Julieanna Berry; 34 Vice President Ms. Berry is a first vice president and a
(Managed Trust only) portfolio manager of Mitchell Hutchins. Ms.
Berry is a vice president of two in-
vestment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Karen L. Finkel; 40 Vice President Mrs. Finkel is a senior vice president and a
(Managed Trust only) portfolio manager of Mitchell Hutchins.
Mrs. Finkel is a vice president of two in-
vestment companies for which Mitchell
Hutchins serves as investment adviser.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
James F. Keegan; 37 Vice President Mr. Keegan is a senior vice president and a
(Managed Trust only) portfolio manager of Mitchell Hutchins.
Prior to March 1996, he was director of
fixed income strategy and research of
Merrion Group, L.P. From 1987 to 1994, he
was a vice president of global investment
management of Bankers Trust. Mr. Keegan is
a vice president of three investment
companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
Thomas J. Libassi; 39 Vice President Mr. Libassi is a senior vice president and
(Managed Trust only) portfolio manager of Mitchell Hutchins.
Prior to May 1994, he was a vice president
of Keystone Custodian Funds Inc. with
portfolio management responsibility. Mr.
Libassi is a vice president of four
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Dennis McCauley; 51 Vice President (Managed Mr. McCauley is a managing director
Trust and Investment Series and chief investment officer--fixed income
only) of Mitchell Hutchins. Prior to December
1994, he was director of fixed
income investments of IBM Corporation. Mr.
McCauley is a vice president of 18
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Ann E. Moran; 40 Vice President and Ms. Moran is a vice president and a manager
Assistant Treasurer of the mutual fund finance division of
Mitchell Hutchins. Ms. Moran is also a vice
president and assistant treasurer of 30
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Dianne E. O'Donnell; 45 Vice President and Ms. O'Donnell is a senior vice president and
Secretary deputy general counsel of Mitchell
Hutchins. Ms. O'Donnell is a vice presi-
dent and secretary of 29 investment
companies and a vice president and
assistant secretary of one investment
company for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
Emil Polito; 37 Vice President Mr. Polito is a senior vice president and di-
rector of operations and control for
Mitchell Hutchins. From March 1991
to September 1993, he was director of the
mutual funds sales support and service
center for Mitchell Hutchins and
PaineWebber. Mr. Polito is a vice presi-
dent of 30 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment adviser.
Victoria E. Schonfeld; 47 Vice President Ms. Schonfeld is a managing director and
general counsel of Mitchell Hutchins. Prior
to May 1994, she was a partner in the law
firm of Arnold & Porter. Ms. Schonfeld is a
vice president of 29 investment companies
and a vice president and secretary of one
investment company for which Mitchell
Hutchins
or PaineWebber serves as investment
adviser.
Paul H. Schubert; 35 Vice President and Mr. Schubert is a first vice president and
Treasurer director of the mutual fund finance divi-
sion of Mitchell Hutchins. From August 1992
to August 1994, he was a vice president at
BlackRock Financial Management L.P. Mr.
Schubert is a vice president and treasurer
of 30 investment companies for which
Mitchell Hutchins or PaineWebber serves as
investment
adviser.
Nirmal Singh; 41 Vice President Mr. Singh is a senior vice president and a
(Managed Trust only) portfolio manager of Mitchell Hutchins.
Prior to 1993, he was a member of the
portfolio management team at Merrill Lynch
Asset Management, Inc. Mr. Singh is a vice
president of four investment companies for
which Mitchell Hutchins or PaineWebber
serves as
investment adviser.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
Barney A. Taglialatela; 36 Vice President and Mr. Taglialatela is a vice president and a
Assistant Treasurer manager of the mutual fund finance divi-
sion of Mitchell Hutchins. Prior to Feb-
ruary 1995, he was a manager of the mutual
fund finance division of Kidder Peabody
Asset Management, Inc. Mr. Taglialatela is
a vice president and assistant treasurer of
30 investment com-
panies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
Mark A. Tincher; 42 Vice President Mr. Tincher is a managing director and chief
(Investment Trust, investment officer--equities of Mitchell
Investment Trust II and Hutchins. Prior to March 1995, he was a
Managed Trust only) vice president and directed the U.S. funds
management and equity research areas of
Chase Manhattan Private Bank. Mr. Tincher
is a vice president of 14 investment
companies for which Mitchell Hutchins or
PaineWebber serves as
investment adviser.
Craig M. Varrelman; 39 Vice President Mr. Varrelman is a senior vice president and
(Managed Trust only) a portfolio manager of Mitchell Hutchins.
Mr. Varrelman is a vice president of four
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Stuart Waugh; 42 Vice President (Investment Mr. Waugh is a managing director and a
Series only) portfolio manager of Mitchell Hutchins
responsible for global fixed income invest-
ments and currency trading. Mr. Waugh is
a vice president of five investment compa-
nies for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Keith A. Weller; 36 Vice President and Mr. Weller is a first vice president and as-
Assistant Secretary sociate general counsel of Mitchell
Hutchins. Prior to May 1995, he was an
attorney in private practice. Mr. Weller is
a vice president and assistant secretary of
29 investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE POSITION WITH EACH TRUST OTHER DIRECTORSHIPS
- ------------------------------------ --------------------------- ---------------------------------------------
<S> <C> <C>
Ian W. Williams; 40 Vice President and Mr. Williams is a vice president and a man-
Assistant Treasurer ager of the mutual fund finance division of
Mitchell Hutchins. Mr. Williams is a vice
president and assistant treasurer of 30
investment companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
</TABLE>
- ------------------
* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.
** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are 'interested persons' of each
Fund as defined in the 1940 Act by virtue of their positions with Mitchell
Hutchins, PaineWebber, and/or PW Group.
Board members are compensated as follows:
o MANAGED TRUST has six series and pays each trustee who is not an
'interested person' of the Trust $1,000 annually for each series.
Therefore, Managed Trust pays each such trustee $6,000 annually,
plus any additional amounts due for board or committee meetings.
o INVESTMENT TRUST II and INVESTMENT SERIES each pays board members
who are not 'interested persons' of the Trust $1,000 annually for
its sole series, plus any additional amounts due for board or
committee meetings.
o INVESTMENT TRUST has two series and pays each board member who is
not an 'interested person' of the Trust $1,000 annually for Global
Equity Fund and an additional $1,500 annually for its second series.
Therefore, Investment Trust pays each such board member $2,500
annually, plus any additional amounts due for board or committee
meetings.
Each Trust pays an additional $150 for each board meeting and each separate
meeting of a board committee with respect to each series. Each chairman of the
audit and contract review committees of individual funds within the PaineWebber
fund complex receives additional compensation, aggregating $15,000 annually,
from the relevant funds. All board members are reimbursed for any expenses
incurred in attending meetings. Board members and officers own in the aggregate
less than 1% of the outstanding shares of each Fund. Because PaineWebber,
Mitchell Hutchins and, as applicable, a Sub-Adviser perform substantially all
the services necessary for the operation of the Trusts and each Fund, the Trusts
require no employees. No officer, director or employee of Mitchell Hutchins or
PaineWebber presently receives any compensation from the Trusts for acting as a
board member or officer.
32
<PAGE>
The table below includes certain information relating to the compensation
of the current board members who held office with the Trusts or with other
PaineWebber funds during the Funds' fiscal years ended October 31, 1997.
COMPENSATION TABLE+
<TABLE>
<CAPTION>
TOTAL
AGGREGATE AGGREGATE AGGREGATE COMPENSATION
AGGREGATE COMPENSATION COMPENSATION COMPENSATION FROM THE
COMPENSATION FROM FROM FROM TRUSTS AND
FROM MANAGED INVESTMENT INVESTMENT INVESTMENT THE FUND
NAME OF PERSON, POSITION TRUST * SERIES* TRUST* TRUST II* COMPLEX**
- --------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Richard Q. Armstrong,
Trustee........................ $7,300 $1,900 $3,075 $1,350 $ 94,885
Richard R. Burt,
Trustee........................ $7,300 $1,750 $3,075 $1,350 $ 87,085
Meyer Feldberg,
Trustee........................ $7,300 $3,053 $4,965 $2,305 $117,853
George W. Gowen,
Trustee........................ $7,700 $1,900 $3,075 $1,350 $101,567
Frederic V. Malek,
Trustee........................ $7,300 $1,900 $3,075 $1,350 $ 95,845
Carl W. Schafer,
Trustee........................ $7,300 $1,900 $3,075 $1,350 $ 94,885
</TABLE>
- ------------------
+ Only independent board members are compensated by the Trusts and identified
above; board members who are 'interested persons,' as defined by the 1940
Act, do not receive compensation.
* Represents fees paid to each Trustee from the Trust indicated for the fiscal
year ended October 31, 1997.
** Represents total compensation paid to each board member during the calendar
ended December 31, 1997; no fund within the fund complex has a bonus,
pension, profit sharing or retirement plan.
PRINCIPAL HOLDERS OF SECURITIES
The following shareholder is shown in the Global Equity Fund records as
owning more than 5% of its shares:
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE
OF SHARES BENEFICIALLY
NAME AND ADDRESS* OWNED AS OF JANUARY 31, 1998
- ----------------------------------------------------------------------------------- ----------------------------
<S> <C>
Northern Trust Company as Trustee 1,783,111.002
FBO PaineWebber 401 K Plan 6.16%
</TABLE>
- ------------------
* The shareholder listed may be contacted c/o Mitchell Hutchins Asset Management
Inc., 1285 Avenue of the Americas, New York, NY 10019.
INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS
INVESTMENT ADVISORY ARRANGEMENTS. Mitchell Hutchins acts as the investment
adviser and administrator to each Fund pursuant to separate contracts (each an
'Advisory Contract') with each Trust. Under the Advisory Contracts, each Fund
pays Mitchell Hutchins a fee, computed daily and paid monthly, at the annual
rates indicated below.
Under the terms of the Advisory Contracts, each Fund bears all expenses
incurred in its operation that are not specifically assumed by Mitchell
Hutchins. Expenses borne by each Fund include the following: (1) the cost
(including brokerage commissions) of securities purchased or sold by the Fund
and any losses incurred in connection therewith; (2) fees payable to and
expenses incurred on behalf of the Fund by Mitchell Hutchins; (3) organizational
expenses; (4) filing fees and expenses relating to the registration and
qualification of the Fund's shares under federal and state securities laws and
maintenance of such registrations and qualifications; (5) fees and salaries
payable to board members and officers who are not interested persons (as defined
in the 1940 Act) of the applicable Trust or Mitchell Hutchins; (6) all expenses
incurred in connection with the board members' services, including travel
expenses; (7) taxes (including any income or franchise taxes) and governmental
fees; (8) costs of any liability, uncollectible items of deposit and other
insurance or
33
<PAGE>
fidelity bonds; (9) any costs, expenses or losses arising out of a liability of
or claim for damages or other relief asserted against the applicable Trust or
Fund for violation of any law; (10) legal, accounting and auditing expenses,
including legal fees of special counsel for the independent board members; (11)
charges of custodians, transfer agents and other agents; (12) costs of preparing
share certificates; (13) expenses of setting in type and printing prospectuses,
statements of additional information and supplements thereto, reports and proxy
materials for existing shareholders, and costs of mailing such materials to
shareholders; (14) any extraordinary expenses (including fees and disbursements
of counsel) incurred by the Fund; (15) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; (16) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the board and any committees thereof; (17) the cost of
investment company literature and other publications provided to board members
and officers; and (18) costs of mailing, stationery and communications
equipment.
Under each Advisory Contract, Mitchell Hutchins will not be liable for any
error of judgment or mistake of law or for any loss suffered by a Fund in
connection with the performance of the Advisory Contract, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Mitchell Hutchins in the performance of its duties or from reckless disregard of
its duties and obligations thereunder. Each Advisory Contract terminates
automatically upon assignment and is terminable at any time without penalty by
the Fund's board or by vote of the holders of a majority of the Fund's
outstanding voting securities on 60 days' written notice to Mitchell Hutchins,
or by Mitchell Hutchins on 60 days' written notice to the Fund.
ASIA PACIFIC GROWTH FUND. Mitchell Hutchins acts as the investment adviser
and administrator of Asia Pacific Growth Fund pursuant to an Investment Advisory
and Administration Contract with Managed Trust, dated April 21, 1988, made
applicable to the Fund by means of an Investment Advisory and Administration Fee
Agreement dated December 18, 1996 (together an 'Advisory Contract'). Under the
Advisory Contract, the Fund pays Mitchell Hutchins a fee, computed daily and
paid monthly, at the annual rate of 1.20% of the Fund's average daily net assets
up to and including $100 million and at an annual rate of 1.10% of its average
daily net assets in excess of $100 million. During the period March 25, 1997
(commencement of operations) through October 31, 1997, the Fund paid (or
accrued) to Mitchell Hutchins advisory and administrative fees of $533,412.
The Advisory Contract authorizes Mitchell Hutchins to retain one or more
sub-advisers, but does not require Mitchell Hutchins to do so. Mitchell Hutchins
has entered into a separate contract with Schroder Capital, dated December 18,
1996 ('Sub-Advisory Contract'), pursuant to which Schroder Capital determines
what securities will be purchased, sold or held by Asia Pacific Growth Fund.
Under the Sub-Advisory Contract, Mitchell Hutchins (not the Fund) pays Schroder
Capital a fee, computed daily and paid monthly, at an annual rate of 0.65% of
the Fund's average daily net assets up to and including $100 million and at an
annual rate of 0.55% of the Fund's average daily net assets in excess of $100
million. Schroder Capital bears all expenses incurred by it in connection with
its services under the Sub-Advisory Contract. During the period March 25, 1997
(commencement of operations) through October 31, 1997, Mitchell Hutchins (not
the Fund) paid (or accrued) Schroder Capital $284,106 in sub-advisory fees.
Under the Sub-Advisory Contract, Schroder Capital will not be liable for
any error of judgment or mistake of law or for any loss suffered by Managed
Trust, Asia Pacific Growth Fund, its shareholders or Mitchell Hutchins in
connection with the Sub-Advisory Contract, except any liability to Managed
Trust, the Fund, its shareholders or Mitchell Hutchins to which Schroder Capital
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under the Sub-Advisory Contract.
The Sub-Advisory Contract terminates automatically upon its assignment or
the termination of the Advisory Contract and is terminable at any time without
penalty by Managed Trust's board or by vote of the holders of a majority of the
Fund's outstanding voting securities on 60 days' notice to Schroder Capital, or
by Schroder Capital on 120 days' written notice to Mitchell Hutchins. The
Sub-Advisory Contract may also be terminated by Mitchell Hutchins (1) upon
material breach by Schroder Capital of its representations and warranties, which
breach shall not have been cured within a 20-day period after notice of such
breach; (2) if the Sub-Adviser becomes unable to discharge its duties and
obligations under the Sub-Advisory Contract or (3) on 120 days' notice to
Schroder Capital.
Prior to August 1, 1997, PaineWebber provided certain services to Asia
Pacific Growth Fund not otherwise provided by its transfer agent. Pursuant to an
agreement between PaineWebber and the Fund
34
<PAGE>
relating to those services, for the period from March 25, 1997 (commencement of
operations) through October 31, 1997, Asia Pacific Growth Fund paid (or accrued)
to PaineWebber $9,958.
EMERGING MARKETS EQUITY FUND. Mitchell Hutchins acts as the investment
adviser and administrator of Emerging Markets Equity Fund pursuant to an
Advisory Contract with Investment Trust II dated February 25, 1997. Under the
Advisory Contract, the Fund pays Mitchell Hutchins a fee, computed daily and
paid monthly, at the annual rate of 1.20% of the Fund's average daily net
assets. During the fiscal year ended October 31, 1997, the four months ended
October 31, 1996, and the fiscal years ended June 30, 1996 and June 30, 1995,
the Fund paid (or accrued) to Mitchell Hutchins, under either the current or a
prior contract, and/or to Kidder Peabody Asset Management, Inc. ('KPAM') (the
Fund's investment adviser prior to February 13, 1995) advisory and
administrative fees of $438,676, $220,071, $867,093 and $1,261,493,
respectively.
During the fiscal year ended October 31, 1997, the four months ended
October 31, 1996 and the fiscal years ended June 30, 1996 and June 30, 1995,
Mitchell Hutchins waived part of its management fees and reimbursed Emerging
Markets Equity Fund in the amounts of $180,568, $142,160, $538,618 and $81,217,
respectively; during these periods, certain expense limitations were applicable
which are no longer in effect. As of the date of this Statement of Additional
Information, Mitchell Hutchins was voluntarily waiving part of its management
fees and making reimbursements to Emerging Markets Equity Fund so that the
Fund's 'Total Operating Expenses' were as listed in the Expense Table in the
Prospectus. Mitchell Hutchins may discontinue these voluntary waivers and
reimbursements at any time.
The Advisory Contract authorizes Mitchell Hutchins to retain one or more
sub-advisers, but does not require Mitchell Hutchins to do so. Mitchell Hutchins
has entered into a separate contract with Schroder Capital, dated February 25,
1997 ('Sub-Advisory Contract'), pursuant to which Schroder Capital determines
what securities will be purchased, sold or held by Emerging Markets Equity Fund.
Under the Sub-Advisory Contract, Mitchell Hutchins (not the Fund) pays Schroder
Capital a fee, computed daily and paid monthly, at an annual rate of 0.70% of
the Fund's average daily net assets. Schroder Capital bears all expenses
incurred by it in connection with its services under the Sub-Advisory Contract.
During the fiscal year ended October 31, 1997, Mitchell Hutchins (not the Fund)
paid (or accrued) to Schroder Capital $161,715 in sub-advisory fees. Under
sub-advisory contracts with the Fund's former sub-adviser, Emerging Markets
Management, from November 1, 1996 through February 24, 1997, for the four months
ended October 31, 1996 and the fiscal years ended June 30, 1996, and June 30,
1995, Mitchell Hutchins and/or KPAM paid (or accrued) fees of $86,731, $152,148,
$599,472 and $872,143, respectively, to Emerging Markets Management.
Under the Sub-Advisory Contract, Schroder Capital will not be liable for
any error of judgment or mistake of law or for any loss suffered by Investment
Trust II, Emerging Markets Equity Fund, its shareholders or Mitchell Hutchins in
connection with the Sub-Advisory Contract, except any liability to Investment
Trust II, the Fund, its shareholders or Mitchell Hutchins to which Schroder
Capital would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under the Sub-Advisory
Contract.
The Sub-Advisory Contract terminates automatically upon the assignment or
the termination of the Advisory Contract and is terminable at any time without
penalty by Investment Trust II's board or by vote of the holders of a majority
of the Fund's outstanding securities on 60 days' notice to Schroder Capital, or
by Schroder Capital on 60 days' written notice to Mitchell Hutchins. The
Sub-Advisory Contract may also be terminated by Mitchell Hutchins (1) upon
material breach by Schroder Capital of its representations and warranties, which
breach shall not have been cured within a 20-day period after notice of such
breach; (2) if the Sub-Adviser becomes unable to discharge its duties and
obligations under the Sub-Advisory Contract or (3) on 120 days' notice to
Schroder Capital.
GLOBAL EQUITY FUND. Mitchell Hutchins acts as the investment adviser and
administrator of Global Equity Fund pursuant to an Advisory Contract with
Investment Trust dated August 25, 1995. Under the Advisory Contract, the Fund
pays Mitchell Hutchins a fee, computed daily and paid monthly, at the annual
rate of 0.85% of the Fund's average daily net assets up to and including $500
million, 0.83% of amounts over $500 million and up to and including $1 billion,
and 0.805% of amounts over $1 billion. During the fiscal year ended October 31,
1997, the two months ended October 31, 1996 and for the fiscal years ended
August 31, 1996 and August 31, 1995, the Fund paid (or accrued) to Mitchell
Hutchins and/or KPAM (the Fund's
35
<PAGE>
investment adviser prior to February 13, 1995) advisory and administrative fees
of $4,689,662, $794,518, $4,990,588 and $2,109,091, respectively.
The Advisory Contract authorizes Mitchell Hutchins to retain one or more
sub-advisers, but does not require Mitchell Hutchins to do so. Mitchell Hutchins
has entered into a separate contract with GE Investment Management dated August
25, 1995 ('Sub-Advisory Contract'), pursuant to which GE Investment Management
determines what securities will be purchased, sold or held by Global Equity
Fund. Under the Sub-Advisory Contract, Mitchell Hutchins (not the Fund) pays GE
Investment Management a fee, computed daily and paid monthly, at an annual rate
of 0.31% of the Fund's of its average daily net assets up to and including $500
million, 0.29% of amounts over $500 million up to and including $1 billion, and
0.265% of amounts over $1 billion. GE Investment Management bears all expenses
incurred by it in connection with its services under the Sub-Advisory Contract.
Under the Sub-Advisory Contract (or a prior sub-advisory contract between KPAM
and GE Investment Management) for the fiscal year ended October 31, 1997, the
two months ended October 31, 1996 and the fiscal years ended August 31, 1996 and
August 31, 1995, Mitchell Hutchins and/or KPAM paid (or accrued) fees of
$1,695,840, $287,688, $1,808,760 and $1,523,282, respectively, to GE Investment
Management.
Under the Sub-Advisory Contract, GE Investment Management will not be
liable for any error of judgment or mistake of law or for any loss suffered by
Investment Trust, Global Equity Fund, its shareholders or Mitchell Hutchins in
connection with the Sub-Advisory Contract, except any liability to the
Investment Trust, the Fund, its shareholders or Mitchell Hutchins to which GE
Investment Management would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under the
Sub-Advisory Contract.
The Sub-Advisory Contract terminates automatically upon its assignment or
the termination of the Advisory Contract and is terminable at any time without
penalty by Investment Trust's board or by vote of the holders of a majority of
the Fund's outstanding voting securities on 60 days' notice to GE Investment
Management and Mitchell Hutchins, or by GE Investment Management or Mitchell
Hutchins on 60 days' written notice to Investment Trust.
GLOBAL INCOME FUND. Mitchell Hutchins acts as the investment adviser and
administrator of Global Income Fund pursuant to an Advisory Contract with
Investment Series dated April 21, 1988. Under the Advisory Contract, the Fund
pays Mitchell Hutchins a fee, computed daily and paid monthly, at the annual
rate of 0.75% of the value of its average daily net assets up to and including
$500 million, 0.725% of amounts in excess of $500 million and up to $1 billion,
0.70% of amounts in excess of $1 billion and up to $1.5 billion, 0.675% of
amounts in excess of $1.5 billion and up to $2.0 billion, and 0.65% of amounts
over $2 billion. For the fiscal years ended October 31, 1997, October 31, 1996
and October 31, 1995, the Fund paid (or accrued) to Mitchell Hutchins advisory
and administrative fees of $5,683,381, $7,812,766 and $9,229,318, respectively.
Prior to August 1, 1997, PaineWebber provided certain services to Global
Income Fund not otherwise provided by its transfer agent. Pursuant to an
agreement between PaineWebber and the Fund relating to those services, for the
fiscal years ended October 31, 1997, October 31, 1996 and October 31, 1995,
Global Income Fund paid (or accrued) to PaineWebber $189,131, $305,944 and
$376,299, respectively.
ALL FUNDS. During its fiscal year period ended October 31, 1997, the
indicated Fund paid (or accrued) the following fees to PaineWebber for its
services as securities lending agent:
<TABLE>
<CAPTION>
FUND AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
Asia Pacific Growth Fund.......................................................... $ 14,324
Emerging Markets Equity Fund...................................................... $ 5,582
Global Equity Fund................................................................ $ 42,125
Global Income Fund................................................................ $ 26,057
</TABLE>
Subsequent to August 1, 1997, PFPC (not the Funds) pays PaineWebber for
certain transfer agency related services that PFPC has delegated to PaineWebber.
36
<PAGE>
NET ASSETS. The following table shows the approximate net assets as of
January 31, 1998, sorted by category of investment objective, of the investment
companies as to which Mitchell Hutchins serves as adviser or sub-adviser. An
investment company may fall into more than one of the categories below.
<TABLE>
<CAPTION>
NET ASSETS
INVESTMENT CATEGORY ($ MIL)
- --------------------------------------------------------------------------------- ----------
<S> <C>
Domestic (excluding Money Market)................................................ $ 6,697.8
Global........................................................................... $ 3,365.6
Equity/Balanced.................................................................. $ 5,173.7
Fixed Income (excluding Money Market)............................................ $ 4,889.7
Taxable Fixed Income........................................................ $ 3,300.0
Tax-Free Fixed Income....................................................... $ 1,589.7
Money Market Funds............................................................... $ 27,372.6
</TABLE>
PERSONNEL TRADING POLICIES. Mitchell Hutchins personnel may invest in
securities for their own accounts pursuant to a code of ethics that describes
the fiduciary duty owed to shareholders of PaineWebber mutual funds and other
Mitchell Hutchins advisory accounts by all Mitchell Hutchins' directors,
officers and employees, establishes procedures for personal investing and
restricts certain transactions. For example, employee accounts generally must be
maintained at PaineWebber, personal trades in most securities require
pre-clearance and short-term trading and participation in initial public
offerings generally are prohibited. In addition, the code of ethics puts
restrictions on the timing of personal investing in relation to trades by
PaineWebber Funds and other Mitchell Hutchins advisory clients. Personnel of
each Sub-Adviser may also invest in securities for their own accounts pursuant
to comparable codes of ethics.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor of
each class of shares of each Fund under separate distribution contracts with
each Trust (collectively, 'Distribution Contracts'). Each Distribution Contract
requires Mitchell Hutchins to use its best efforts, consistent with its other
businesses, to sell shares of the applicable Fund. Shares of each Fund are
offered continuously. Under separate exclusive dealer agreements between
Mitchell Hutchins and PaineWebber relating to each class of shares of the Funds
(collectively, 'Exclusive Dealer Agreements'), PaineWebber and its correspondent
firms sell each Fund's shares.
Under separate plans of distribution pertaining to the Class A, Class B and
Class C shares of each Fund adopted by each Trust in the manner prescribed under
Rule 12b-1 under the 1940 Act (each, respectively, a 'Class A Plan,' 'Class B
Plan' and 'Class C Plan,' and collectively, 'Plans'), each Fund pays Mitchell
Hutchins a service fee, accrued daily and payable monthly, at the annual rate of
0.25% of the average daily net assets of each class of shares. Under the Class B
Plan, each Fund pays Mitchell Hutchins a distribution fee, accrued daily and
payable monthly, at the annual rate of 0.75% of the average daily net assets of
the Class B shares. Under the Class C Plan, each Fund pays Mitchell Hutchins a
distribution fee, accrued daily and payable monthly, at the annual rate of 0.75%
(in the case of Asia Pacific Growth Fund, Emerging Markets Equity Fund and
Global Equity Fund) or 0.50% (in the case of Global Income Fund) of the average
daily net assets of the Class C shares. There is no distribution plan with
respect to the Funds' Class Y shares.
Among other things, each Plan provides that (1) Mitchell Hutchins will
submit to the applicable board at least quarterly, and the board members will
review, reports regarding all amounts expended under the Plan and the purposes
for which such expenditures were made, (2) the Plan will continue in effect only
so long as it is approved at least annually, and any material amendment thereto
is approved, by the applicable board, including those board members who are not
'interested persons' of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or any agreement related to the Plan,
acting in person at a meeting called for that purpose, (3) payments by a Fund
under the Plan shall not be materially increased without the affirmative vote of
the holders of a majority of the outstanding shares of the relevant class and
(4) while the Plan remains in effect, the selection and nomination of board
members who are not 'interested persons' of the Trust shall be committed to the
discretion of the board members who are not 'interested persons' of that Trust.
In reporting amounts expended under the Plans to the board members,
Mitchell Hutchins allocates expenses attributable to the sale of each class of
each Fund's shares to such class based on the ratio of sales of shares of such
class to the sales of all three classes of shares. The fees paid by one class of
a Fund's shares will not be used to subsidize the sale of any other class of
Fund shares.
37
<PAGE>
The Funds paid (or accrued) the following fees to Mitchell Hutchins under
the Class A, Class B and Class C Plans during the fiscal year (or period) ended
October 31, 1997:
<TABLE>
<CAPTION>
ASIA PACIFIC EMERGING MARKETS
GROWTH FUND EQUITY FUND GLOBAL EQUITY FUND GLOBAL INCOME FUND
------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Class A........................... $ 43,850 $ 32,006 $ 789,664 $ 1,317,917
Class B........................... $ 167,837 $ 13,867 $ 1,070,444 $ 1,847,036
Class C........................... $ 101,270 $ 66,418 $ 650,447 $ 325,118
</TABLE>
Mitchell Hutchins estimates that it and its parent corporation,
PaineWebber, incurred the following shareholder service-related and
distribution-related expenses with respect to each Fund during the fiscal year
(or period) ended October 31, 1997:
<TABLE>
<CAPTION>
ASIA PACIFIC EMERGING MARKETS
GROWTH FUND EQUITY FUND GLOBAL EQUITY FUND GLOBAL INCOME FUND
------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
CLASS A
Marketing and advertising......... $ 0 $60,062 $ 199,199 $ 348,403
Amortization of commissions....... $ 0 $ 0 $ 0 $ 0
Printing of prospectuses and
statements of additional
information..................... $11,988 $ 938 $ 16,675 $ 1,896
Branch network costs allocated and
interest expense................ $79,808 $88,809 $ 1,269,679 $ 2,405,758
Service fees paid to PaineWebber
investment executives........... $16,663 $12,073 $ 298,221 $ 500,809
CLASS B
Marketing and advertising......... $ 0 $ 6,508 $ 67,518 $ 114,697
Amortization of commissions....... $44,419 $ 3,985 $ 310,227 $ 539,463
Printing of prospectuses and
statements of additional
information..................... $11,470 $ 102 $ 5,652 $ 624
Branch network costs allocated and
interest expense................ $90,536 $ 9,624 $ 465,675 $ 799,194
Service fees paid to PaineWebber
investment executives........... $15,945 $ 1,311 $ 101,024 $ 175,469
CLASS C
Marketing and advertising......... $ 0 $31,153 $ 41,022 $ 28,228
Amortization of commissions....... $28,862 $18,795 $ 184,177 $ 82,363
Printing of prospectuses and
statement of additional
information..................... $ 6,919 $ 487 $ 3,434 $ 154
Branch network costs allocated and
interest expense................ $46,407 $46,067 $ 263,148 $ 194,222
Service fees paid to PaineWebber
investment executives........... $ 9,621 $ 6,265 $ 61,393 $ 41,182
</TABLE>
'Marketing and advertising' includes various internal costs allocated by
Mitchell Hutchins to its efforts at distributing the Funds' shares. These
internal costs encompass office rent, salaries and other overhead expenses of
various departments and areas of operations of Mitchell Hutchins. 'Branch
network costs allocated and interest expense' consist of an allocated portion of
the expenses of various PaineWebber departments involved in the distribution of
the Funds' shares, including the PaineWebber retail branch system.
In approving each Fund's overall Flexible Pricing(Service Mark) system of
distribution, the applicable board considered several factors, including that
implementation of Flexible Pricing would (1) enable investors to choose the
purchasing option best suited to their individual situation, thereby encouraging
current shareholders to make additional investments in the Fund and attracting
new investors and assets to the Fund to the benefit of the Fund and its
shareholders, (2) facilitate distribution of the Fund's shares and (3) maintain
the competitive position of the Fund in relation to other funds that have
implemented or are seeking to implement similar distribution arrangements.
38
<PAGE>
In approving the Class A Plan, each board considered all the features of
the distribution system, including (1) the conditions under which initial sales
charges would be imposed and the amount of such charges, (2) Mitchell Hutchins'
belief that the initial sales charge combined with a service fee would be
attractive to PaineWebber investment executives and correspondent firms,
resulting in greater growth of the Fund than might otherwise be the case, (3)
the advantages to the shareholders of economies of scale resulting from growth
in the Fund's assets and potential continued growth, (4) the services provided
to the Fund and its shareholders by Mitchell Hutchins, (5) the services provided
by PaineWebber pursuant to its Exclusive Dealer Agreement with Mitchell Hutchins
and (6) Mitchell Hutchins' shareholder service-related expenses and costs.
In approving the Class B Plan, the board of each Fund considered all the
features of the distribution system, including (1) the conditions under which
contingent deferred sales charges would be imposed and the amount of such
charges, (2) the advantage to investors in having no initial sales charges
deducted from Fund purchase payments and instead having the entire amount of
their purchase payments immediately invested in Fund shares, (3) Mitchell
Hutchins' belief that the ability of PaineWebber investment executives and
correspondent firms to receive sales commissions when Class B shares are sold
and continuing service fees thereafter while their customers invest their entire
purchase payments immediately in Class B shares would prove attractive to the
investment executives and correspondent firms, resulting in greater growth of
the Fund than might otherwise be the case, (4) the advantages to the
shareholders of economies of scale resulting from growth in the Fund's assets
and potential continued growth, (5) the services provided to the Fund and its
shareholders by Mitchell Hutchins, (6) the services provided by PaineWebber
pursuant to its Exclusive Dealer Agreement with Mitchell Hutchins and (7)
Mitchell Hutchins' shareholder service- and distribution-related expenses and
costs. The board members also recognized that Mitchell Hutchins' willingness to
compensate PaineWebber and its investment executives, without the concomitant
receipt by Mitchell Hutchins of initial sales charges, was conditioned upon its
expectation of being compensated under the Class B Plan.
In approving the Class C Plan, each board considered all the features of
the distribution system, including (1) the advantage to investors in having no
initial sales charges deducted from Fund purchase payments and instead having
the entire amount of their purchase payments immediately invested in Fund
shares, (2) the advantage to investors in being free from contingent deferred
sales charges upon redemption for shares held more than one year and paying for
distribution on an ongoing basis, (3) Mitchell Hutchins' belief that the ability
of PaineWebber investment executives and correspondent firms to receive sales
compensation for their sales of Class C shares on an ongoing basis, along with
continuing service fees, while their customers invest their entire purchase
payments immediately in Class C shares and generally do not face contingent
deferred sales charges, would prove attractive to the investment executives and
correspondent firms, resulting in greater growth to the Fund than might
otherwise be the case, (4) the advantages to the shareholders of economies of
scale resulting from growth in the Fund's assets and potential continued growth,
(5) the services provided to the Fund and its shareholders by Mitchell Hutchins,
(6) the services provided by PaineWebber pursuant to its Exclusive Dealer
Agreement with Mitchell Hutchins and (7) Mitchell Hutchins' shareholder service-
and distribution-related expenses and costs. The board members also recognized
that Mitchell Hutchins' willingness to compensate PaineWebber and its investment
executives, without the concomitant receipt by Mitchell Hutchins of initial
sales charges or contingent deferred sales charges upon redemption, was
conditioned upon its expectation of being compensated under the Class C Plan.
With respect to each Plan, the boards considered all compensation that
Mitchell Hutchins would receive under the Plan and the Distribution Contract,
including service fees and, as applicable, initial sales charges, distribution
fees and contingent deferred sales charges. The boards also considered the
benefits that would accrue to Mitchell Hutchins under each Plan in that Mitchell
Hutchins would receive service, distribution and advisory fees that are
calculated based upon a percentage of the average net assets of a Fund, which
fees would increase if the Plan were successful and the Fund attained and
maintained significant asset levels.
39
<PAGE>
Under the Distribution Contract between each Trust and Mitchell Hutchins
for the Class A shares for the fiscal years (or periods) set forth below,
Mitchell Hutchins earned the following approximate amounts of sales charges and
retained the following approximate amounts, net of concessions to PaineWebber as
exclusive dealer.
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1997
------------------
<S> <C>
ASIA PACIFIC GROWTH FUND
Earned.......................................... $1,142,055
Retained........................................ $ 67,143
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
FOUR MONTHS JUNE 30,
FISCAL YEAR ENDED ENDED OCTOBER 31, --------------------
OCTOBER 31, 1997 1996 1996 1995
------------------ ----------------- -------- --------
<S> <C> <C> <C> <C>
EMERGING MARKETS EQUITY FUND
Earned.......................................... $ 10,692 $ 4,109 $ 25,696 $ 28,289
Retained........................................ $ 662 $ 251 $ 1,280 $ 225
<CAPTION>
FISCAL YEARS ENDED
TWO MONTHS AUGUST 31,
FISCAL YEAR ENDED ENDED OCTOBER 31, --------------------
OCTOBER 31, 1997 1996 1996 1995
------------------ ----------------- -------- --------
<S> <C> <C> <C> <C>
GLOBAL EQUITY FUND
Earned.......................................... $ 132,728 $ 22,360 $229,590 $130,094
Retained........................................ $ 8,400 $ 1,366 $ 10,949 $ 3,353
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31,
---------------------------------------------------
1997 1996 1995
------------------ ----------------- --------
<S> <C> <C> <C>
GLOBAL INCOME FUND
Earned.......................................... $ 29,617 $ 37,752 $ 43,136
Retained........................................ $ 2,950 $ 6,564 $ 12,003
</TABLE>
Mitchell Hutchins earned and retained the following contingent deferred
sales charges paid upon certain redemptions of shares for the fiscal year (or
period) ended October 31, 1997:
<TABLE>
<CAPTION>
ASIA PACIFIC EMERGING MARKETS
GROWTH FUND EQUITY FUND GLOBAL EQUITY FUND GLOBAL INCOME FUND
------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Class A........................... $ 0 $ 0 $ 0 $ 0
Class B........................... $ 7,821 $ 785 $ 249,534 $ 387,664
Class C........................... $10,620 $ 1,792 $ 2,641 $ 8,479
</TABLE>
40
<PAGE>
PORTFOLIO TRANSACTIONS
Subject to policies established by each board, Mitchell Hutchins or a
Sub-Adviser, as applicable, is responsible for the execution of each Fund's
portfolio transactions and the allocation of brokerage transactions. In
executing portfolio transactions, Mitchell Hutchins or the Sub-Adviser seeks to
obtain the best net results for a Fund, taking into account such factors as the
price (including the applicable brokerage commission or dealer spread), size of
order, difficulty of execution and operational facilities of the firm involved.
While Mitchell Hutchins and the Sub-Advisers generally seek reasonably
competitive commission rates, payment of the lowest commission is not
necessarily consistent with obtaining the best net results. Prices paid to
dealers in principal transactions, through which most debt securities and some
equity securities are traded, generally include a 'spread,' which is the
difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. The Funds may invest in securities traded
in the OTC market and will engage primarily in transactions directly with the
dealers who make markets in such securities, unless a better price or execution
could be obtained by using a broker. For the period March 25, 1997 (commencement
of operations) to October 31, 1997, Asia Pacific Growth Fund paid $454,243 in
brokerage commissions. For the fiscal year ended October 31, 1997, the four
months ended October 31, 1996, and the fiscal years ended June 30, 1996 and June
30, 1995, Emerging Markets Equity Fund paid $266,325, $80,726, $264,723 and
$531,901, respectively, in brokerage commissions. For the fiscal year ended
October 31, 1997, the two months ended October 31, 1996 and the fiscal years
ended August 31, 1996 and August 31, 1995, Global Equity Fund paid $384,903,
$118,589, $1,472,329 and $850,531, respectively, in brokerage commissions. For
the fiscal years ended October 31, 1997, 1996 and 1995, Global Income Fund paid
$3,330, $0 and $0, respectively, in brokerage commissions.
The Funds have no obligation to deal with any broker or group of brokers in
the execution of portfolio transactions. The Funds contemplate that, consistent
with the policy of obtaining the best net results, brokerage transactions may be
conducted through Mitchell Hutchins or its affiliates, including PaineWebber, or
brokerage affiliates of Schroder Capital or GE Management. Each board has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to ensure
that all brokerage commissions paid to PaineWebber or brokerage affiliates of
Schroder Capital or GE Management are reasonable and fair. Specific provisions
in the Advisory Contracts and the applicable Sub-Advisory Contracts authorize
Mitchell Hutchins and Schroder Capital or GE Management, respectively, and any
of their affiliates that is a member of a national securities exchange to effect
portfolio transactions for the applicable Funds on such exchange and to retain
compensation in connection with such transactions. Any such transactions will be
effected and related compensation paid only in accordance with applicable SEC
regulations. None of the Funds paid brokerage commissions to PaineWebber or
Schroder Capital's or GE Management's affiliates during its last three fiscal
years (or with respect to Asia Pacific Growth Fund, since operations commenced).
Transactions in futures contracts are executed through futures commission
merchants ('FCMs'), who receive brokerage commissions for their services. The
Funds' procedures in selecting FCMs to execute their transactions in futures
contracts, including procedures permitting the use of Mitchell Hutchins and its
affiliates or brokerage affiliates of Schroder Capital or GE Management, are
similar to those in effect with respect to brokerage transactions in securities.
Consistent with the interests of the Funds and subject to the review of
each board, Mitchell Hutchins or a Sub-Adviser may cause a Fund to purchase and
sell portfolio securities through brokers who provide that Fund with research,
analysis, advice and similar services. In return for such services, the Funds
may pay to those brokers a higher commission than may be charged by other
brokers, provided that Mitchell Hutchins or the Sub-Adviser determines in good
faith that such commission is reasonable in terms either of that particular
transaction or of the overall responsibility of Mitchell Hutchins or the
Sub-Adviser, as applicable, to that Fund and its other clients, and that the
total commissions paid by the Fund will be reasonable in relation to the
benefits to the Fund over the long term. For the fiscal period March 25, 1997
(commencement of operations) to October 31, 1997, Schroder Capital directed
$882,017 in Asia Pacific Growth Fund's portfolio transactions to brokers chosen
because they provided research services, for which Asia Pacific Growth Fund paid
$4,678 in commissions. For the fiscal year ended October 31, 1997, Schroder
Capital directed none of Emerging Markets Equity Fund's portfolio transactions
to brokers chosen for research services. For the fiscal year ended October 31,
1997, GE Investment Management directed none of Global Equity Fund's portfolio
transactions
41
<PAGE>
to brokers chosen research services. For the fiscal year ended October 31, 1997,
Mitchell Hutchins directed none of Global Income Fund's portfolio transactions
to brokers chosen for research services.
For purchases or sales with broker-dealer firms that act as principal,
Mitchell Hutchins or the applicable Sub-Adviser seeks best execution. Although
Mitchell Hutchins and the Sub-Adviser may receive certain research or execution
services in connection with these transactions, Mitchell Hutchins and the
Sub-Advisers will not purchase securities at a higher price or sell securities
at a lower price than would otherwise be paid if no weight was attributed to the
services provided by the executing dealer. Moreover, Mitchell Hutchins and the
Sub-Advisers will not enter into any explicit soft dollar arrangements relating
to principal transactions and will not receive in principal transactions the
types of services that could be purchased for hard dollars. Mitchell Hutchins or
a Sub-Adviser may engage in agency transactions in OTC equity and debt
securities in return for research and execution services. These transactions are
entered into only in compliance with procedures ensuring that the transaction
(including commissions) is at least as favorable as it would have been if
effected directly with a market-maker that did not provide research or execution
services. These procedures include Mitchell Hutchins or the Sub-Adviser
receiving multiple quotes from dealers before executing the transactions on an
agency basis.
Information and research services furnished by brokers or dealers through
which or with which the Funds effect securities transactions may be used by
Mitchell Hutchins or a Sub-Adviser in advising other funds or accounts and,
conversely, research services furnished to Mitchell Hutchins or a Sub-Adviser by
brokers or dealers in connection with other funds or accounts that either of
them advises may be used in advising the Funds. Information and research
received from brokers or dealers will be in addition to, and not in lieu of, the
services required to be performed by Mitchell Hutchins under the Advisory
Contracts or the Sub-Advisers under the Sub-Advisory Contracts.
Investment decisions for a Fund and for other investment accounts managed
by Mitchell Hutchins or by a Sub-Adviser are made independently of each other in
light of differing considerations for the various accounts. However, the same
investment decision may occasionally be made for a Fund and one or more of such
accounts. In such cases, simultaneous transactions are inevitable. Purchases or
sales are then averaged as to price and allocated between that Fund and such
other account(s) as to amount according to a formula deemed equitable to the
Fund and such account(s). While in some cases this practice could have a
detrimental effect upon the price or value of the security as far as the Funds
are concerned, or upon their ability to complete their entire order, in other
cases it is believed that coordination and the ability to participate in volume
transactions will be beneficial to the Funds.
The Funds will not purchase securities that are offered in underwritings in
which PaineWebber or an affiliate of a Sub-Adviser is a member of the
underwriting or selling group, except pursuant to procedures adopted by each
board pursuant to Rule 10f-3 under the 1940 Act. Among other things, these
procedures require that the spread or commission paid in connection with such a
purchase be reasonable and fair, the purchase be at not more than the public
offering price prior to the end of the first business day after the date of the
public offering and that PaineWebber or any affiliate thereof or an affiliate of
a Sub-Adviser not participate in or benefit from the sale to the Funds.
As of October 31, 1997, Global Equity Fund owned common stock issued by the
following company which is a regular broker-dealer for the Fund: Morgan Stanley,
Dean Witter, Discover & Co. ($4,289,901). In addition, the Fund had entered
into repurchase agreement transactions as of that date with State Street Bank &
Trust Company ($10,510,000), also one of its regular broker-dealers.
As of October 31, 1997, Emerging Markets Equity Fund had entered into a
repurchase agreement transaction with the following regular broker-dealer for
the Fund: State Street Bank & Trust Company ($269,000).
As of October 31, 1997, Asia Pacific Growth Fund had entered into
repurchase agreement transactions with the following regular broker-dealers for
the Fund: Union Bank of Switzerland ($2,740,000); State Street Bank & Trust
Company ($1,010,000); and Dresdner Bank AG ($2,740,000).
As of October 31, 1997, Global Income Fund had entered into repurchase
agreement transactions with the following regular broker-dealers for the Fund:
Citicorp Securities Inc. ($20,000,000); Dresdner Securities (USA) Inc.
($1,466,000); Salomon Brothers Inc. ($13,247,000); J.P. Morgan Inc.
($15,368,000); and Union Bank of Switzerland ($30,000,000).
42
<PAGE>
PORTFOLIO TURNOVER. The Funds' annual portfolio turnover rates may vary
greatly from year to year, but they will not be a limiting factor when
management deems portfolio changes appropriate. The portfolio turnover rate is
calculated by dividing the lesser of a Fund's annual sales or purchases of
portfolio securities (exclusive of purchases or sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the portfolio during the year.
The Funds' respective portfolio turnover rates for the fiscal periods shown
were:
<TABLE>
<S> <C>
ASIA PACIFIC GROWTH FUND
Fiscal Period March 25, 1997 (commencement of operations) to October 31, 1997............................. 13%
EMERGING MARKETS EQUITY FUND
Fiscal Year ended October 31, 1997........................................................................ 87%
Four Months ended October 31, 1996........................................................................ 22%
Fiscal Year ended June 30, 1996........................................................................... 69%
GLOBAL EQUITY FUND
Fiscal Year ended October 31, 1997........................................................................ 86%
Two Months ended October 31, 1996......................................................................... 3%
Fiscal Year ended August 31, 1996......................................................................... 33%
GLOBAL INCOME FUND
Fiscal Year ended October 31, 1997........................................................................ 172%
Fiscal Year ended October 31, 1996........................................................................ 126%
</TABLE>
REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND REDEMPTION
INFORMATION AND OTHER SERVICES
COMBINED PURCHASE PRIVILEGE-CLASS A SHARES. Investors and eligible groups
of related Fund investors may combine purchases of Class A shares of the Funds
with concurrent purchases of Class A shares of any other PaineWebber mutual fund
and thus take advantage of the reduced sales charges indicated in the table of
sales charges for Class A shares in the Prospectus. The sales charge payable on
the purchase of Class A shares of the Funds and Class A shares of such other
funds will be at the rates applicable to the total amount of the combined
concurrent purchases.
An 'eligible group of related Fund investors' can consist of any
combination of the following:
(a) an individual, that individual's spouse, parents and children;
(b) an individual and his or her Individual Retirement Account
('IRA');
(c) an individual (or eligible group of individuals) and any company
controlled by the individual(s) (a person, entity or group that holds 25%
or more of the outstanding voting securities of a corporation will be
deemed to control the corporation, and a partnership will be deemed to be
controlled by each of its general partners);
(d) an individual (or eligible group of individuals) and one or more
employee benefit plans of a company controlled by the individual(s);
(e) an individual (or eligible group of individuals) and a trust
created by the individual(s), the beneficiaries of which are the individual
and/or the individual's spouse, parents or children;
(f) an individual and a Uniform Gifts to Minors Act/Uniform Transfers
to Minors Act account created by the individual or the individual's spouse;
(g) an employer (or group of related employers) and one or more
qualified retirement plans of such employer or employers (an employer
controlling, controlled by or under common control with another employer is
deemed related to that other employer); or
(h) individual accounts related together under one registered
investment adviser having full discretion and control over the accounts.
The registered investment adviser must communicate at least quarterly
through a newsletter or investment update establishing a relationship with
all of the accounts.
RIGHTS OF ACCUMULATIONS-CLASS A SHARES. Reduced sales charges are
available through a right of accumulation, under which investors and eligible
groups of related Fund investors (as defined above) are permitted to purchase
Class A shares of the Funds among related accounts at the offering price
applicable to
43
<PAGE>
the total of (1) the dollar amount then being purchased plus (2) an amount equal
to the then-current net asset value of the purchaser's combined holdings of
Class A Fund shares and Class A shares of any other PaineWebber mutual fund. The
purchaser must provide sufficient information to permit confirmation of his or
her holdings, and the acceptance of the purchase order is subject to such
confirmation. The right of accumulation may be amended or terminated at any
time.
WAIVERS OF SALES CHARGES-CLASS B SHARES. Among other circumstances, the
contingent deferred sales charge on Class B shares is waived where a total or
partial redemption is made within one year following the death of the
shareholder. The contingent deferred sales charge waiver is available where the
decedent is either the sole shareholder or owns the shares with his or her
spouse as a joint tenant with right of survivorship. This waiver applies only to
redemption of shares held at the time of death.
ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION. As discussed in the
Prospectus, eligible shares of the Funds may be exchanged for shares of the
corresponding class of most other PaineWebber mutual funds. Shareholders will
receive at least 60 days' notice of any termination or material modification of
the exchange offer, except no notice need be given if, under extraordinary
circumstances, either redemptions are suspended under the circumstances
described below or a Fund temporarily delays or ceases the sales of its shares
because it is unable to invest amounts effectively in accordance with the Fund's
investment objective, policies and restrictions.
If conditions exist that make cash payments undesirable, each Fund reserves
the right to honor any request for redemption by making payment in whole or in
part in securities chosen by the Fund and valued in the same way as they would
be valued for purposes of computing the Fund's net asset value. Any such
redemption in kind will be made with readily marketable securities, to the
extent available. If payment is made in securities, a shareholder may incur
brokerage expenses in converting these securities into cash. Each Fund has
elected, however, to be governed by Rule 18f-1 under the 1940 Act, under which
it is obligated to redeem shares solely in cash up to the lesser of $250,000 or
1% of its net asset value during any 90-day period for one shareholder. This
election is irrevocable unless the SEC permits its withdrawal.
The Funds may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange ('NYSE') is closed or
trading on the NYSE is restricted as determined by the SEC, (2) when an
emergency exists, as defined by the SEC, that makes it not reasonably
practicable for a Fund to dispose of securities owned by it or fairly to
determine the value of its assets or (3) as the SEC may otherwise permit. The
redemption price may be more or less than the shareholder's cost, depending on
the market value of a Fund's portfolio at the time.
AUTOMATIC INVESTMENT PLAN. Participation in the Automatic Investment Plan
enables an investor to use the technique of 'dollar cost averaging.' When an
investor invests the same dollar amount each month under the Plan, the investor
will purchase more shares when a Fund's net asset value per share is low and
fewer shares when the net asset value per share is high. Using this technique,
an investor's average purchase price per share over any given period will be
lower than if the investor purchased a fixed number of shares on a monthly basis
during the period. Of course, investing through the automatic investment plan
does not assure a profit or protect against loss in declining markets.
Additionally, because the automatic investment plan involves continuous
investing regardless of price levels, an investor should consider his or her
financial ability to continue purchases through periods of both low and high
price levels.
SYSTEMATIC WITHDRAWAL PLAN. An investor's participation in the systematic
withdrawal plan will terminate automatically if the 'Initial Account Balance' (a
term that means the value of the Fund account at the time the investor elects to
participate in the systematic withdrawal plan) less aggregate redemptions made
other than pursuant to the systematic withdrawal plan is less than $5,000 for
Class A and Class C shareholders or $20,000 for Class B shareholders. Purchases
of additional shares of a Fund concurrent with withdrawals are ordinarily
disadvantageous to shareholders because of tax liabilities and, for Class A
shares, initial sales charges. On or about the 20th of a month for monthly,
quarterly, semi-annual and annual plans, PaineWebber will arrange for redemption
by the Funds of sufficient Fund shares to provide the withdrawal payments
specified by participants in the Funds' systematic withdrawal plan. The payments
generally are mailed approximately five Business Days (defined under 'Valuation
of Shares') after the redemption date. Withdrawal payments should not be
considered dividends, but redemption proceeds, with the tax consequences
described under 'Dividends & Taxes' in the Prospectus. If periodic withdrawals
continually
44
<PAGE>
exceed reinvested dividends and other distributions, a shareholder's investment
may be correspondingly reduced. A shareholder may change the amount of the
systematic withdrawal or terminate participation in the systematic withdrawal
plan at any time without charge or penalty by written instructions with
signatures guaranteed to PaineWebber or PFPC Inc. ('Transfer Agent').
Instructions to participate in the plan, change the withdrawal amount or
terminate participation in the plan will not be effective until five days after
written instructions with signatures guaranteed are received by the Transfer
Agent. Shareholders may request the forms needed to establish a systematic
withdrawal plan from their PaineWebber investment executives, correspondent
firms or the Transfer Agent at 1-800-647-1568.
REINSTATEMENT PRIVILEGE-CLASS A SHARES. As described in the Prospectus,
shareholders who have redeemed Class A shares of a Fund may reinstate their
account without a sales charge. Shareholders may exercise the reinstatement
privilege by notifying the Transfer Agent of such desire and forwarding a check
for the amount to be purchased within 365 days after the date of redemption. The
reinstatement will be made at the net asset value per share next computed after
the notice of reinstatement and check are received. The amount of a purchase
under this reinstatement privilege cannot exceed the amount of the redemption
proceeds. Gain on a redemption is taxable regardless of whether the
reinstatement privilege is exercised; however, a loss arising out of a
redemption will not be deductible to the extent the reinstatement privilege is
exercised within 30 days after redemption, and an adjustment will be made to the
shareholder's tax basis for shares acquired pursuant to the reinstatement
privilege. Gain or loss on a redemption also will be adjusted for federal income
tax purposes by the amount of any sales charge paid on Class A shares, under the
circumstances and to the extent described in 'Dividends & Taxes' in the
Prospectus.
PAINEWEBBER RMA RESOURCE ACCUMULATION PLAN(SERVICE MARK);
PAINEWEBBER RESOURCE MANAGEMENT ACCOUNT(REGISTERED) (RMA)(REGISTERED)
Shares of PaineWebber mutual funds (each a 'PW Fund' and, collectively, the
'PW Funds') are available for purchase through the RMA Resource Accumulation
Plan ('Plan') by customers of PaineWebber and its correspondent firms who
maintain Resource Management Accounts ('RMA accountholders'). The Plan allows an
RMA accountholder to continually invest in one or more of the PW Funds at
regular intervals, with payment for shares purchased automatically deducted from
the client's RMA account. The client may elect to invest at monthly or quarterly
intervals and may elect either to invest a fixed dollar amount (minimum $100 per
period) or to purchase a fixed number of shares. A client can elect to have Plan
purchases executed on the first or fifteenth day of the month. Settlement occurs
three Business Days (defined under 'Valuation of Shares') after the trade date,
and the purchase price of the shares is withdrawn from the investor's RMA
account on the settlement date from the following sources and in the following
order: uninvested cash balances, balances in RMA money market funds, or margin
borrowing power, if applicable to the account.
To participate in the Plan, an investor must be an RMA accountholder, must
have made an initial purchase of the shares of each PW Fund selected for
investment under the Plan (meeting applicable minimum investment requirements)
and must complete and submit the RMA Resource Accumulation Plan Client Agreement
and Instruction Form available from PaineWebber. The investor must have received
a current prospectus for each PW Fund selected prior to enrolling in the Plan.
Information about mutual fund positions and outstanding instructions under the
Plan are noted on the RMA accountholder's account statement. Instructions under
the Plan may be changed at any time, but may take up to two weeks to become
effective.
The terms of the Plan, or an RMA accountholder's participation in the Plan,
may be modified or terminated at any time. It is anticipated that, in the
future, shares of other PW Funds and/or mutual funds other than the PW Funds may
be offered through the Plan.
PERIODIC INVESTING AND DOLLAR COST AVERAGING. Periodic investing in the PW
Funds or other mutual funds, whether through the Plan or otherwise, helps
investors establish and maintain a disciplined approach to accumulating assets
over time, de-emphasizing the importance of timing the market's highs and lows.
Periodic investing also permits an investor to take advantage of 'dollar cost
averaging.' By investing a fixed amount in mutual fund shares at established
intervals, an investor purchases more shares when the price is lower and fewer
shares when the price is higher, thereby increasing his or her earning
potential. Of course, dollar cost averaging does not guarantee a profit or
protect against a loss in a declining market, and an investor should consider
his or her financial ability to continue investing through periods of both low
and high share prices.
45
<PAGE>
However, over time, dollar cost averaging generally results in a lower average
original investment cost than if an investor invested a larger dollar amount in
a mutual fund at one time.
PAINEWEBBER'S RESOURCE MANAGEMENT ACCOUNT. In order to enroll in the Plan,
an investor must have opened an RMA account with PaineWebber or one of its
correspondent firms. The RMA account is PaineWebber's comprehensive asset
management account and offers investors a number of features, including the
following:
o monthly Premier account statements that itemize all account activity,
including investment transactions, checking activity and Gold
MasterCard(Registered) transactions during the period, and provide
unrealized and realized gain and loss estimates for most securities held
in the account;
o comprehensive preliminary 9-month and year-end summary statements that
provide information on account activity for use in tax planning and tax
return preparation;
o automatic 'sweep' of uninvested cash into the RMA accountholder's choice
of one of the six RMA money market funds-RMA Money Market Portfolio, RMA
U.S. Government Portfolio, RMA Tax-Free Fund, RMA California Municipal
Money Fund, RMA New Jersey Municipal Money Fund and RMA New York
Municipal Money Fund. Each money market fund attempts to maintain a
stable price per share of $1.00, although there can be no assurance that
it will be able to do so. Investments in the money market funds are not
insured or guaranteed by the U.S. government;
o check writing, with no per-check usage charge, no minimum amount on
checks and no maximum number of checks that can be written. RMA
accountholders can code their checks to classify expenditures. All
canceled checks are returned each month;
o Gold MasterCard, with or without a line of credit, which provides RMA
accountholders with direct access to their accounts and can be used with
automatic teller machines worldwide. Purchases on the Gold MasterCard are
debited to the RMA account once monthly, permitting accountholders to
remain invested for a longer period of time;
o 24-hour access to account information through toll-free numbers, and more
detailed personal assistance during business hours from the RMA Service
Center;
o expanded account protection to $100 million in the event of the
liquidation of PaineWebber. This protection does not apply to shares of
the RMA money market funds or the PW Funds because those shares are held
at the Transfer Agent and not through PaineWebber; and
o automatic direct deposit of checks into your RMA account and automatic
withdrawals from the account.
The annual account fee for an RMA account is $85, which includes the Gold
MasterCard, with an additional fee of $40 if the investor selects an optional
line of credit with the Gold MasterCard.
CONVERSION OF CLASS B SHARES
Class B shares of a Fund will automatically convert to Class A shares of
that Fund, based on the relative net asset values per share of the two classes,
as of the close of business on the first Business Day (as defined under
'Valuation of Shares') of the month in which the sixth anniversary of the
initial issuance of such Class B shares occurs. For the purpose of calculating
the holding period required for conversion of Class B shares, the date of
initial issuance shall mean (i) the date on which such Class B shares were
issued, or (ii) for Class B shares obtained through an exchange, or a series of
exchanges, the date on which the original Class B shares were issued. For
purposes of conversion to Class A shares, Class B shares purchased through the
reinvestment of dividends and other distributions paid in respect of Class B
shares will be held in a separate sub-account. Each time any Class B shares in
the shareholder's regular account (other than those in the sub-account) convert
to Class A shares, a pro rata portion of the Class B shares in the sub-account
will also convert to Class A shares. The portion will be determined by the ratio
that the shareholder's Class B shares converting to Class A shares bears to the
shareholder's total Class B shares not acquired through dividends and other
distributions.
The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A and Class B shares will not result in
46
<PAGE>
'preferential dividends' under the Code and that the conversion of shares does
not constitute a taxable event. If the conversion feature ceased to be
available, the Class B shares would not be converted and would continue to be
subject to the higher ongoing expenses of the Class B shares beyond six years
from the date of purchase. Mitchell Hutchins has no reason to believe that this
condition for the availability of the conversion feature will not continue to be
met.
VALUATION OF SHARES
Each Fund determines its net asset value per share separately for each
class of shares as of the close of regular trading (currently 4:00 p.m., Eastern
time) on the NYSE on each Business Day, which is defined as each Monday through
Friday when the NYSE is open. Currently the NYSE is closed on the observance of
the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Securities that are listed on U.S. and foreign stock exchanges are valued
at the last sale price on the day the securities are valued or, lacking any
sales on such day, at the last available bid price. In cases where securities
are traded on more than one exchange, the securities are generally valued on the
exchange considered by Mitchell Hutchins or the Sub-Adviser as the primary
market. Securities traded in the OTC market and listed on the Nasdaq Stock
Market ('Nasdaq') are valued at the last trade price on Nasdaq at 4:00 p.m.,
Eastern time; other OTC securities are valued at the last bid price available
prior to valuation (other than short-term investments that mature in 60 days or
less which are valued as described further below). Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the applicable board. It
should be recognized that judgment often plays a greater role in valuing thinly
traded securities and lower rated bonds than is the case with respect to
securities for which a broader range of dealer quotations and last-sale
information is available. The amortized cost method of valuation generally is
used to value debt obligations with 60 days or less remaining until maturity,
unless the applicable board determines that this does not represent fair value.
All investments quoted in foreign currency will be valued daily in U.S.
dollars on the basis of the foreign currency exchange rate prevailing at the
time such valuation is determined by a Fund's custodian. Foreign currency
exchange rates are generally determined prior to the close of regular trading on
the NYSE. Occasionally events affecting the value of foreign investments and
such exchange rates occur between the time at which they are determined and the
close of trading on the NYSE, which events would not be reflected in the
computation of a Fund's net asset value on that day. If events materially
affecting the value of such investments or currency exchange rates occur during
such time period, the investments will be valued at their fair value as
determined in good faith by or under the direction of the applicable board. The
foreign currency exchange transactions of the Funds conducted on a spot (that
is, cash) basis are valued at the spot rate for purchasing or selling currency
prevailing on the foreign exchange market. Under normal market conditions this
rate differs from the prevailing exchange rate by less than one-tenth of one
percent due to the costs of converting from one currency to another.
47
<PAGE>
PERFORMANCE INFORMATION
The Funds' performance data quoted in advertising and other promotional
materials ('Performance Advertisements') represent past performance and are not
intended to indicate future performance. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
TOTAL RETURN CALCULATIONS. Average annual total return quotes ('Standardized
Return') used in each Fund's Performance Advertisements are calculated according
to the following formula:
<TABLE>
<C> <S>
n
P(1 + T) = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares of a specified class
T = average annual total return of shares of that class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at the beginning of that period.
</TABLE>
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or 'T' in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
period. In calculating the ending redeemable value, for Class A shares, the
maximum 4.5% sales charge (4.0% for Global Income Fund) is deducted from the
initial $1,000 payment and, for Class B and Class C shares, the applicable
contingent deferred sales charge imposed on a redemption of Class B or Class C
shares held for the period is deducted. All dividends and other distributions
are assumed to have been reinvested at net asset value.
The Funds also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ('Non-Standardized Return'). The Funds calculate Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in Fund shares
and assuming the reinvestment of all dividends and other distributions. The rate
of return is determined by subtracting the initial value of the investment from
the ending value and by dividing the remainder by the initial value. Neither
initial nor contingent deferred sales charges are taken into account in
calculating Non-Standardized Return; the inclusion of those charges would reduce
the return.
Both Standardized Return and Non-Standardized Return for Class B shares for
periods of over six years reflect conversion of the Class B shares to Class A
shares at the end of the sixth year.
The following tables show performance information for each class of the
Funds' shares outstanding for the periods indicated. All returns for periods of
more than one year are expressed as an average return.
ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Inception** to October 31, 1997:
Standardized Return*.................. (31.55 )% (32.21 )% (29.35 )%
Non-Standardized Return............... (23.82 )% (28.64 )% (28.64 )%
</TABLE>
- ------------------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5%. All Standardized Return figures for
Class B and Class C shares reflect deduction of the applicable contingent
deferred sales charges imposed on a redemption of shares held for the period.
** The inception date for Class A, Class B and Class C shares was March 25,
1997. There were no Class Y shares outstanding as of October 31, 1997.
48
<PAGE>
EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended October 31, 1997:
Standardized Return*.................. (5.25)% (6.39)% (2.61)% (0.53)%
Non-Standardized Return............... (0.74)% (1.39)% (1.61)% (0.53)%
Inception** to October 31, 1997:
Standardized Return*.................. (7.27)% (1.76)% (6.85)% (5.90)%
Non-Standardized Return............... (6.13)% 0.34% (6.85)% (5.90)%
</TABLE>
- ------------------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5%. All Standardized Return figures for
Class B and Class C shares reflect deduction of the applicable contingent
deferred sales charges imposed on a redemption of shares held for the period.
** The inception date for each Class of shares is as follows: Class A--January
19, 1994, Class B-- December 5, 1995, Class C--January 19, 1994, and Class
Y--January 19, 1994.
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended October 31, 1997:
Standardized Return*.................. 3.98 % 3.05 % 7.05 % 9.31 %
Non-Standardized Return............... 8.87 % 8.05 % 8.05 % 9.31 %
Five Years ended October 31, 1997:
Standardized Return*.................. 11.00 % N/A N/A N/A
Non-Standardized Return............... 12.04 % N/A N/A N/A
Inception** to October 31, 1997:
Standardized Return*.................. 9.90 % 7.38 % 9.74 % 10.92 %
Non-Standardized Return............... 10.76 % 8.63 % 9.74 % 10.92 %
</TABLE>
- ------------------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5%. All Standardized Return figures for
Class B and Class C shares reflect deduction of the applicable contingent
deferred sales charges imposed on a redemption of shares held for the period.
** The inception date for each Class of shares is as follows: Class A--November
14, 1991, Class B-- August 25, 1995, and Class C--May 10, 1993 and Class
Y--May 10, 1993.
GLOBAL INCOME FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended October 31, 1997:
Standardized Return*.................. 0.75% (0.89 )% 3.73% 5.20%
Non-Standardized Return............... 4.99% 4.11 % 4.48% 5.20%
Five years ended October 31, 1997:
Standardized Return*.................. 5.78% 5.49 % 6.10% 6.91%
Non-Standardized Return............... 6.64% 5.81 % 6.10% 6.91%
Inception** to October 31, 1997:
Standardized Return*.................. 6.55% 9.08 % 5.82% 7.43%
Non-Standardized Return............... 7.23% 9.08 % 5.82% 7.43%
</TABLE>
(Footnotes on next page)
49
<PAGE>
(Footnotes from previous page)
- ------------------
* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4%. All Standardized Return figures for Class
B and Class C shares reflect deduction of the applicable contingent deferred
sales charges imposed on a redemption of shares held for the period.
** The inception date for each Class of shares is as follows: Class A--July 1,
1991, Class B--March 20, 1987, and Class C-- July 2, 1992 and Class Y--August
26, 1991.
YIELD. Yields used in Global Income Fund's Performance Advertisements are
calculated by dividing the Fund's interest income attributable to a Class of
shares for a 30-day period ('Period'), net of expenses attributable to such
Class, by the average number of shares of such Class entitled to receive
dividends during the Period and expressing the result as an annualized
percentage (assuming semi-annual compounding) of the maximum offering price per
share (in the case of Class A shares) or the net asset value per share (in the
case of Class B and Class C shares) at the end of the Period. Yield quotations
are calculated according to the following formula:
a-b 6
YIELD = 2 [( --- +1 ) -1 ]
cd
<TABLE>
<S> <C>
where: a = interest earned during the Period attributable to a Class of shares
b = expenses accrued for the Period attributable to a Class of shares (net of
reimbursements)
c = the average daily number of shares of a Class outstanding during the Period that were
entitled to receive dividends
d = the maximum offering price per share (in the case of Class A shares) or the net asset
value per share (in the case of Class B and Class C shares) on the last day of the
Period.
</TABLE>
Except as noted below, in determining interest income earned during the
Period (variable 'a' in the above formula), Global Income Fund calculates
interest earned on each debt obligation held by it during the Period by (1)
computing the obligation's yield to maturity, based on the market value of the
obligation (including actual accrued interest) on the last business day of the
Period or, if the obligation was purchased during the Period, the purchase price
plus accrued interest and (2) dividing the yield to maturity by 360, and
multiplying the resulting quotient by the market value of the obligation
(including actual accrued interest) to determine the interest income on the
obligation for each day of the period that the obligation is in the portfolio.
Once interest earned is calculated in this fashion for each debt obligation held
by the Fund, interest earned during the Period is then determined by totalling
the interest earned on all debt obligations. For purposes of these calculations,
the maturity of an obligation with one or more call provisions is assumed to be
the next date on which the obligation reasonably can be expected to be called
or, if none, the maturity date. With respect to Class A shares, in calculating
the maximum offering price per share at the end of the Period (variable 'd' in
the above formula) the Fund's current maximum 4% initial sales charge on Class A
shares is included. For the 30-day period ended October 31, 1997, the yields for
its Class A shares, Class B shares, Class C shares and Class Y shares were
6.06%, 5.52%, 5.63%, and 6.66% respectively.
OTHER INFORMATION. In Performance Advertisements, the Funds may compare
their Standardized Return and/or their Non-Standardized Return with data
published by Lipper Analytical Services, Inc. ('Lipper'), CDA Investment
Technologies, Inc. ('CDA'), Wiesenberger Investment Companies Service
('Wiesenberger'), Investment Company Data, Inc. ('ICD') or Morningstar Mutual
Funds ('Morningstar'), with the performance of recognized stock and other
indices, including (but not limited to) the Standard & Poor's 500 Composite
Stock Price Index ('S&P 500'), the Dow Jones Industrial Average, the
International Finance Corporation Global Total Return Index, the Nasdaq
Composite Index, the Russell 2000 Index, the Wilshire 5000 Index, the Lehman
Bond Index, the Lehman Brothers 20+ Year Treasury Bond Index, the Lehman
Brothers Government/Corporate Bond Index, other similar Lehman Brothers indices
or components thereof, 30-year and 10-year U.S. Treasury bonds, the Morgan
Stanley Capital International Perspective Indices, the Morgan Stanley Capital
International Energy Sources Index, the Standard & Poor's Oil Composite Index,
the Morgan Stanley Capital International World Index (including Asia Pacific
regional indices), the Salomon Brothers Non-U.S. Dollar Index, the Salomon
Brothers Non-U.S. World Government
50
<PAGE>
Bond Index, the Salomon Brothers World Government Index, other similar Salomon
Brothers indices or components thereof and changes in the Consumer Price Index
as published by the U.S. Department of Commerce. The Funds also may refer in
such materials to mutual fund performance rankings and other data, such as
comparative asset, expense and fee levels, published by Lipper, CDA,
Wiesenberger, ICD or Morningstar. Performance Advertisements also may refer to
discussions of the Funds and comparative mutual fund data and ratings reported
in independent periodicals, including (but not limited to) THE WALL STREET
JOURNAL, MONEY MAGAZINE, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S,
FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST AND THE
KIPLINGER LETTERS. Comparisons in Performance Advertisements may be in graphic
form.
The Funds may include discussions or illustrations of the effects of
compounding in Performance Advertisements. 'Compounding' refers to the fact
that, if dividends or other distributions on a Fund investment are reinvested in
additional Fund shares, any future income or capital appreciation of a Fund
would increase the value, not only of the original Fund investment, but also of
the additional Fund shares received through reinvestment. As a result, the value
of a Fund investment would increase more quickly than if dividends or other
distributions had been paid in cash.
The Funds may also compare their performance with the performance of bank
certificates of deposit (CDs) as measured by the CDA Certificate of Deposit
Index, the Bank Rate Monitor National Index and the averages of yields of CDs of
major banks published by Banxquote(Registered) Money Markets. In comparing the
Funds' performance to CD performance, investors should keep in mind that bank
CDs are insured in whole or in part by an agency of the U.S. government and
offer fixed principal and fixed or variable rates of interest, and that bank CD
yields may vary depending on the financial institution offering the CD and
prevailing interest rates. Shares of the Funds are not insured or guaranteed by
the U.S. government and returns and net asset values will fluctuate. The debt
securities held by the Funds generally have longer maturities than most CDs and
may reflect interest rate fluctuations for longer term debt securities. An
investment in any Fund involves greater risks than an investment in either a
money market fund or a CD.
51
<PAGE>
Each Fund may also compare its performance to general trends in the stock
and bond markets, as illustrated by the following graph prepared by Ibbotson
Associates, Chicago.
<TABLE>
<CAPTION>
S&P 500 TR U.S. LT Gvt TR U.S. 30 Day Tbill TR U.S. Inflation
---------- -------------- -------------------- --------------
<S> <C> <C> <C> <C>
1925 $10,000 $10,000 $10,000 $10,000
1926 $11,162 $10,777 $10,327 $9,851
1927 $15,347 $11,739 $10,649 $9,646
1928 $22,040 $11,751 $11,028 $9,553
1929 $20,185 $12,153 $11,552 $9,572
1930 $15,159 $12,719 $11,830 $8,994
1931 $8,590 $12,044 $11,957 $8,138
1932 $7,886 $14,073 $12,072 $7,300
1933 $12,144 $14,062 $12,108 $7,337
1934 $11,969 $15,472 $12,128 $7,486
1935 $17,674 $16,243 $12,148 $7,710
1936 $23,669 $17,464 $12,170 $7,803
1937 $15,379 $17,504 $12,207 $8,045
1938 $20,165 $18,473 $12,205 $7,821
1939 $20,082 $19,570 $12,208 $7,784
1940 $18,117 $20,761 $12,208 $7,859
1941 $16,017 $20,955 $12,216 $8,622
1942 $19,275 $21,629 $12,248 $9,423
1943 $24,267 $22,080 $12,291 $9,721
1944 $29,060 $22,702 $12,332 $9,926
1945 $39,649 $25,139 $12,372 $10,149
1946 $36,449 $25,113 $12,416 $11,993
1947 $38,529 $24,454 $12,478 $13,073
1948 $40,649 $25,285 $12,580 $13,426
1949 $48,287 $26,916 $12,718 $13,184
1950 $63,601 $26,932 $12,870 $13,948
1951 $78,875 $25,873 $13,063 $14,767
1952 $93,363 $26,173 $13,279 $14,898
1953 $92,439 $27,125 $13,521 $14,991
1954 $141,084 $29,075 $13,638 $14,916
1955 $185,614 $28,699 $13,852 $14,972
1956 $197,783 $27,096 $14,193 $15,400
1957 $176,457 $29,117 $14,639 $15,866
1958 $252,975 $27,342 $14,864 $16,145
1959 $283,219 $26,725 $15,303 $16,387
1960 $284,549 $30,407 $15,711 $16,629
1961 $361,060 $30,703 $16,045 $16,741
1962 $329,545 $32,818 $16,483 $16,946
1963 $404,685 $33,216 $16,997 $17,225
1964 $471,388 $34,381 $17,598 $17,430
1965 $530,081 $34,625 $18,289 $17,765
1966 $476,737 $35,889 $19,159 $18,361
1967 $591,038 $32,594 $19,966 $18,920
1968 $656,415 $32,509 $21,005 $19,814
1969 $600,590 $30,860 $22,388 $21,024
1970 $624,653 $34,596 $23,849 $22,179
1971 $714,058 $39,173 $24,895 $22,924
1972 $849,559 $41,400 $25,851 $23,706
1973 $725,003 $40,942 $27,643 $25,792
1974 $533,110 $42,725 $29,855 $28,939
1975 $731,443 $46,653 $31,588 $30,969
1976 $905,842 $54,470 $33,193 $32,458
1977 $840,766 $54,095 $34,893 $34,656
1978 $895,922 $53,458 $37,398 $37,784
1979 $1,061,126 $52,799 $41,279 $42,812
1980 $1,405,137 $50,715 $45,917 $48,120
1981 $1,336,161 $51,657 $52,671 $52,421
1982 $1,622,226 $72,507 $58,224 $54,451
1983 $1,987,451 $72,979 $63,347 $56,518
1984 $2,111,991 $84,274 $69,586 $58,753
1985 $2,791,168 $110,371 $74,960 $60,968
1986 $3,306,709 $137,446 $79,580 $61,657
1987 $3,479,675 $133,716 $83,929 $64,376
1988 $4,064,583 $146,650 $89,257 $67,221
1989 $5,344,555 $173,215 $98,728 $70,345
1990 $5,174,990 $183,924 $104,286 $74,640
1991 $6,755,922 $219,420 $110,121 $76,927
1992 $7,274,115 $237,092 $113,982 $79,159
1993 $8,000,785 $280,339 $117,284 $81,334
1994 $8,105,379 $258,556 $121,862 $83,510
1995 $11,139,184 $340,436 $128,681 $85,630
1996 $13,709,459 $337,265 $135,381 $88,475
1997 $18,272,762 $390,736 $142,496 $90,092
</TABLE>
The chart is shown for illustrative purposes only and does not represent any
Fund's performance. These returns consist of income and capital appreciation (or
depreciation) and should not be considered an indication or guarantee of future
investment results. Year-to-year fluctuations in certain markets have been
significant, and negative returns have been experienced in certain markets from
time to time. Stocks are measured by the S&P 500, an unmanaged weighted index
comprising 500 widely held common stock and varying in composition. Unlike
investors in bonds and U.S. Treasury bills, common stock investors do not
receive fixed income payments and are not entitled to repayment of principal.
These differences contribute to investment risk. Returns shown for long-term
government bonds are based on U.S. Treasury bonds with 20-year maturities.
Inflation is measured by the Consumer Price Index. The indexes are unmanaged and
are not available for investment.
- ------------------
Source: Ibbotson Assoc., Chi., (annual updates work by Roger G. Ibbotson & Rex
A. Sinquefield).
Over time, stocks have outperformed all other investments by a wide margin,
offering a solid hedge against inflation. From 1925 to 1997, stocks beat all
other traditional asset classes. A $10,000 investment in the S&P 500 grew to
$18,272,762, significantly more than any other investment.
TAXES
In order to continue to qualify for treatment as a RIC under the Code, each
Fund must distribute to its shareholders for each taxable year at least 90% of
its investment company taxable income (consisting generally of net investment
income, net short-term capital gains and net gains from certain foreign currency
transactions) ('Distribution Requirement') and must meet several additional
requirements. For each Fund, these requirements include the following: (1) the
Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other
52
<PAGE>
disposition of securities or foreign currencies, or other income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in securities or those currencies ('Income Requirement');
(2) at the close of each quarter of the Fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
government securities, securities of other RICs and other securities, with these
other securities limited, in respect of any one issuer, to an amount that does
not exceed 5% of the value of the Fund's total assets and that does not
represent more than 10% of the issuer's outstanding voting securities; and (3)
at the close of each quarter of the Fund's taxable year, not more than 25% of
the value of its total assets may be invested in securities (other than U.S.
government securities or the securities of other RICs) of any one issuer. If a
Fund failed to qualify for treatment as a RIC for any taxable year, it would be
taxed as an ordinary corporation on its taxable income for that year (even if
that income was distributed to its shareholders) and all distributions out of
its earnings and profits would be taxable to its shareholders, as dividends
(that is, ordinary income).
Dividends and other distributions declared by a Fund in October, November
or December of any year and payable to shareholders of record on a date in any
of those months will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
A portion of the dividends from each Fund's investment company taxable
income (whether paid in cash or additional shares) may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion may
not exceed the aggregate dividends received by a Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
If shares of a Fund are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
Investors also should be aware that if shares are purchased shortly before
the record date for any dividend or capital gain distribution, the shareholder
will pay full price for the shares and receive some portion of the price back as
a taxable distribution.
Dividends and interest received, and gains realized, by a Fund on foreign
securities may be subject to income, withholding or other taxes imposed by
foreign countries and U.S. possessions (collectively 'foreign taxes') that would
reduce the yield and/or total return on its securities. However, tax conventions
between certain countries and the United States may reduce or eliminate foreign
taxes and many foreign countries do not impose taxes on capital gains in respect
of investments by foreign investors. If more than 50% of the value of a Fund's
total assets at the close of its taxable year consists of securities of foreign
corporations, it will be eligible to, and may, file an election with the
Internal Revenue Service that will enable its shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to any foreign taxes
paid by it. Pursuant to the election, the Fund would treat those taxes as
dividends paid to its shareholders and each shareholder would be required to (1)
include in gross income, and treat as paid by him or her, his or her
proportionate share of those taxes, (2) treat his or her share of those taxes
and of any dividend paid by the Fund that represents income from foreign or U.S.
possessions sources as his or her own income from those sources, and (3) either
deduct the foreign taxes deemed paid by him or her in computing his or her
taxable income or, alternatively, use the foregoing information in calculating
the foreign tax credit against his or her federal income tax. If a Fund makes
this election, it will report to its shareholders, shortly after each taxable
year, their respective shares of the foreign taxes paid by the Fund on its
income from foreign countries and U.S. possession sources.
Each Fund will be subject to a nondeductible 4% excise tax ('Excise Tax')
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
Each Fund may invest in the stock of 'passive foreign investment companies'
('PFICs') if such stock is a permissible investment. A PFIC is a foreign
corporation--other than a 'controlled foreign corporation' (i.e., a foreign
corporation of which, on any day during its taxable year, more than 50% of the
total voting power of its
53
<PAGE>
voting stock or the total value of all of its stock is owned, directly,
indirectly, or constructively, by 'U.S. shareholders,' defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which a Fund is U.S. shareholder (effective for their
taxable years beginning November 1, 1998)--that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a Fund will be subject to
federal income tax on a portion of any 'excess distribution' received on the
stock of a PFIC or of any gain from disposition of such stock (collectively
'PFIC income'), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
will be included in the Fund's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders. If a Fund invests in a PFIC and elects to treat the PFIC as
a 'qualified electing fund' ('QEF'), then in lieu of the foregoing tax and
interest obligation, the Fund will be required to include in income each year
its pro rata share of the QEF's annual ordinary earnings and net capital gain
(the excess of net long-term capital gain over net short-term capital
loss)--which may have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax--even if those earnings and
gain are not distributed to the Fund by the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain of
its requirements.
Effective for their taxable years beginning November 1, 1998, each Fund may
elect to 'mark to market' its stock in any PFIC. 'Marking-to-market,' in this
context, means including in ordinary income each taxable year the excess, if
any, of the fair market value of a PFIC's stock over a Fund's adjusted basis
therein as of the end of that year. Pursuant to the election, a Fund also would
be allowed to deduct (as an ordinary, not capital, loss) the excess, if any, of
its adjusted basis in PFIC stock over the fair market value thereof as of the
taxable year-end, but only to the extent of any net mark-to-market gains with
respect to that stock included by the Fund for prior taxable years. A Fund's
adjusted basis in each PFIC's stock with respect to which it has made this
election will be adjusted to reflect the amounts of income included and
deductions taken under the election. Regulations proposed in 1992 would have
provided a similar election with respect to the stock of certain PFIC's.
The use of hedging strategies, such as writing (selling) and purchasing
options and futures contracts and entering into forward currency contracts,
involves complex rules that will determine for income tax purposes the amount,
character and timing of recognition of the gains and losses a Fund realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
options, futures and forward currency contracts derived by a Fund with respect
to its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement.
A Fund may acquire zero coupon or other securities issued with original
issue discount or Treasury Inflation-Protection Securities ('TIPS'), on which
principal is adjusted based on changes in the Consumer Price Index. A Fund must
include in its gross income the portion of the original issue discount
(including the amount of any principal increases on TIPS) that accrues on such
securities during the taxable year, even if the Fund receives no corresponding
payment on them during the year. Because a Fund annually must distribute
substantially all of its investment company taxable income, including any
accrued original issue discount, to satisfy the Distribution Requirement and
avoid imposition of the Excise Tax, it may be required in a particular year to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives. Those distributions will be made from the Fund's cash
assets or from the proceeds of sales of portfolio securities, if necessary. The
Fund may realize capital gains or losses from those sales, which would increase
or decrease its investment company taxable income and/or net capital gain.
OTHER INFORMATION
Each Trust is an entity of the type commonly known as a 'Massachusetts
business trust.' Under Massachusetts law, shareholders of a Fund could, under
certain circumstances, be held personally liable for the obligations of the Fund
or its Trust. However, each Trust's Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust or the Fund and requires that
notice of such disclaimer be given in
54
<PAGE>
each note, bond, contract, instrument, certificate or undertaking made or issued
by the board members or by any officers or officer by or on behalf of the Trust
or the Fund, the board members or any of them in connection with the Trust. Each
Declaration of Trust provides for indemnification from the relevant Fund's
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund itself would be unable to meet its obligations, a possibility
that Mitchell Hutchins believes is remote and not material. Upon payment of any
liability incurred by a shareholder solely by reason of being or having been a
shareholder, the shareholder paying such liability would be entitled to
reimbursement from the general assets of the relevant Fund. The board members
intend to conduct each Fund's operations in such a way as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Fund.
Prior to November 1, 1995, the name of Emerging Markets Equity Fund was
'Mitchell Hutchins/Kidder Peabody Emerging Markets Equity Fund.' Prior to
February 13, 1995, the name of the Fund was 'Kidder, Peabody Emerging Markets
Equity Fund.' Prior to November 10, 1995, the Fund's Class C shares were called
'Class B' shares, and the Fund's Class Y shares were called 'Class C'shares. New
Class B shares were not offered prior to December 5, 1995.
Prior to August 25, 1995, the name of Global Equity Fund was 'Mitchell
Hutchins/Kidder, Peabody Global Equity Fund.' Prior to February 13, 1995, the
name of the Fund was 'Kidder, Peabody Global Equity Fund.' Prior to November 10,
1995, the Fund's Class B shares were known as 'Class E' shares and its Class C
shares were known as 'Class B' shares, and the Fund's Class Y shares were known
as 'Class C' shares.
Prior to November 10, 1995, Global Income Fund's Class C shares were known
as 'Class D' shares, and the Fund's Class Y shares were known as 'Class C'
shares.
CLASS-SPECIFIC EXPENSES. Each Fund may determine to allocate certain of
its expenses (in addition to service and distribution fees) to the specific
classes of its shares to which those expenses are attributable. For example,
Class B and Class C shares bear higher transfer agency fees per shareholder
account than those borne by Class A or Class Y shares. The higher fee is imposed
due to the higher costs incurred by the Transfer Agent in tracking shares
subject to a contingent deferred sales charge because, upon redemption, the
duration of the shareholder's investment must be determined in order to
determine the applicable charge. Although the transfer agency fee will differ on
a per account basis as stated above, the specific extent to which the transfer
agency fees will differ between the classes as a percentage of net assets is not
certain, because the fee as a percentage of net assets will be affected by the
number of shareholder accounts in each class and the relative amounts of net
assets in each class.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, serves as counsel to the Funds.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters.
AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for Asia Pacific Growth Fund, Emerging Markets
Equity Fund and Global Equity Fund. Price Waterhouse LLP, 1177 Avenue of the
Americas, New York, New York 10036, serves as independent accountants for Global
Income Fund.
FINANCIAL STATEMENTS
Each Fund's Annual Report to Shareholders for its last fiscal year (or
period) is a separate document supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors or independent accountants appearing therein are
incorporated herein by this reference.
55
<PAGE>
APPENDIX
RATINGS INFORMATION
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as a
'gilt edged.' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues; Aa. Bonds which are rated Aa
are judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities; A. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future; Baa. Bonds which are rated Baa are considered
as medium-grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payment and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well; BA. Bonds
which are rated Ba are judged to have speculative elements; their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class; B. Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small; Caa. Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest; Ca. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings; C. Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category, the modifier 2 indicates a mid-range ranking, and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF S&P CORPORATE DEBT RATINGS
AAA. An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong; AA. An obligation rated AA differs from the higher rated
issues only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong; A. An obligation rated A is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than obligations in higher rated categories. However, the
obligor's capacity to meet its financial commitment on the obligation is still
strong; BBB. An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation; BB, B, CCC, CC, C. Obligations rated BB, B, CCC, CC and C are
regarded as having significant speculative characteristics. BB indicates the
lowest degree of speculation and C the highest. While such debt will likely have
some quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions; BB. An obligation rated
BB is less vulnerable to nonpayment than other speculative issues. However, it
faces major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's inadequate capacity to
meet its financial commitment on the obligation; B. An obligation rated B is
more vulnerable to nonpayment than obligations rated BB, but the obligor
currently has the capacity to meet its financial commitment on the
A-1
<PAGE>
obligation. Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment on
the obligation; CCC. An obligation rated CCC is currently vulnerable to
nonpayment and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitments on the obligation.
In the event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation; CC. An obligation rated CC is currently highly vulnerable to
nonpayment; C. The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on this
obligation are being continued; D. An obligation rated D is in payment default.
The D rating category is used when payments on an obligation are not made on the
date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
Plus (+) or Minus (-): The ratings from 'AA' to 'CCC' may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
R. This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
A-2
<PAGE>
[This page intentionally left blank]
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THE PROSPECTUS OR IN THIS STATEMENT OF
ADDITIONAL INFORMATION IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY A FUND OR ITS DISTRIBUTOR. THE PROSPECTUS AND
THIS STATEMENT OF ADDITIONAL INFORMATION DO NOT CONSTITUTE AN OFFERING BY ANY
FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Restrictions........... 1
Hedging and Other Strategies Using Derivative
Instruments.................................. 17
Trustees and Officers; Principal Holders of
Securities................................... 25
Investment Advisory and Distribution
Arrangements................................. 33
Portfolio Transactions......................... 41
Reduced Sales Charges, Additional Exchange and
Redemption Information and Other Services.... 43
Conversion of Class B Shares................... 46
Valuation of Shares............................ 47
Performance Information........................ 48
Taxes.......................................... 52
Other Information.............................. 54
Financial Statements........................... 55
Appendix....................................... A-1
</TABLE>
(Copyright)1998 PaineWebber Incorporated
PaineWebber
Asia Pacific
Growth Fund
PaineWebber
Emerging Markets
Equity Fund
PaineWebber
Global Equity Fund
PaineWebber
Global Income Fund
----------------------------------------
Statement of Additional Information
March 1, 1998
----------------------------------------
PAINEWEBBER
<PAGE>
PART C. OTHER INFORMATION
-------------------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements: (filed herewith)
Included in Part A of this Registration Statement for PaineWebber Asia Pacific
Growth Fund:
Financial Highlights for one Class A, Class B and Class C Share for the
period March 25, 1997 (commencement of operations) to October 31, 1997.
Included in Part B of this Registration Statement for PaineWebber Asia Pacific
Growth Fund through incorporation by reference from the annual report to
shareholders previously filed with the Securities and Exchange Commission
through EDGAR on December 29, 1997 (Accession No. 0000746703-97-000006).
Portfolio of Investments at October 31, 1997.
Statement of Assets and Liabilities at October 31, 1997.
Statement of Operations for the period ended October 31, 1997.
Statement of Changes in Net Assets for the period ended October 31,
1997.
Notes to Financial Statements.
Financial Highlights for one Class A, Class B and Class C Share for the
period March 25, 1997 (commencement of operations) to October 31, 1997.
Report of Ernst & Young LLP, Independent Auditors, dated December 19,
1997.
(b) Exhibits:
(1) Amended and Restated Declaration of Trust (filed herewith)
(2) Restated By-Laws (filed herewith)
(3) Voting trust agreement - none
(4) Instruments defining the rights of holders of the Registrant's
shares of beneficial interest 1/
(5) (a) Investment Advisory and Administration Contract
(filed herewith)
(b) Investment Advisory Fee Agreement with respect to
PaineWebber Utility Income Fund (filed herewith)
(c) Investment Advisory Fee Agreement with respect to
PaineWebber Low Duration U.S. Government Income Fund
(filed herewith)
(d) Investment Advisory Fee Agreement with respect to
PaineWebber Asia Pacific Growth Fund 2/
(e) Sub-Investment Advisory Contract with respect to
PaineWebber Low Duration U.S. Government Income Fund
3/
(f) Sub-Advisory Contract with respect to PaineWebber
Asia Pacific Growth Fund 2/
(6) (a) Distribution Contract with respect to Class A Shares
(filed herewith)
(b) Distribution Contract with respect to Class B Shares
(filed herewith)
C-1
<PAGE>
(c) Distribution Contract with respect to Class C Shares
4/
(d) Distribution Contract with respect to Class Y Shares
4/
(e) Exclusive Dealer Agreement with respect to Class A
Shares (filed herewith)
(f) Exclusive Dealer Agreement with respect to Class B
Shares (filed herewith)
(g) Exclusive Dealer Agreement with respect to Class C
Shares 4/
(h) Exclusive Dealer Agreement with respect to Class Y
Shares 4/
(7) Bonus, profit sharing or pension plans - none
(8) Custodian Agreement (filed herewith)
(9) Transfer Agency Agreement (filed herewith)
(10) Opinion and Consent of Counsel (filed herewith)
(11) Auditor's Consent ( filed herewith)
(12) Financial statements omitted from prospectus - none
(13) Letter of investment intent (filed herewith)
(14) Prototype Retirement Plan (not applicable)
(15) (a) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class A Shares (filed herewith)
(b) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class B Shares (filed herewith)
(c) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class C Shares (filed herewith)
(d) Distribution Fee Addendum with respect to Class C
shares of PaineWebber Low Duration U.S. Government
Income Fund (filed herewith)
(e) Distribution Fee Addendum with respect to Class C
shares of PaineWebber Asia Pacific Growth Fund 5/
(16) Schedule for Computation of Performance Quotations (filed
herewith)
(17) and (27)Financial Data Schedule (filed herewith)
(18) Plan pursuant to Rule 18f-3 6/
1/ Incorporated by reference from Articles III, VIII, IX, X and XI of
Registrant's Amended and Restated Declaration of Trust and from
Articles II, VII and X of Registrant's Restated By-Laws.
2/ Incorporated by reference from Post Effective Amendment No. 50 to the
registration statement, SEC File No. 2-91362, filed July 7, 1997.
3/ Incorporated by reference from Post-Effective Amendment No. 37 to the
registration statement, SEC File No. 2-91362, filed March 31, 1995.
4/ Incorporated by reference from Post-Effective Amendment No. 39 to the
registration statement, SEC File No. 2-91362, filed February 14, 1996.
5/ Incorporated by reference from Post-Effective Amendment No. 46 to the
registration statement, SEC File No. 2-91362, filed October 4, 1996.
C-2
<PAGE>
6/ Incorporated by reference from Post-Effective Amendment No. 43 to the
registration statement, SEC File No. 2-91362, filed July 31, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
None.
Item 26. Number of Holders of Securities
-------------------------------
<TABLE>
<CAPTION>
Number of Record Shareholders
Title of Class as of February 17, 1998
-------------- -----------------------
<S> <C>
U.S. Government Income Fund
Class A Shares 20,386
Class B Shares 2,696
Class C Shares 2,103
Class Y Shares 112
Investment Grade Income Fund
Class A Shares 13,322
Class B Shares 2,321
Class C Shares 1,540
Class Y Shares 0
High Income Fund
Class A Shares 14,973
Class B Shares 10,544
Class C Shares 5,964
Class Y Shares 0
PaineWebber Utility Income Fund
Class A Shares 641
Class B Shares 1,692
Class C Shares 650
Class Y Shares 0
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
Number of Record Shareholders
Title of Class as of February 17, 1998
-------------- -----------------------
<S> <C>
PaineWebber Low Duration U.S. Government Income Fund
Class A Shares 902
Class B Shares 563
Class C Shares 10,533
Class Y Shares 30
PaineWebber Asia Pacific Growth Fund
Class A Shares 2,367
Class B Shares 2,913
Class C Shares 1,250
Class Y Shares 0
</TABLE>
Item 27. Indemnification
---------------
Section 2 of "Indemnification" in Article X of the Declaration of Trust
provides that the Registrant will indemnify its trustees and officers to the
fullest extent permitted by law against claims and expenses asserted against or
incurred by them by virtue of being or having been a trustee or officer;
provided that no such person shall be indemnified where there has been an
adjudication or other determination, as described in Article X, that such person
is liable to the Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office or did not act in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. Section 2 of "Indemnification" in Article X also provides that the
Registrant may maintain insurance policies covering such rights of
indemnification.
Additionally, "Limitation of Liability" in Article X of the Declaration
of Trust provides that the trustees or officers of the Registrant shall not be
personally liable to any person extending credit to, contracting with, or having
a claim against, the Trust; and that, provided they have exercised reasonable
care and have acted under the reasonable belief that their actions are in the
best interest of the Registrant, the trustees and officers shall not be liable
for neglect or wrongdoing by them or any officer, agent, employee or investment
adviser of the Registrant.
Section 2 of Article XI of the Declaration of Trust additionally
provides that, subject to the provisions of Section 1 of Article XI and to
Article X, the trustees shall not be liable for errors of judgment or mistakes
of fact or law, or for any act or omission in accordance with advice of counsel
or other experts, or failing to follow such advice, with respect to the meaning
and operation of the Declaration of Trust.
Article XI of the By-Laws provides that the Registrant may purchase and
maintain insurance on behalf of any person who is or was a trustee, officer or
employee of the Trust, or is or was serving at the request of the Trust as a
trustee, officer or employee of a corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity or arising out of his or her status
as such, whether or not the Registrant would have the power to indemnify him or
her against such liability, provided that the Registrant may not acquire
insurance protecting any trustee or officer against liability to the Registrant
or its shareholders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his or her office.
Section 9 of the Investment Advisory and Administration Contract
("Advisory Contract") between Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins") and the Trust provides that Mitchell Hutchins shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Registrant in connection with the
C-4
<PAGE>
matters to which the Advisory Contract relates, except for a loss resulting from
willful misfeasance, bad faith, or gross negligence of Mitchell Hutchins in the
performance of its duties or from its reckless disregard of its obligations and
duties under the Advisory Contract. The sub-advisory contracts with respect to
PaineWebber Low Duration U.S. Government Income Fund and PaineWebber Asia
Pacific Growth Fund contain similar provisions with respect to those
sub-advisers. Section 10 of the Advisory Contract provides that the trustees
shall not be liable for any obligations of the Trust under the Advisory Contract
and that Mitchell Hutchins shall look only to the assets and property of the
Trust in settlement of such right or claim and not to the assets and property of
the trustees.
Section 9 of each Distribution Contract provides that the Trust will
indemnify Mitchell Hutchins and its officers, directors or controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by Mitchell Hutchins to the Trust for use in the Registration
Statement; and provided that this indemnity agreement shall not protect any such
persons against liabilities arising by reason of their bad faith, gross
negligence or willful misfeasance; and shall not inure to the benefit of any
such persons unless a court of competent jurisdiction or controlling precedent
determines that such result is not against public policy as expressed in the
Securities Act of 1933. Section 9 of each Distribution Contract also provides
that Mitchell Hutchins agrees to indemnify, defend and hold the Trust, its
officers and trustees free and harmless of any claims arising out of any alleged
untrue statement or any alleged omission of material fact contained in
information furnished by Mitchell Hutchins for use in the Registration Statement
or arising out of an agreement between Mitchell Hutchins and any retail dealer,
or arising out of supplementary literature or advertising used by Mitchell
Hutchins in connection with each Distribution Contract.
Section 9 of each Exclusive Dealer Agreement contains provisions
similar to Section 9 of each Distribution Contract, with respect to PaineWebber
Incorporated ("PaineWebber").
Section 10 of each Distribution Contract contains provisions similar to
that of Section 10 of the Investment Advisory and Administration Contract, with
respect to Mitchell Hutchins and PaineWebber, as appropriate.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be provided to trustees, officers and controlling
persons of the Trust, pursuant to the foregoing provisions or otherwise, the
Trust has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust of expenses
incurred or paid by a trustee, officer or controlling person of the Trust in
connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Trust by such
trustee, officer or controlling person in connection with the securities being
registered, the Trust will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Mitchell Hutchins, a Delaware corporation, is a registered investment
advisor and is a wholly owned subsidiary of PaineWebber which is, in turn, a
wholly owned subsidiary of Paine Webber Group Inc. Mitchell Hutchins is
primarily engaged in the investment advisory business. Information as to the
officers and directors of Mitchell Hutchins is included in its Form ADV, as
filed with the Securities and Exchange Commission (registration number
801-13219), and is incorporated herein by reference.
Pacific Investment Management Company ("PIMCO") serves as sub-adviser
for PaineWebber Low Duration U.S. Government Income Fund. PIMCO, a Delaware
partnership, is a registered investment adviser and a subsidiary general
partnership of PIMCO Advisors L.P. ("PIMCO Advisors"). A majority interest in
PIMCO Advisors is held by PIMCO Partners, G.P., a general partnership between
Pacific Investment Management
C-5
<PAGE>
Company, a California corporation and an indirect wholly owned subsidiary of
Pacific Life Insurance Company ("Pacific Life") and PIMCO Partners, L.L.C., a
limited liability company controlled by the PIMCO Managing Directors. PIMCO is
primarily engaged in the investment advisory business. Information as to the
officers and Managing Directors and partners of PIMCO is included in its Form
ADV, as filed with the Securities and Exchange Commission (registration number
801-48187), and is incorporated herein by reference.
Schroder Capital Management International Inc. ("Schroder Capital")
serves as investment sub-adviser for PaineWebber Asia Pacific Growth Fund.
Schroder Capital, a New York corporation, is a registered investment adviser and
a wholly owned subsidiary of Schroders Incorporated, the wholly owned U.S.
holding company subsidiary of Schroders plc. Schroder Capital is primarily
engaged in the investment advisory business. Information as to the officers and
directors of Schroder Capital is included on its Form ADV, as filed with the
Securities and Exchange Commission (registration number 801-15834), and is
incorporated herein by reference.
Item 29. Principal Underwriters
----------------------
(a) Mitchell Hutchins serves as principal underwriter and/or investment adviser
for the following other investment companies:
ALL-AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
GLOBAL SMALL CAP FUND INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
MANAGED HIGH YIELD FUND INC.
MITCHELL HUTCHINS PORTFOLIOS
MITCHELL HUTCHINS SERIES TRUST
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INDEX TRUST
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
2002 TARGET TERM TRUST INC.
(b) Mitchell Hutchins is the principal underwriter for the Registrant.
PaineWebber acts as exclusive dealer for the shares of the Registrant.
The directors and officers of Mitchell Hutchins, their principal
business addresses and their positions and offices with Mitchell
Hutchins are identified in its Form ADV, as filed with the Securities
and Exchange Commission (registration number 801-13219). The directors
and officers of PaineWebber, their principal business addresses and
their positions and offices with PaineWebber are identified in its Form
ADV, as filed with the Securities and Exchange Commission (registration
number 801-7163). The foregoing information is hereby incorporated by
reference. The information set forth below is furnished for those
directors and officers of Mitchell Hutchins or PaineWebber who also
serve as trustees or officers of the Registrant. Unless otherwise
indicated, the principal business address of each person named is 1285
Avenue of the Americas, New York, NY 10019.
C-6
<PAGE>
<TABLE>
<CAPTION>
Position and Offices with
Name Position With Registrant Underwriter or Exclusive Dealer
- ---- ------------------------ -------------------------------
<S> <C> <C>
Margo N. Alexander President and Trustee Director, President and Chief Executive Officer of
Mitchell Hutchins and Director and Executive Vice
President of PaineWebber
Mary C. Farrell Trustee Managing Director, Senior Investment Strategist
and member of Investment Policy Committee of
PaineWebber
Julianna Berry Vice President Vice President and a Portfolio Manager of Mitchell
Hutchins
Karen L. Finkel Vice President First Vice President and a Portfolio Manager of
Mitchell Hutchins
James F. Keegan Vice President Senior Vice President and a Portfolio Manager of
Mitchell Hutchins
Thomas J. Libassi Vice President Senior Vice President and a Portfolio Manager of
Mitchell Hutchins
Dennis McCauley Vice President Managing Director and Chief Investment Officer -
Fixed Income of Mitchell Hutchins
Ann E. Moran Vice President and Assistant Vice President and a Manager of the Mutual Fund
Treasurer Finance Division of Mitchell Hutchins
Dianne E. O'Donnell Vice President and Secretary Senior Vice President and Deputy General Counsel
of Mitchell Hutchins
Emil Polito Vice President Senior Vice President and Director of Operations
and Control of Mitchell Hutchins
Victoria E. Schonfeld Vice President Managing Director and General Counsel of Mitchell
Hutchins
Paul H. Schubert Vice President and Assistant First Vice President and Director of the Mutual
Fund Finance Division of Mitchell Hutchins
Nirmal Singh Vice President First Vice President and a Portfolio Manager of
Mitchell Hutchins
Barney A. Taglialatela Vice President and Assistant Vice President and a Manager of the Mutual Fund
Treasurer Finance Division of Mitchell Hutchins
Mark A. Tincher Vice President Managing Director and Chief Investment Officer -
U.S. Equity Investments of Mitchell Hutchins
Craig M. Varrelman Vice President First Vice President and a Portfolio Manager of
Mitchell Hutchins
Keith A. Weller Vice President and Assistant First Vice President and Associate General Counsel
Secretary of Mitchell Hutchins
Ian W. Williams Vice President and Assistant Vice President and a Manager of the Mutual Fund
Treasurer Finance Division of Mitchell Hutchins
</TABLE>
(c) None.
Item 30. Location of Accounts and Records
--------------------------------
The books and other documents required by paragraphs (b)(4), (c) and
(d) of Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Mitchell Hutchins, 1285 Avenue of
C-7
<PAGE>
the Americas, New York, New York 10019. All other accounts, books and documents
required by Rule 31a-1 are maintained in the physical possession of Registrant's
transfer agent and custodian.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and State of
New York, on the 25th day of February, 1998.
PAINEWEBBER MANAGED INVESTMENTS TRUST
By: /s/ Dianne E. O'Donnell
-------------------------------
Dianne E. O'Donnell
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Margo N. Alexander President and Trustee February 25, 1998
- -------------------------- (Chief Executive Officer)
Margo N. Alexander *
/s/ E. Garrett Bewkes, Jr. Trustee and Chairman February 25, 1998
- -------------------------- of the Board of Trustees
E. Garrett Bewkes, Jr. *
/s/ Richard Q. Armstrong Trustee February 25, 1998
- --------------------------
Richard Q. Armstrong *
/s/ Richard R. Burt Trustee February 25, 1998
- --------------------------
Richard R. Burt *
/s/ Mary C. Farrell Trustee February 25, 1998
- --------------------------
Mary C. Farrell *
/s/ Meyer Feldberg Trustee February 25, 1998
- --------------------------
Meyer Feldberg *
/s/ George W. Gowen Trustee February 25, 1998
- --------------------------
George W. Gowen *
/s/ Frederic V. Malek Trustee February 25, 1998
- --------------------------
Frederic V. Malek *
/s/ Carl W. Schafer Trustee February 25, 1998
- --------------------------
Carl W. Schafer *
/s/ Paul H. Schubert Vice President and Treasurer (Chief February 25, 1998
- -------------------------- Financial and Accounting Officer)
Paul H. Schubert
</TABLE>
<PAGE>
SIGNATURES (Continued)
* Signature affixed by Elinor W. Gammon pursuant to powers of attorney
dated May 21, 1996 and incorporated by reference from Post-Effective
Amendment No. 30 to the registration statement of PaineWebber Managed
Municipal Trust, SEC File 2-89016, filed June 27, 1996.
<PAGE>
PAINEWEBBER MANAGED INVESTMENTS TRUST
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER
- ------
(1) Amended and Restated Declaration of Trust (filed herewith)
(2) Restated By-Laws (filed herewith)
(3) Voting trust agreement - none
(4) Instruments defining the rights of holders of the Registrant's
shares of beneficial interest 1/
(5) (a) Investment Advisory and Administration Contract
(filed herewith)
(b) Investment Advisory Fee Agreement with respect to
PaineWebber Utility Income Fund (filed herewith)
(c) Investment Advisory Fee Agreement with respect to
PaineWebber Low Duration U.S. Government Income Fund
(filed herewith)
(d) Investment Advisory Fee Agreement with respect to
PaineWebber Asia Pacific Growth Fund 2/
(e) Sub-Investment Advisory Contract with respect to
PaineWebber Low Duration U.S. Government Income Fund
3/
(f) Sub-Advisory Contract with respect to PaineWebber
Asia Pacific Growth Fund 2/
(6) (a) Distribution Contract with respect to Class A Shares
(filed herewith)
(b) Distribution Contract with respect to Class B Shares
(filed herewith)
(c) Distribution Contract with respect to Class C Shares
4/
(d) Distribution Contract with respect to Class Y Shares
4/
(e) Exclusive Dealer Agreement with respect to Class A
Shares (filed herewith)
(f) Exclusive Dealer Agreement with respect to Class B
Shares (filed herewith)
(g) Exclusive Dealer Agreement with respect to Class C
Shares 4/
(h) Exclusive Dealer Agreement with respect to Class Y
Shares 4/
(7) Bonus, profit sharing or pension plans - none
(8) Custodian Agreement (filed herewith)
(9) Transfer Agency Agreement (filed herewith)
(10) Opinion and Consent of Counsel (filed herewith)
(11) Auditor's Consent ( filed herewith)
(12) Financial statements omitted from prospectus - none
(13) Letter of investment intent (filed herewith)
(14) Prototype Retirement Plan (not applicable)
(15) (a) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class A Shares (filed herewith)
<PAGE>
(b) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class B Shares (filed herewith)
(c) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class C Shares (filed herewith)
(d) Distribution Fee Addendum with respect to Class C
shares of PaineWebber Low Duration U.S. Government
Income Fund (filed herewith)
(e) Distribution Fee Addendum with respect to Class C
shares of PaineWebber Asia Pacific Growth Fund 5/
(16) Schedule for Computation of Performance Quotations (filed
herewith)
(17) and (27) Financial Data Schedule (filed herewith)
(18) Plan pursuant to Rule 18f-3 6/
1/ Incorporated by reference from Articles III, VIII, IX, X and XI of
Registrant's Amended and Restated Declaration of Trust and from
Articles II, VII and X of Registrant's Restated By-Laws.
2/ Incorporated by reference from Post Effective Amendment No. 50 to the
registration statement, SEC File No. 2-91362, filed July 7, 1997.
3/ Incorporated by reference from Post-Effective Amendment No. 37 to the
registration statement, SEC File No. 2-91362, filed March 31, 1995.
4/ Incorporated by reference from Post-Effective Amendment No. 39 to the
registration statement, SEC File No. 2-91362, filed February 14, 1996.
5/ Incorporated by reference from Post-Effective Amendment No. 46 to the
registration statement, SEC File No. 2-91362, filed October 4, 1996.
6/ Incorporated by reference from Post-Effective Amendment No. 43 to the
registration statement, SEC File No. 2-91362, filed July 31, 1996.
<PAGE>
Exhibit No. 1
PAINEWEBBER MANAGED INVESTMENTS TRUST
AMENDED AND RESTATED DECLARATION OF TRUST
DECLARATION OF TRUST, made at Boston, Massachusetts, this 21st day of November,
1986 and amended and restated this 19th day of November, 1997 by the Trustees:
WHEREAS, the Trustees desire to establish a trust fund for the
investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed in trust under
this Declaration of Trust as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1. This Trust shall be known as "PaineWebber Managed
Investments Trust." The resident agent for the Trust in Massachusetts shall be
CT Corporation System, whose address is 2 Oliver Street, Boston, Massachusetts,
or such other person as the Trustees may from time to time designate.
DEFINITIONS
Section 2. Wherever used herein, unless otherwise required by the
context or specifically provided:
(a) The Terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Majority Shareholder Vote" (the 67% or 50% requirement of
the third sentence of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "Principal Underwriter" shall have the meanings given them in
the 1940 Act, as amended from time to time;
(b) The "Trust" refers to PaineWebber Managed Investments Trust and
reference to the Trust, when applicable to one or more Series of the Trust,
shall refer to any such Series;
(c) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 3;
(d) "Shareholder" means a record owner of Shares of the Trust;
(e) The "Trustees" means the person who has signed this Declaration of
Trust so long as he shall continue in office in accordance with the terms
hereof, and all other persons who may from time to time be duly elected or
appointed, qualified and serving as Trustees in accordance
<PAGE>
with the provisions of Article IV hereof, and reference herein to a Trustee or
the Trustees shall refer to such person or persons in his capacity or their
capacities as trustees hereunder.
(f) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest of each Series or Class thereof
shall be divided from time to time and includes fractions of shares as well as
whole shares (all of the transferable units of a Series or of a single Class may
be referred to as "Shares" as the context may require);
(g) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time;
(h) "Series" refers to series of Shares of the Trust established in
accordance with the provisions of Article III;
(i) "Class" refers to the class of Shares of a Series of the Trust
established in accordance with the Provisions of Article III.
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to provide investors a continuous source
of managed investment in securities.
ARTICLE III
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 1. The beneficial interest in the Trust shall be divided into
such transferable Shares of one or more separate and distinct Series or Classes
thereof as the Trustees shall from time to time create and establish. The number
of Shares is unlimited and each Share shall have a par value of $0.001 per Share
and upon issuance in accordance with the terms hereof shall be fully paid and
nonassessable. The Trustees shall have full power and authority, in their sole
discretion and without obtaining any prior authorization or vote of the
Shareholders of the Trust, to create and establish (and to change in any manner)
Shares with such preferences, terms of conversion, voting powers, rights and
privileges as the Trustees may from time to time determine, to divide or combine
the Shares into a greater or lesser number, to classify or reclassify any
unissued Shares into one or more Series or Classes of Shares, to abolish any one
or more Series or Classes of Shares, and to take such other action with respect
to the Shares as the Trustees may deem desirable. The Trustees, in their
discretion without a vote of the Shareholders, may divide the Shares of any
Series into Classes. In such event, each Class of a Series shall represent
interests in the assets of that Series and have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
expenses allocated to a Class of a Series may be borne solely by such Class as
shall be determined by the Trustees and a Class of a Series may have exclusive
voting rights with respect to matters affecting only that Class. Without
limiting the authority of the Trustees set forth in this Section 1 to establish
and designate any further Series or Classes, the Trustees have
2
<PAGE>
established and designated the Series of Shares and Classes listed in Schedule A
attached hereto and made a part hereof.
ESTABLISHMENT OF SERIES OR CLASS
Section 2. The establishment of any Series or Class in addition to
those set forth in Section 1 shall be effective upon the adoption of a
resolution by a majority of the then Trustees setting forth such establishment
and designation and the relative rights and preferences of the Shares of such
Series or Class thereof. At any time that there are no Shares outstanding of any
particular Series previously established and designated, the Trustees may by a
majority vote abolish that Series and the establishment and designation thereof.
At any time that there are no shares outstanding of any particular Class of a
Series, the Trustees may by a majority vote abolish that Class and the
establishment and designation thereof. The Trustees by a majority vote may
change the name of any Series or Class.
OWNERSHIP OF SHARES
Section 3. The ownership of Shares shall be recorded in the books of
the Trust. The Trustees may make such rules as they consider appropriate for the
transfer of Shares and similar matters. The record books of the Trust shall be
conclusive as to who are the holders of Shares and as to the number of Shares
held from time to time by each Shareholder.
INVESTMENT IN THE TRUST
Section 4. The Trustees shall accept investments in the Trust from such
persons and on such terms as they may from time to time authorize. Such
investments may be in the form of cash or securities in which the appropriate
Series is authorized to invest, valued as provided in Article IX, Section 3.
After the date of the initial contribution of capital, the number of Shares to
represent the initial contribution may in the Trustees' discretion be considered
as outstanding and the amount received by the Trustees on account of the
contribution shall be treated as an asset of the Trust or a Series thereof, as
appropriate. Subsequent investments in the Trust shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however, that
the Trustees may, in their sole discretion, (a) impose a sales charge upon
investments in the Trust or Series and (b) issue fractional Shares. The Trustees
shall have the right to refuse to accept investments in the Trust or any Series
at any time without any cause or reason therefor whatsoever.
ASSETS AND LIABILITIES OF SERIES
Section 5. All consideration received by the Trust for the issue or
sale of Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
referred to as "assets belonging to" that Series. In addition, any assets,
income, earnings, profits, and proceeds thereof, funds, or
3
<PAGE>
payments which are not readily identifiable as belonging to any particular
Series shall be allocated by the Trustees between and among one or more of the
Series in such manner as they, in their sole discretion, deem fair and
equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes, and shall be referred to as assets
belonging to that Series. The assets belonging to a particular Series shall be
so recorded upon the books of the Trust, and shall be held by the Trustees in
Trust for the benefit of the holders of Shares of that Series. The assets
belonging to each particular Series shall be charged with the liabilities of
that Series and all expenses, costs, charges and reserves attributable to that
Series except that liabilities and expenses allocated solely to a particular
Class shall be borne by that Class. Any general liabilities, expenses, costs,
charges or reserves of the Trust or Series which are not readily identifiable as
belonging to any particular Series or Class shall be allocated and charged by
the Trustees between or among any one or more of the Series or Classes in such
manner as the Trustees in their sole discretion deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes. Any creditor of any Series may look only to
the assets of that Series to satisfy such creditor's debt. See Article X,
Section 1.
NO PREEMPTIVE RIGHTS
Section 6. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust or
the Trustees.
STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY
Section 7. Shares shall be deemed to be personal property giving only
the rights provided in this Declaration of Trust. Every Shareholder by virtue of
having become a Shareholder shall be held expressly to have assented and agreed
to the terms of this Declaration of Trust and to have become a party hereto. The
death of a Shareholder during the continuance of the Trust shall not operate to
terminate the Trust nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere against the Trust
or the Trustees, but only to the rights of said decedent under this Trust.
Ownership of Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the Trust property or right to call for a partition or
division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders partners. Neither the Trust nor the Trustees shall
have any power to bind any Shareholder personally or to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay by way of
subscription for any Shares or otherwise.
ARTICLE IV
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 1. The business and affairs of the Trust shall be managed by
the Trustees, and they shall have all powers necessary and desirable to carry
out that responsibility. A Trustee shall not be required to be a Shareholder of
the Trust.
4
<PAGE>
ELECTION OF TRUSTEES AND APPOINTMENT OF INITIAL TRUSTEE
Section 2. On a date fixed by the Trustees, the Shareholders shall
elect the Trustees. Until such election, the Trustees shall be the initial
Trustee and such other persons as may be hereafter appointed pursuant to Section
4 of this Article IV. The initial Trustee shall be Dianne E. O'Donnell.
TERM OF OFFICE OF TRUSTEES
Section 3. The Trustees shall hold office during the lifetime of this
Trust, and until its termination as hereinafter provided; except (a) that any
Trustee may resign his trust by written instrument signed by him and delivered
to the other Trustees or to any officer of the Trust, which shall take effect
upon such delivery or upon such later date as is specified therein; (b) that any
Trustee may be removed with or without cause at any time by written instrument,
signed by at least two-thirds of the number of Trustees prior to such removal,
specifying the date when such removal shall become effective; (c) that any
Trustee who requests in writing to be retired or who has become incapacitated by
illness or injury may be retired by written instrument signed by a majority of
other Trustees, specifying the date of his retirement; and (d) that any Trustee
may be removed at any Special Meeting of the Trust by a vote of at least
two-thirds of the outstanding Shares.
RESIGNATION AND APPOINTMENT OF TRUSTEES
Section 4. In case of the declination, death, resignation, retirement,
removal, incapacity, or inability of any of the Trustees, or in case a vacancy
shall exist by reason of an increase in number or for any other reason, the
remaining Trustees shall fill such vacancy by appointment of such other person
as they in their discretion shall see fit consistent with the limitations under
the 1940 Act. Such appointment shall be evidenced by a written instrument signed
by a majority of the Trustees in office or by a recording in the records of the
Trust, whereupon the appointment shall take effect. An appointment of a Trustee
may be made by the Trustees then in office as aforesaid in anticipation of a
vacancy to occur by reason of retirement, resignation or increase in number of
Trustees effective at a later date, provided that said appointment shall become
effective only at or after the effective date of said retirement, resignation or
increase in number of Trustees. As soon as any Trustee so appointed shall have
accepted this trust, the trust estate shall vest in the new Trustee or Trustees,
together with the continuing Trustees, without any further act or conveyance,
and he shall be deemed a Trustee hereunder. The power of appointment is subject
to the provisions of Section 16(a) of the 1940 Act.
TEMPORARY ABSENCE OF TRUSTEE
Section 5. Any Trustee may, by power of attorney, delegate his power
for a period not exceeding six months at any one time to any other Trustee or
Trustees, provided that in no case shall less than two Trustees personally
exercise the other powers hereunder except as herein otherwise expressly
provided.
5
<PAGE>
NUMBER OF TRUSTEES
Section 6. The number of Trustees shall initially be one (1) and
thereafter shall be such number as shall be fixed from time to time by a written
instrument signed by a majority of the Trustees (or by an officer of the Trust
pursuant to a vote of the majority of such Trustees); provided, however, that
the number of Trustees serving hereunder at any time shall in no event be less
than one (1) nor more than fifteen (15).
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, or while any Trustee is absent from his state of domicile
(unless said Trustee has made arrangements to be informed about, and to
participate in, the affairs of the Trust during such absence), or is physically
or mentally incapacitated by reason of disease or otherwise, the other Trustees
shall have all the powers hereunder and the certificate of the other Trustees of
such vacancy, absence or incapacity, shall be conclusive.
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 7. The death, declination, resignation, retirement, removal,
incapacity, or inability of the Trustee, or any one of them, shall not operate
to annul the Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust.
OWNERSHIP OF ASSETS OF THE TRUST
Section 8. The assets of the Trust shall be held separate and apart
from any assets now or hereafter held in any capacity other than as Trustee
hereunder by the Trustees or any successor Trustees. All of the assets of the
Trust shall at all times be considered as vested in the Trustees.
ARTICLE V
POWERS OF THE TRUSTEES
POWERS
Section 1. The Trustees in all instances shall act as principals, and
are and shall be free from the control of the Shareholders. The Trustees shall
have full power and authority to do any and all acts and to make and execute any
and all contracts and instruments that they may consider necessary or
appropriate in connection with the management of the Trust. The Trustees shall
not in any way be bound or limited by present or future laws or customs in
regard to trust investments, but shall have full authority and power to make any
and all investments which they, in their uncontrolled discretion, shall deem
proper to accomplish the purposes of this Trust. Subject to any applicable
limitation in this Declaration of Trust or the By-Laws of the Trust, the
Trustees shall have power and authority, without limitation:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by any
present or future law or custom in regard to investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust; to purchase and sell (or write) options
on securities, currencies, indices, futures contracts and other financial
instruments and enter into
6
<PAGE>
closing transactions in connection therewith; to enter into all types of
commodities contracts, including without limitation the purchase and sale of
futures contracts and forward contracts on securities, indices, currencies, and
other financial instruments; to engage in forward commitment, "when issued" and
delayed delivery transactions; to enter into repurchase agreements and reverse
repurchase agreements; and to employ all kinds of hedging techniques and
investment management strategies.
(b) To adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve the right to the Shareholders.
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate.
(d) To employ as custodian of any assets of the Trust subject to any
conditions set forth in this Declaration of Trust or in the By-Laws, if any, a
bank, trust company, or other entity permitted by the Commission to serve as
such.
(e) To retain a transfer agent and Shareholder servicing agent, or
both.
(f) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both.
(g) To set record dates in the manner hereinafter provided for.
(h) To delegate such authority as they consider desirable to any
officers of the Trust and to any agent, independent contractor, custodian or
underwriter.
(i) To sell or exchange any or all of the assets of the Trust, subject
to the provisions of Article XI, Section 4(b) hereof.
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper.
(k) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities.
(l) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form; or either in
its own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts trust companies or investment companies.
(m) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article III and to establish separate Classes
thereof.
7
<PAGE>
(n) To allocate assets, liabilities and expenses of the Trust to a
particular Series and liabilities and expenses to a particular Class thereof or
to apportion the same between or among two or more Series or Classes, provided
that any liabilities or expenses incurred by a particular Series or Class shall
be payable solely out of the assets belonging to that Series or Class as
provided for in Article III.
(o) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust.
(p) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes.
(q) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided for.
(r) To borrow money.
(s) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any Shareholders
whose investment is less than such minimum upon giving notice to such
Shareholder.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 2. Any Trustee, officer, other agent or independent contractor
of the Trust may acquire, own and dispose of Shares to the same extent as if he
were not a Trustee, officer, agent or independent contractor; and the Trustees
may issue and sell or cause to be issued and sold Shares to and buy such Shares
from any such person or any firm or company in which he is interested, subject
only to the general limitations herein contained as to the sale and purchase of
such Shares; and all subject to any restrictions which may be contained in the
By-Laws.
ACTION BY THE TRUSTEES
Section 3. The Trustees shall act by majority vote at a meeting duly
called or by unanimous written consent without a meeting or by telephone consent
provided a quorum of Trustees participate in any such telephonic meeting, unless
the 1940 Act requires that a particular action be taken only at a meeting in
person of the Trustees. At any meeting of the Trustees, a majority of the
Trustees shall constitute a quorum. Meetings of the Trustees may be called
orally or in writing by the Chairman of the Trustees or by any two other
Trustees. Notice of the time, date and place of all meetings of the Trustees
shall be given by the party calling the meeting to each Trustee by telephone or
telegram sent to his home or business address at least twenty-four hours in
advance of the meeting or by written notice mailed to his home or business
address at least seventy-two hours
8
<PAGE>
in advance of the meeting. Notice need not be given to any Trustee who attends
the meeting without objecting to the lack of notice or who executes a written
waiver of notice with respect to the meeting either before or after such
meeting. Subject to the requirements of the 1940 Act, the Trustees by majority
vote may delegate to any one of their number their authority to approve
particular matters or take particular actions on behalf of the Trust.
CHAIRMAN OF THE TRUSTEES
Section 4. The Trustees may appoint one of their number to be Chairman
of the Board of Trustees. The Chairman shall preside at all meetings of the
Trustees, shall be responsible for the execution of policies established by the
Trustees and the administration of the Trust, and may be the chief executive,
financial and/or accounting officer of the Trust.
ARTICLE VI
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 1. Subject to the provisions of Article III, Section 5, the
Trustees shall be reimbursed from the Trust estate or the assets belonging to
the appropriate Series for their expenses and disbursements, including, without
limitation, fees and expenses of Trustees who are not Interested Persons of the
Trust, interest expense, taxes, fees and commissions of every kind, expenses of
pricing Trust portfolio securities, expenses of issue, repurchase and redemption
of Shares including expenses attributable to a program of periodic repurchases
or redemptions, expenses of distributing its Shares and providing services to
Shareholders, expenses of registering and qualifying the Trust and its Shares
under Federal and State laws and regulations, charges of investment advisers,
administrators, custodians, transfer agents, and registrars, expenses of
preparing and setting in type prospectuses and statements of additional
information, expenses of printing and distributing prospectuses and statements
of additional information sent to existing Shareholders, auditing and legal
expenses, reports to Shareholders, expenses of meetings of Shareholders and
proxy solicitations therefor, insurance expense, association membership dues and
for such non-recurring items as may arise, including litigation to which the
Trust is a party (except those losses and expenses the indemnification of which
is not permitted under Article X hereof), and for all losses and liabilities by
them incurred in administering the Trust; and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series prior to any rights or interests of
the Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
9
<PAGE>
ARTICLE VII
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
INVESTMENT ADVISER
Section 1. Subject to a Majority Shareholder Vote, the Trustees may in
their discretion from time to time enter into an investment advisory or
management contract(s) with respect to the Trust or any Series thereof whereby
the other party(ies) to such contract(s) shall undertake to furnish the Trustees
such management, investment advisory, statistical and research facilities and
services and such other facilities and services, if any, and all upon such terms
and conditions, as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Declaration of Trust, the Trustees may
authorize the investment adviser(s) (subject to such general or specific
instruments as the Trustees may from time to time adopt) to effect purchases,
sales or exchanges of portfolio securities and other investment instruments of
the Trust on behalf of the Trustees or may authorize any officer, agent, or
Trustee to effect such purchases, sales or exchanges pursuant to recommendations
of the investment adviser (and all without further action by the Trustees). Any
such purchases, sales and exchanges shall be deemed to have been authorized by
all of the Trustees.
The Trustees may, subject to applicable requirements of the 1940 Act,
including those relating to Shareholder approval, authorize the investment
adviser to employ one or more sub-advisers from time to time to perform such of
the acts and services of the investment adviser, and upon such terms and
conditions, as may be agreed upon between the investment adviser and
sub-adviser.
PRINCIPAL UNDERWRITER
Section 2. The Trustees may in their discretion from time to time enter
into one or more contract(s) providing for the sale of the Shares, whereby the
Trust may either agree to sell the Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as may be prescribed in the
By-Laws, if any, and such further terms and conditions as the Trustees may in
their discretion determine not inconsistent with the provisions of this Article
VII, or of the By-Laws, if any; and such contract may also provide for the
repurchase or sale of Shares by such other party as principal or as agent of the
Trust. The Trustees may in their discretion adopt a plan or plans of
distribution and enter into any related agreements whereby the Trust finances
directly or indirectly any activity that is primarily intended to result in
sales of Shares. Such plan or plans of distribution and any related agreements
may contain such terms and conditions as the Trustees may in their discretion
determine subject to the requirements of Section 12 of the 1940 Act, Rule 12b-1
thereunder and any other applicable rules and regulations.
TRANSFER AGENT
Section 3. The Trustees may in their discretion from time to time enter
into a transfer agency and Shareholder service contract whereby the other party
shall undertake to furnish the Trustees and Trust with transfer agency and
shareholder services. The contract shall be on such terms and conditions as the
Trustees may in their discretion determine not inconsistent with the
10
<PAGE>
provisions of this Declaration of Trust or of the By-Laws, if any. Such
services may be provided by one or more entities, including one or more agents
of such other party.
PARTIES TO CONTRACT
Section 4. Any contract of the character described in Sections 1, 2 and
3 of this Article VII or that relates to the provision of custodian services to
the Trust may be entered into with any corporation, firm, partnership, trust or
association, although one more of the Trustees or officers of the Trust may be
an officer, director, trustee, shareholder, or member of such other party to the
contract, and no such contract shall be invalidated or rendered voidable by
reason of the existence of any relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of said contract or accountable for any
profit realized directly or indirectly therefrom, provided that the contract
when entered into was reasonable and fair and not inconsistent with the
provisions of this Article VII or the By-Laws, if any. The same person
(including a firm, corporation, partnership, trust, or association) may be the
other party to contracts entered into pursuant to Sections 1, 2 and 3 above or
with respect to the provision of custodian services to the Trust, and any
individual may be financially interested in or otherwise affiliated with persons
who are parties to any or all of the contracts mentioned in this Section 4.
PROVISIONS AND AMENDMENTS
Section 5. Any contract entered into pursuant to Sections 1 and 2 of
this Article VII shall be consistent with and subject to the applicable
requirements of Sections 12 and 15 of the 1940 Act and the rules and orders
thereunder (including any amendments thereto or other applicable Act of Congress
hereafter enacted) with respect to its continuance in effect, its termination,
and the method of authorization and approval of such contract or renewal
thereof.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 1. The Shareholders shall have power to vote (i) for the
election of Trustees as provided in Article IV, Section 2, (ii) for the removal
of Trustees as provided in Article IV, Section 3(d), (iii) with respect to any
investment advisory or management contract as provided in Article VII, Section
1, (iv) with respect to any termination or reorganization of the Trust as
provided in Article XI, Section 4, (v) with respect to the amendment of this
Declaration of Trust to the extent and as provided in Article XI, Section 7,
(vi) to the same extent as the shareholders of a Massachusetts business
corporation, as to whether or not a court action, proceeding or claim should be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, provided, however, that a Shareholder of a particular
Series shall not be entitled to bring any derivative or class action on behalf
of any other Series of the Trust, and provided further that, within a Series, a
Shareholder of a particular Class shall not be entitled to bring any derivative
or class action on behalf of any other Class except with respect to matters
sharing a common fact pattern with said Shareholder's own Class; and (vii) with
respect to such additional matters relating
11
<PAGE>
to the Trust as may be required or authorized by law, by this Declaration of
Trust, or the By-Laws of the Trust, if any, or any registration of the Trust
with the Commission or any State, or as the Trustees may consider desirable. On
any matter submitted to a vote of the Shareholders, all Shares shall be voted by
individual Series, except (i) when required by the 1940 Act, Shares shall be
voted in the aggregate and not by individual Series; and (ii) when the Trustees
have determined that the matter affects only the interests of one or more
Classes, then only the Shareholders of such Class or Classes shall be entitled
to vote thereon. Each whole Share shall be entitled to one vote as to any matter
on which it is entitled to vote, and each fractional Share shall be entitled to
a proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required or permitted by law, this Declaration of Trust or any
By-Laws of the Trust to be taken by Shareholders.
MEETINGS
Section 2. The first Shareholders' meeting shall be held as specified
in Section 2 of Article IV at the principal office of the Trust or such other
place as the Trustees may designate. Special meetings of the Shareholders or any
Series or Class thereof may be called by the Trustees and shall be called by the
Trustees upon the written request of Shareholders owning at least one-tenth of
the outstanding Shares entitled to vote. Whenever ten or more Shareholders
meeting the qualifications set forth in Section 16(c) of the 1940 Act, as the
same may be amended from time to time, seek the opportunity of furnishing
materials to the other Shareholders with a view to obtaining signatures on such
a request for a meeting, the Trustees shall comply with the provisions of said
Section 16(c) and any rules or orders thereunder with respect to providing such
Shareholders access to the list of the Shareholders of record of the Trust or
the mailing of such materials to such Shareholders of record. Shareholders shall
be entitled to at least fifteen days' notice of any meeting.
QUORUM AND REQUIRED VOTE
Section 3. A majority of Shares entitled to vote in person or by proxy
shall be a quorum for the transaction of business at a Shareholders' meeting,
except that where any provision of law or of this Declaration of Trust permits
or requires that holders of any Series or Class thereof shall vote as a Series
or Class, then a majority of the aggregate number of Shares of that Series or
Class thereof entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that Series or Class. Any lesser number shall be
sufficient for adjournments. Any adjourned session or sessions may be held,
within one hundred twenty (120) days after the date set for the original
meeting, without the necessity of further notice. Except when a larger vote is
required by any provision of this Declaration of Trust or the By-Laws, a
majority of the Shares voted in person or by proxy shall decide any questions
and a plurality shall elect a Trustee, provided that where any provision of law
or of this Declaration of Trust permits or requires that the holders of any
Series or Class shall vote as a Series or Class, then a majority of the Shares
of that Series or Class voted on the matter shall decide that matter insofar as
that Series or Class is concerned.
12
<PAGE>
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Section 1.
(a) The Trustees may from time to time declare and pay dividends and
other distributions. The amount of such dividends and the payment of them shall
be wholly in the discretion of the Trustees.
(b) The Trustees shall have power, to the fullest extent permitted by
the laws of the Commonwealth of Massachusetts, at any time to declare and cause
to be paid dividends on Shares of a particular Series, from the assets belonging
to that Series, which dividends and other distributions, at the election of the
Trustees, may be paid daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, and may be payable in Shares of that Series or Class thereof, as
appropriate, at the election of each Shareholder of that Series or Class. All
dividends and distributions on Shares of a particular Series shall be
distributed pro rata to the holders of that Series in proportion to the number
of Shares of that Series held by such holders at the date and time of record
established for the payment of such dividends or distributions, except that such
dividends and distributions shall appropriately reflect expenses allocated to a
particular Class of such Series.
(c) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a "stock dividend" pro rata
among the Shareholders of a particular Series or of a Class thereof as of the
record date of that Series (fixed as provided in Section 3 of Article XI
hereof).
REDEMPTIONS
Section 2. In case any holder of record of Shares of a particular
Series or Class desires to dispose of his Shares, he may deposit at the office
of the transfer agent or other authorized agent of that Series a written request
or such other form of request as the Trustees may from time to time authorize,
requesting that the Series purchase the Shares in accordance with this Section
2; and the Shareholder so requesting shall be entitled to require the Series to
purchase, and the Series or the principal underwriter of the Series shall
purchase his said Shares, but only at the Net Asset Value of the Series or Class
held by the Shareholder (as described in Section 3 hereof) minus any applicable
sales charge or redemption or repurchase fee. The Series shall make payment for
any such Shares to be redeemed, as aforesaid, in cash or property from the
assets of that Series and payment for such Shares shall be made by the Series or
the principal underwriter of the Series to the Shareholder of record within
seven (7) days after the date upon which the request is effective; provided,
however, that if Shares being redeemed have been purchased by check, the Trust
may postpone payment until the Trust has assurance that good payment has been
collected for the purchase of the Shares. The Trust may require Shareholders to
pay a sales charge to the Trust, the underwriter or any other person designated
by the Trustees upon redemption or repurchase of Shares of any Series or Class
thereof, in such amount as shall be determined from time to time by the
Trustees. The amount of
13
<PAGE>
such sales charge may but need not vary depending on various factors, including
without limitation the holding period of the redeemed or repurchased Shares. The
Trustees may also charge a redemption or repurchase fee in such amount as may be
determined from time to time by the Trustees.
DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS
Section 3. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Net Asset Value per Share
shall be determined separately for each Series of Shares and shall be determined
on such days and at such times as the Trustees may determine. Such determination
may be made on a Series-by-Series or Class-by-Class basis, as appropriate, and
shall include any expenses allocated to a specific Series or Class. The
determination shall be made with respect to securities for which market
quotations are readily available at the market value of such securities; and
with respect to other securities and assets, at the fair value as determined in
good faith by the Trustees, provided, however, that the Trustees, without
Shareholder approval, may alter the method of appraising portfolio securities
insofar as permitted under the 1940 Act and the rules, regulations and
interpretations thereof promulgated or issued by the Commission or insofar as
permitted by any order of the Commission applicable to the Series. The Trustees
may delegate any of their powers and duties under this Section 3 with respect to
appraisal of assets and liabilities. At any time the Trustees may cause the Net
Asset Value per Share last determined to be determined again in a similar manner
and may fix the time when such redetermined values shall become effective.
SUSPENSION OF THE RIGHT OF REDEMPTION
Section 4. Notwithstanding Section 2 hereof, the Trustees may declare a
suspension of the right of redemption or postpone the date of payment as
permitted under the 1940 Act. Such suspension shall take effect at such time as
the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share existing after the termination of the
suspension.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
Section 1. All persons extending credit to, contracting with or having
any claim against the Trust or a particular Series shall look only to the assets
of the Trust or such Series, as the case may be, for payment under such credit,
contract or claim; and neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or future, nor any
other Series shall be personally liable therefor.
14
<PAGE>
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Trust, any Series, or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only in or with
respect to their or his capacity as Trustees or Trustee and neither such
Trustees or Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that the
same was executed or made by them on behalf of the Trust or by them as Trustees
or Trustee or as officers or officer and not individually and that the
obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust or the particular Series in question, as the case may be, but the
omission thereof shall not operate to bind any Trustees or Trustee or officers
or officer or Shareholders or Shareholder individually.
Section 2. Provided they have exercised reasonable care and have acted
under the reasonable belief that their actions are in the best interest of the
Trust, the Trustees and officers of the Trust shall not be responsible for or
liable in any event for neglect or wrongdoing of them or any officer, agent,
employee, investment adviser or independent contractor of the Trust, but nothing
contained in this Declaration of Trust shall protect any Trustee or officer
against any liability to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
INDEMNIFICATION
Section 3.
(a) Subject to the exceptions and limitations contained in
Section 3(b) below:
(i) every person who is, or has been a Trustee or officer of
the Trust (hereinafter referred to as "Covered Person") shall be indemnified by
the appropriate Series to the fullest extent permitted by law against liability
and against all expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened while in office or thereafter,
and the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office or (B)
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
15
<PAGE>
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office,
(A) by the court or other body approving the
settlement;
(B) by at least a majority of those Trustees who are
neither interested persons of the Trust nor are parties to the
matter based upon a review of readily available facts (as
opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to
a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees, or by independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be such
Trustee or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled to by contract or otherwise under
law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 3 may be paid by the applicable Series from time
to time prior to final disposition thereof upon receipt of an undertaking by or
on behalf of such Covered Person that such amount will be paid over by him to
the applicable Series if it is ultimately determined that he is not entitled to
indemnification under this Section 3; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance payments
or (c) either a majority of the Trustees who are neither interested persons of
the Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
(as opposed to a trial-type inquiry or full investigation), that there is reason
to believe that such Covered Person will not be disqualified from
indemnification under this Section 3.
SHAREHOLDERS
Section 4. In case any Shareholder or former Shareholder of any Series
of the Trust shall be held to be personally liable solely by reason of his being
or having been a Shareholder and not because of his acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets belonging to the applicable Series to be held
harmless from and indemnified against all loss and expense arising from such
liability. The Series shall, upon request by the Shareholder, assume the defense
16
<PAGE>
of any claim made against the Shareholder for any act or obligation of the
Series and satisfy any judgment thereon.
ARTICLE XI
MISCELLANEOUS
TRUST NOT A PARTNERSHIP
Section 1. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power to bind
personally either the Trust's officers or any Shareholder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 2. The exercise by the Trustees of their powers and discretion
hereunder in good faith and with reasonable care under the circumstances then
prevailing, shall be binding upon everyone interested. Subject to the provisions
of Article X, the Trustees shall not be liable for errors of judgment or
mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust,
and subject to the provisions of Article X, shall be under no liability for any
act or omission in accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is obtained.
ESTABLISHMENT OF RECORD DATES
Section 3. The Trustees may close the stock transfer books of the Trust
for a period not exceeding sixty (60) days preceding the date of any meeting of
Shareholders, or the date for the payment of any dividends, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect; or in lieu of closing the stock transfer books as
aforesaid, the Trustees may fix in advance a date, not exceeding ninety (90)
days preceding the date of any meeting of Shareholders, or the date for payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or to receive payment of such dividend, or to receive
such allotment or rights, or to exercise such rights in respect of any such
change, conversion or exchange of Shares, and in such case such Shareholders and
only such Shareholders as shall be Shareholders of record on the date so fixed
shall be entitled to such notice of, and to vote at, such meeting, or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights, as the case may be, notwithstanding any transfer of any Shares on
the books of the Trust after any such record date fixed or aforesaid.
TERMINATION OF TRUST
Section 4.
(a) This Trust shall continue without limitation of time but subject to
the provisions of sub-section (b) of this Section 4.
17
<PAGE>
(b) Subject to a Majority Shareholder Vote of each Series affected by
the matter or, if applicable, to a Majority Shareholder Vote of the Trust, the
Trustees may
(i) sell, convey, merge and transfer all or substantially all
of the assets of the Trust or any affected Series to another Series or to a
trust, partnership, association or corporation organized under the laws of any
state which is an investment company as defined in the 1940 Act, for adequate
consideration which may include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or contingent, of the Trust or any affected
Series, and which may include shares of beneficial interest or stock of such
Series, trust, partnership, association or corporation; or
(ii) at any time sell and convert into money all or
substantially all of the assets of the Trust or any affected Series.
Upon making provision for the payment of all known liabilities of the
Trust or any affected Series in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) ratably among the holders of the Shares of the Trust or any
affected Series then outstanding; however, the payment to any particular Class
within such Series may be reduced by any fees, expenses or charges allocated to
that Class. Nothing in this Declaration of Trust shall preclude the Trustees
from distributing such remaining proceeds or assets so that holders of the
Shares of a particular Class of the Trust or any affected Series receive as
their ratable distribution shares solely of an analogous class, as determined by
the Trustees, of such trust, partnership, association or corporation.
The Trustees may take any of the actions specified in clauses (i) and
(ii) above without obtaining a Majority Shareholder Vote of any Series or the
Trust if a majority of the Trustees makes a determination that the continuation
of a Series or the Trust is not in the best interests of such Series, the Trust
or their respective Shareholders as a result of factors or events adversely
affecting the ability of such Series or the Trust to conduct its business and
operations in an economically viable manner. Such factors and events may include
the inability of a Series or the Trust to maintain its assets at an appropriate
size, changes in laws or regulations governing the Series or Trust or affecting
assets of the type in which such Series or the Trust invests or economic
developments or trends having a significant adverse impact on the business or
operations of such Series or the Trust.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in sub-section (b), the Trust or any affected
Series shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder with respect thereto and the right,
title and interest of all parties therein shall be canceled and discharged.
FILING OF COPIES, REFERENCES, HEADINGS
Section 5. The original or a copy of this instrument and of each
amendment hereto shall be kept at the office of the Trust where it may be
inspected by any shareholder. A copy of this instrument and of each amendment
hereto shall be filed by the Trustees with the Secretary of the Commonwealth of
Massachusetts and the Boston City Clerk, as well as any other governmental
office where such filing may from time to time be required. Anyone dealing with
the Trust may
18
<PAGE>
rely on a certificate by an officer or Trustee of the Trust as to whether or not
any such amendments to this Declaration of Trust have been made and as to any
matters in connection with the Trust hereunder, and with the same effect as if
it were the original, may rely on a copy certified by an officer or Trustee of
the Trust to be a copy of this instrument or of any such amendments. In this
instrument or in any such amendments, references to this instrument, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to
this instrument as amended from time to time. The masculine gender shall include
the feminine and neuter genders. Headings are placed herein for convenience of
reference only, and in case of any conflict, the text of this instrument, rather
than the headings, shall control. This instrument may be executed in any number
of counterparts each of which shall be deemed an original.
APPLICABLE LAW
Section 6. The Trust set forth in this instrument is made in the
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a Massachusetts business trust, and,
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
AMENDMENTS
Section 7. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time, so long as such
amendment does not adversely affect the rights of any Shareholder with respect
to which such amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including the 1940 Act, by
an instrument in writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to the vote of a majority of such Trustees).
Except as provided in the first sentence of this Section 7, any amendment to
this Declaration of Trust that adversely affects the rights of Shareholders may
be adopted at any time by an instrument signed in writing by a majority of the
then Trustees (or by an officer of the Trust pursuant to the vote of a majority
of such Trustees) when authorized to do so by Majority Shareholder Vote;
provided, however, that an amendment that shall affect the Shareholders of one
or more Series (or of one or more Classes), but not the Shareholders of all
outstanding Series (or Classes), shall be authorized by a Majority Shareholder
Vote of each Series (or Class, as the case may be) affected, and no vote of a
Series (or Class) not affected shall be required. Subject to the foregoing, any
such amendment shall be effective as provided in the instrument containing the
terms of such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate (which
may be a part of such instrument) executed by a Trustee or officer to the effect
that such amendment has been duly adopted. Copies of the amendment to this
Declaration of Trust shall be filed as specified in Section 5 of this Article
XI. A restated Declaration of Trust, integrating into a single instrument all of
the provisions of the Declaration of Trust which are then in effect and
operative, may be executed from time to time by a majority of the Trustees and
shall be effective upon filing as specified in such Section 5.
19
<PAGE>
FISCAL YEAR
Section 8. The fiscal year of the Trust shall be determined by the
Trustees in accordance with the By-Laws, provided, however, that the Trustees
may, without Shareholder approval, change the fiscal year of the Trust.
Schedule A
Series of the Trust
PaineWebber Asia Pacific Growth Fund
PaineWebber High Income Fund
PaineWebber Investment Grade Income Fund
PaineWebber Low Duration U.S. Government Income Fund
PaineWebber U.S. Government Income Fund
PaineWebber Utility Income Fund
Classes of Shares of Each Series
An unlimited number of shares of beneficial interest have been established by
the Board as Class A shares, Class B shares, Class C shares and Class Y shares
of each of the above Series. Each of the Class A shares, Class B shares, Class C
shares and Class Y shares of a Series represents interests in the assets of only
that Series and has the same preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of shares, except as provided in the Trust's
Declaration of Trust and as set forth below with respect to the Class B shares
of each Series:
1. Each Class B share, other than a share purchased through the
reinvestment of a dividend or a distribution with respect to the
Class B share, shall be converted automatically, and without any
action or choice on the part of the holder thereof, into Class A
shares of the same Series, based on the relative net asset value
of each such class at the time of the calculation of the net
asset value of such class of shares on the date that is the first
Business Day (as defined in the Series' prospectus and/or
statement of additional information) of the month in which the
sixth anniversary of the issuance of such Class B shares occurs
(which, for the purpose of calculating the holding period
required for conversion, shall mean (i) the date on which the
issuance of such Class B shares occurred or (ii) for Class B
shares obtained through an exchange, the date on which the
issuance of the Class B shares of an eligible PaineWebber fund
occurred, if such shares were exchanged directly, or through a
series of exchanges for the Series' Class B shares (the
"Conversion Date")).
2. Each Class B share purchased through the reinvestment of a
dividend or a distribution with respect to the Class B shares and
the dividends and distributions on such shares
20
<PAGE>
shall be segregated in a separate sub-account on the stock
records of the Series for each of the holders of record thereof.
On any Conversion Date, a number of the shares held in the
sub-account of the holder of record of the share or shares being
converted, calculated in accordance with the next following
sentence, shall be converted automatically, and without any
action or choice on the part of the holder thereof, into Class A
shares of the same Series. The number of shares in the holder's
sub-account so converted shall bear the same relation to the
total number of shares maintained in the sub-account on the
Conversion Date as the number of shares of the holder converted
on the Conversion Date pursuant to Paragraph 2(a) hereof bears to
the total number of Class B shares of the holder on the
Conversion Date not purchased through the automatic reinvestment
of dividends or distributions with respect to the Class B shares.
3. The number of Class A shares into which a Class B share is
converted pursuant to paragraphs 1 and 2 hereof shall equal the
number (including for this purpose fractions of a share) obtained
by dividing the net asset value per share of the Class B shares
for purposes of sales and redemptions thereof at the time of the
calculation of the net asset value on the Conversion Date by the
net asset value per share of the Class A shares for purposes of
sales and redemptions thereof at the time of the calculation of
the net asset value on the Conversion Date.
4. On the Conversion Date, the Class B shares converted into Class A
shares will cease to accrue dividends and will no longer be
outstanding and the rights of the holders thereof will cease
(except the right to receive declared but unpaid dividends to the
Conversion Date).
For purposes of Paragraph 1 above, the term "eligible PaineWebber fund" includes
any and all mutual funds for which PaineWebber Incorporated or Mitchell Hutchins
Asset Management Inc. serves as investment adviser that offer shares with a
contingent deferred sales charge imposed upon certain redemptions of such shares
and that are exchangeable with the Class B shares of the Series.
21
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the all the Trustees of the
Trust, have executed this Amended and Restated Declaration of Trust as of the
day and year first above written.
/s/ Margo N. Alexander /s/ Meyer Feldberg
- ------------------------------- -------------------------------
Margo N. Alexander Meyer Feldberg
/s/ E. Garrett Bewkes, Jr. /s/ George W. Gowen
- ------------------------------- -------------------------------
E. Garrett Bewkes, Jr. George W. Gowen
/s/ Richard Q. Armstrong /s/ Frederic V. Malek
- ------------------------------- -------------------------------
Richard Q. Armstrong Frederic V. Malek
/s/ Richard R. Burt /s/ Carl W. Schafer
- ------------------------------- -------------------------------
Richard R. Burt Carl W. Schafer
/s/ Mary C. Farrell
- -------------------------------
Mary C. Farrell
22
<PAGE>
Exhibit No. 2
PAINEWEBBER MANAGED INVESTMENTS TRUST
A Massachusetts Business Trust
RESTATED BY-LAWS
November 19, 1997
<PAGE>
BY-LAWS OF PAINEWEBBER MANAGED INVESTMENTS TRUST
ARTICLE I
DECLARATION OF TRUST,
LOCATION OF OFFICES AND SEAL
Section 1.01. Declaration of Trust: These By-Laws shall be subject to
the Declaration of Trust, as from time to time in effect (the "Declaration of
Trust"), of PaineWebber Managed Investments Trust, the Massachusetts business
trust established by the Declaration of Trust (the "Trust").
Section 1.02. Principal Office of the Trust: Resident Agent: The
principal office of the Trust shall be located in the City of New York, New
York. Its resident agent in Massachusetts shall be CT Corporation System, 2
Oliver Street, Boston, Massachusetts, or such other person as the Trustees may
from time to time designate. The Trust may establish and maintain such other
offices and places of business as the Trustees may, from time to time,
determine.
Section 1.03. Seal: The seal of the Trust shall be circular in form and
shall bear the name of the Trust. The form of the seal shall be subject to
alteration by the Trustees and the seal may be used by causing it or a facsimile
to be impressed or affixed or printed or otherwise reproduced. Any officer or
Trustee of the Trust shall have authority to affix the seal of the Trust to any
document, instrument or other paper executed and delivered by or on behalf of
the Trust; however, unless otherwise required by the Trustees, the seal shall
not be necessary to be placed on and its absence shall not impair the validity
of any document, instrument, or other paper executed by or on behalf of the
Trust.
ARTICLE II
SHAREHOLDERS
Section 2.01. Shareholder Meetings: Meetings of the shareholders may be
called at any time by the Trustees or, if the Trustees shall fail to call any
meeting for a period of 30 days after written request of Shareholders owning at
least one-tenth of the outstanding shares entitled to vote, then such
Shareholders may call such meeting. Each call of a meeting shall state the
place, date, hour and purposes of the meeting.
Section 2.02. Place of Meetings: All meetings of the Shareholders shall
be held at the principal office of the Trust, except that the Trustees may
designate a different place of meeting within the United States.
Section 2.03. Notice of Meeting: The secretary or an assistant
secretary or such other officer as may be designated by the Trustees shall cause
notice of the place, date and hour, and purpose or purposes for which the
meeting is called, to be mailed, not less than fifteen days before the date of
the meeting, to each Shareholder entitled to vote at such meeting, at his
address as it appears on the records of the Trust at the time of such mailing.
Notice of any Shareholders' meeting need not be given to any Shareholder if a
written waiver of notice, executed before or after
<PAGE>
such meeting, is filed with
the records of such meeting, or to any Shareholder who shall attend such meeting
in person or by proxy. Notice of adjournment of a Shareholders' meeting to
another time or place need not be given, if such time and place are announced at
the meeting.
Section 2.04. Ballots: The vote upon any question shall be by ballot
whenever requested by any person entitled to vote, but, unless such a request is
made, voting may be conducted in any way approved by the meeting.
Section 2.05. Voting; Proxies: Shareholders entitled to vote may vote
either in person or by proxy, provided that such proxy to act is authorized to
act by (1) a written instrument, dated not more than eleven months before the
meeting and executed either by the Shareholder or by his or her duly authorized
attorney in fact (who may be so authorized by a writing or by any non-written
means permitted by the laws of the Commonwealth of Massachusetts) or (2) such
electronic, telephonic, computerized or other alternative means as may be
approved by a resolution adopted by the Trustees. Proxies shall be delivered to
the secretary of the Trust or other person responsible for recording the
proceedings before being voted. A proxy with respect to shares held in the name
of two or more persons shall be valid if executed by one of them unless at or
prior to exercise of such proxy the Trust receives a specific written notice to
the contrary from any one of them. Unless otherwise specifically limited by
their terms, proxies shall entitle the holder thereof to vote at any adjournment
of a meeting. A proxy purporting to be exercised by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger. At all
meetings of the Shareholders, unless the voting is conducted by inspectors, all
questions relating to the qualifications of voters, the validity of proxies, and
the acceptance or rejection of votes shall be decided by the chairman of the
meeting.
Section 2.06. Action Without a Meeting: Any action to be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of meetings of Shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting.
ARTICLE III
TRUSTEES
Section 3.01. Regular Meetings: Regular meetings of the Trustees may be
held without further call or notice at such places and at such times as the
Trustees may from time to time determine, provided that notice of the first
regular meeting following any such determination shall be given to absent
Trustees. A regular meeting of the Trustees may be held without further call or
notice immediately after and at the same place as any meeting of the
Shareholders.
Section 3.02. Special Meetings: Special meetings of the Trustees may be
held at any time and at any place designated in the call of the meeting, when
called by the chairman of the Trustees or by two or more Trustees, provided that
notice thereof shall being given to each Trustee as set forth in the Declaration
of Trust.
Section 3.03. Committees: The Trustees, by vote of a majority of the
Trustees then in office, may elect from their number an executive committee or
other committees and may delegate
2
<PAGE>
thereto some or all of their powers except those which by law, by the
Declaration of Trust, or by these By-Laws may not be delegated. Except as the
Trustees may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these By-Laws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect. Any such committee may act by meeting in person, by
unanimous written consent, or by telephonic meeting provided a quorum of members
participates in any such telephonic meeting.
Section 3.04. Other Committees: The Trustees may appoint other
committees, each consisting of one or more persons, who need not be Trustees.
Each such committee shall have such powers perform such duties and abide by such
procedures as may be determined from time to time by the Trustees, but shall not
exercise any power which may lawfully be exercised only by the Trustees or a
committee of Trustees.
Section 3.05. Compensation: Each Trustee and each committee member may
receive such compensation for his services and reimbursement for his expenses as
may be fixed from time to time by resolution of the Trustees.
ARTICLE IV
OFFICERS
Section 4.01. General: The officers of the Trust shall be a president,
a treasurer, a secretary and such other officers, if any, as the Trustees from
time to time may in their discretion elect or appoint. The Trust may also have
such agents, if any, as the Trustees from time to time may in their discretion
appoint. Any officer may be but need not be a Trustee or shareholder. Any two or
more offices may be held by the same person.
Section 4.02. Election and Term of Office: The president, the treasurer
and the secretary shall be elected annually by the Trustees at their first
meeting in each calendar year or at such later meeting in such year as the
Trustees shall determine ("Annual Meeting"). Other officers or agents, if any,
may be elected or appointed by the Trustees at said meeting or at any other
time. The president, treasurer and secretary shall hold office until the next
Annual Meeting and until their respective successors are chosen and qualified,
or in each case until he dies, resigns, is removed or become disqualified. Each
other officer shall hold office and each agent shall retain his authority at the
pleasure of the Trustees.
Section 4.03. Powers: Subject to the other provisions of these By-Laws,
each officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to his office as if the Trust were organized as a Massachusetts business
corporation and such other duties and powers as the Trustees may from time to
time designate.
3
<PAGE>
Section 4.04. Chairman of the Board: The chairman of the Board of
Trustees, if one is so appointed, shall be chosen from among the Trustees and
may hold office only so long as he continues to be a Trustee. Unless the
Trustees otherwise provide, the chairman, if any is so appointed, shall preside
at all meetings of the Shareholders and of the Trustees at which he is present;
may be ex officio a member of all committees established by the Trustees; and
shall have such other duties and powers as specified herein and as may be
assigned to him by the Trustees.
Section 4.05. President: The president shall be the chief executive
officer of the Trust and, subject to the supervision of the Trustees, shall have
general charge of the business, affairs and property of the Trust and general
supervision over its officers, employees and agents. He shall exercise such
other powers and perform such other duties as from time to time may be assigned
to him by the Trustees.
Section 4.06. Vice Presidents: The Trustees may from time to time
designate and elect one or more vice presidents who shall have such powers and
perform such duties as from time to time may be assigned to them by the Trustees
or the president. At the request or in the absence or disability of the
president, the vice president (or, if there are two or more vice presidents,
then the senior of the vice presidents present and able to act) may perform all
the duties of the president and, when so acting, shall have all the powers of
and be subject to all the restrictions upon the president.
Section 4.07. Treasurer and Assistant Treasurers: The treasurer shall
be the principal financial and accounting officer of the Trust and shall have
general charge of the finances and books of account of the Trust. Except as
otherwise provided by the Trustees, he shall have general supervision of the
funds and property of the Trust and of the performance by the custodian of its
duties with respect thereto. He shall render to the Trustees, whenever directed
by the Trustees, an account of the financial condition of the Trust and of all
his transactions as treasurer; and as soon as possible after the close of each
financial year he shall make and submit to the Trustees a like report for such
financial year. He shall perform all the acts incidental to the office of
treasurer, subject to the control of the Trustees.
Any assistant treasurer may perform such duties of the treasurer as the
treasurer or the Trustees may assign, and, in the absence of the treasurer, (or,
if there are two or more assistant treasurers, then the senior of the assistant
treasurers present and able to act) may perform all the duties of the treasurer,
subject to the control of the Trustees.
Section 4.08. Secretary and Assistant Secretaries: The secretary shall
attend to the giving and serving of all notices of the Trust and shall record
all proceedings of the meetings of the Shareholders and Trustees in books to be
kept for that purpose. He shall keep in safe custody the seal of the Trust, and
shall have charge of the records of the Trust, all of which shall at all
reasonable times be open to inspection by the Trustees. He shall perform such
other duties as appertain to his office or as may be required by the Trustees.
Any assistant secretary may perform such duties of the secretary as the
secretary or the Trustees may assign, and, in the absence of the secretary, (or,
if there are two or more assistant secretaries. then the senior of the assistant
secretaries present and able to act) may perform all the duties of the
secretary.
4
<PAGE>
Section 4.09. Subordinate Officers: The Trustees from time to time may
appoint such other officers or agents as they may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine. The Trustees from time to
time may delegate to one or more officers or agents the power to appoint any
such subordinate officers or agents and to prescribe their respective rights,
terms of office, authorities and duties.
Section 4.10. Remuneration: The salaries or other compensation of the
officers of the Trust shall be fixed from time to time by resolution of the
Trustees, except that the Trustees may by resolution delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
Section 4.09 hereof.
Section 4.11. Surety Bonds: The Trustees may require any officer or
agent of the Trust to execute a bond (including, without limitation, any bond
required by the Investment Company Act of 1940, as amended, ("1940 Act") and the
rules and regulations of the Securities and Exchange Commission ("Commission"))
to the Trust in such sum and with such surety or sureties as the Trustees may
determine, conditioned upon the faithful performance of his duties to the Trust
including responsibility for negligence and for the accounting of any of the
Trust's property, funds or securities that may come into his hands.
Section 4.12. Resignation: Any officer may resign his office at any
time by delivering a written resignation to the Trustees, the president, the
secretary, or any assistant secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Section 4.13. Removal: Any officer may be removed from office whenever
in the judgment of the Trustees the best interest of the Trust will be served
thereby, by the vote of a majority of the Trustees given at a regular meeting or
any special meeting of the Trustees called for such purpose. In addition, any
officer or agent appointed in accordance with the provision of Section 4.09
hereof may be removed, either with or without cause, by any officer upon whom
such power of removal shall have been conferred by the Trustees.
Section 4.14. Vacancies and Newly Created Offices: If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification
or other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Trustees at any regular or special meeting
of the Trustees or, in the case of any office created pursuant to Section 4.09
hereof, by any officer upon whom such power shall have been conferred by the
Trustees.
ARTICLE V
CUSTODIAN
Section 5.01. Employment of Custodian: The Trustees shall at all times
employ one or more banks or trust companies organized under the laws of the U.S.
or one of the states thereof provided that each such bank or trust company has
capital, surplus and undivided profits of at least two million dollars
($2,000,000) as custodian with authority as the Trust's agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in these By-Laws:
5
<PAGE>
(1) to hold the securities owned by the Trust and deliver the same
upon written order, or oral order if confirmed in writing, or
order delivered by such electromechanical or electronic
devices as are agreed to by the Trust and the custodian, if
such procedures have been authorized in writing by the Trust;
(2) to receive and give receipt for any moneys due to the Trust
and deposit the same in its own banking department or
elsewhere as the Trustees may direct; and
(3) to disburse such moneys upon orders or vouchers;
and the Trust may also enjoy such custodian as its agent:
(1) to keep the books and accounts of the Trust and furnish
clerical and accounting services; and
(2) to compute, if authorized to do so by the Trustees, the Net
Asset Value of any Series or Class (which terms are defined in
the Declaration of Trust) in accordance with the provisions of
the Declaration of Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a vote of a majority of the outstanding
shares of the Trust entitled to vote, the custodian shall deliver and pay over
all property of the Trust held by it as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having capital,
surplus and undivided profits of at least two million dollars ($2,000,000) or
such other person as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act.
Section 5.02. Use of Central Securities Handling System: Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to deposit any or all of the securities owned by the Trust
(1) in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, pursuant to which system
all securities of any particular class or series of any issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust; or (2) with such other person as may be permitted by the Commission, or
otherwise in accordance with the 1940 Act.
6
<PAGE>
ARTICLE VI
EXECUTION OF PAPERS
Section 6.01. General: Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other manner, all
deeds, leases, transfers, contracts, bonds, notes, checks, drafts, and other
obligations made, accepted, or endorsed by the Trust shall be executed by the
president, any vice president, or the treasurer, or by whomever else shall be
designated for that purpose by the Trustees, and need not bear the seal of the
Trust.
ARTICLE VII
SHARES OF BENEFICIAL INTEREST
Section 7.01. Share Certificates: No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
authorize. In the event that the Trustees authorize the issuance of Share
certificates, subject to the provisions of Section 7.03, each Shareholder shall
be entitled to a certificate stating the number of shares owned by him, in such
form as shall be prescribed from time to time by the Trustees. Such certificate
shall be signed by the president or a vice president and by the treasurer,
assistant treasurer, secretary or assistant secretary. Such signatures may be
facsimiles if the certificate is signed by a transfer or shareholder services
agent or by a registrar, other than a Trustee, officer or employee of the Trust.
In case any officer who has signed or whose facsimile signature has been placed
on such certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the Trust with the same effect as if he were such
officer at the time of its issue.
In lieu of issuing certificates for shares, the Trustees, the transfer
agent or shareholder services agent may either issue receipts therefor or may
keep accounts upon the books of the Trust for the record holders of such shares,
who shall in either case be deemed, for all purposes hereunder, to be the
holders of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
Section 7.02. Loss of Certificates: In the case of the alleged loss or
destruction or the mutilation of a Share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
Section 7.03. Discontinuance of Issuance of Certificates: The Trustees
may at any time discontinue the issuance of Share certificates and may, by
written notice to each Shareholder, require the surrender of Share certificates
to the Trust for cancellation. Such surrender and cancellation shall not affect
the ownership of Shares in the Trust.
Section 7.04. Equitable Interest Not Recognized: The Trust shall be
entitled to treat the holder of record of any Share or Shares of the Trust as
the holder in fact thereof, and shall not be bound to recognize any equitable or
other claim of interest in such Share or Shares on the part of any other person
except as may be otherwise expressly provided by law.
7
<PAGE>
Section 7.05. Transfer of Shares: The Shares of the Trust shall be
transferable only by transfer recorded on the books of the Trust, in person or
by attorney.
ARTICLE VIII
FISCAL YEAR; ACCOUNTANT
Section 8.01. Fiscal Year: The fiscal year of the Trust shall end on
such date in each year as the Trustees shall from time to time determine.
Section 8.02. Accountant:
(a) The Trust shall employ an independent public accountant or firm of
independent public accountants as its accountant to examine the accounts of the
Trust and to sign and certify the financial statements of the Trust. The
accountant's certificates and reports shall be addressed both to the Trustees
and to the Shareholders of the Trust.
(b) Any vacancy occurring due to the death or resignation of the
accountant may be filled by a majority vote of the Trustees who are not
interested persons of the Trust.
ARTICLE IX
INSURANCE
Section 9.01. Insurance of Officers, Trustees, and Employees: The Trust
may purchase and maintain insurance on behalf of any person who is or was a
Trustee, officer or employee of the Trust, or is or was serving at the request
of the Trust as a Trustee, officer or employee of a corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising out of his status as
such, whether or not the Trust would have the power to indemnify him against
such liability.
The Trust may not acquire or obtain a contract for insurance that
protects or purports to protect any Trustee or officer of the Trust against any
liability to the Trust or its Shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE X
AMENDMENTS; REPORTS; MISCELLANEOUS
Section 10.1. Amendments: These By-Laws may be amended or repealed, in
whole or in part, by a majority of the Trustees then in office at any meeting of
the Trustees, or by one or more writings signed by such majority.
Section 10.2. Reports: The Trustees shall at least semiannually submit
to the Shareholders a written report of the transactions of the Trust, including
financial statements that shall at least annually be certified by independent
public accountants.
8
<PAGE>
Section 10.3. Gender: As used in these By-Laws, the masculine gender
shall include the feminine and neuter genders.
Section 10.3. Headings: Headings are placed in these bylaws for
convenience of reference only and in case of any conflict, the text of these
By-Laws rather than the headings shall control.
Section 10.4. Inspection of Books: The Trustees shall from time to time
determine whether and to what extent, and at what times and places, and under
what conditions and regulations the accounts and books of the Trust or any of
them shall be open to the inspection of the Shareholders, and no Shareholder
shall have any right to inspect any account or book or document of the Trust
except as conferred by law or otherwise by the Trustees.
<PAGE>
Exhibit No. 5(a)
INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT
Contract made as of April 21, 1988, between PAINEWEBBER FIXED INCOME
PORTFOLIOS, a Massachusetts business trust ("Trust"), and MITCHELL HUTCHINS
ASSET MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation registered
as a broker-dealer under the Securities Exchange Act of 1934, as amended ("1934
Act"), and as an investment adviser under the Investment Advisers Act of 1940,
as amended.
WHEREAS the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company, and
intends to offer for public sale distinct series of shares of beneficial
interest ("Series"), each corresponding to a distinct portfolio; and
WHEREAS the Trust desires to retain Mitchell Hutchins as investment
adviser and administrator to furnish certain administrative, investment advisory
and portfolio management services to the Trust and each Series as now exists and
as hereafter may be established, and Mitchell Hutchins is willing to furnish
such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints Mitchell Hutchins as
investment adviser and administrator of the Trust and each Series for the period
and on the terms set forth in this Contract. Mitchell Hutchins accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Investment Adviser.
(a) Subject to the supervision of the Trust's Board of Trustees
("Board"), Mitchell Hutchins will provide a continuous investment program for
each Series, including investment research and management with respect to all
securities and investments and cash equivalents in each Series. Mitchell
Hutchins will determine from time to time what securities and other investments
will be purchased, retained or sold by each Series.
(b) Mitchell Hutchins agrees that in placing orders with brokers and
dealers, it will attempt to obtain the best net result in terms of price and
execution; provided that, on behalf of any Series, Mitchell Hutchins may, in its
discretion, purchase and sell portfolio securities to and from brokers and
dealers who provide the Series with research, analysis, advice and similar
services, and Mitchell Hutchins may pay to those brokers and dealers, in return
for research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to Mitchell Hutchins' determining in good
faith that such commission or spread is reasonable in terms either of the
particular transaction or of the overall responsibility of Mitchell Hutchins to
such Series and its other clients and that the total commissions or spreads paid
by such Series will be reasonable in relation to the benefits to the Series over
the long term. In no instance will portfolio securities be purchased from or
sold to Mitchell Hutchins, or any affiliated person thereof, except in
accordance with the federal securities laws and the rules and regulations
thereunder. Whenever Mitchell Hutchins simultaneously places orders to purchase
or sell the same security on behalf of a Series and one or more other accounts
advised by Mitchell Hutchins, such orders will be allocated as to price and
amount among all such accounts in a manner
<PAGE>
believed to be equitable to each account. The Trust recognizes that in some
cases this procedure may adversely affect the results obtained for the Series.
(c) Mitchell Hutchins will oversee the maintenance of all books and
records with respect to the securities transactions of each Series, and will
furnish the Board with such periodic and special reports as the Board reasonably
may request. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Mitchell Hutchins hereby agrees that all records which it maintains for the
Trust are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Trust and which are required to be maintained by Rule 31a-1 under the 1940
Act, and further agrees to surrender promptly to the Trust any records which it
maintains for the Trust upon request by the Trust.
(d) Mitchell Hutchins will oversee the computation of the net asset
value and the net income of each Series as described in the currently effective
registration statement of the Trust under the Securities Act of 1933, as
amended, and 1940 Act and any supplements thereto ("Registration Statement") or
as more frequently requested by the Board.
(e) The Trust hereby authorizes Mitchell Hutchins and any entity or
person associated with Mitchell Hutchins which is a member of a national
securities exchange to effect any transaction on such exchange for the account
of any Series, which transaction is permitted by Section 11(a) of the 1934 Act
and Rule 11a2-2(T) thereunder, and the Trust hereby consents to the retention of
compensation by Mitchell Hutchins or person or entity associated with Mitchell
Hutchins for such transactions in accordance with Rule 11a2-2(T)(a)(2)(iv).
3. Duties as Administrator. Mitchell Hutchins will administer the
affairs of the Trust and each Series subject to the supervision of the Board and
the following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of
the Trust and each Series, including the oversight of transfer agency, custodial
and accounting services, except as hereinafter set forth; provided, however,
that nothing herein contained shall be deemed to relieve or deprive the Board of
its responsibility for and control of the conduct of the affairs of the Trust
and each Series.
(b) Mitchell Hutchins will provide the Trust and each Series with such
corporate, administrative and clerical personnel (including officers of the
Trust) and services as are reasonably deemed necessary or advisable by the
Board, including the maintenance of certain books and records of the Trust and
each Series.
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Trust's
Registration Statement, proxy material, tax returns and required reports to each
Series' shareholders and the Securities and Exchange Commission and other
appropriate federal or state regulatory authorities.
(d) Mitchell Hutchins will provide the Trust and each Series with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items.
2
<PAGE>
(e) Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board
upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. Further Duties. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Declaration of
Trust, By-Laws and Registration Statement of the Trust and with the instructions
and directions of the Board and will comply with the requirements of the 1940
Act, the rules thereunder, and all other applicable federal and state laws and
regulations.
5. Delegation of Mitchell Hutchins' Duties as Investment Adviser and
Administrator. With respect to any or all Series, Mitchell Hutchins may enter
into one or more contracts ("Sub-Advisory or Sub-Administration Contract") with
a sub-adviser or sub-administrator in which Mitchell Hutchins delegates to such
sub-adviser or sub-administrator any or all its duties specified in Paragraph 2
and 3 of this Contract, provided that each Sub-Advisory or Sub-Administration
Contract imposes on the sub-adviser or sub-administrator bound thereby all the
duties and conditions to which Mitchell Hutchins is subject by Paragraph 2, 3
and 4 of this Contract, and further provided that each Sub-Advisory or
Sub-Administration Contract meets all requirements of the 1940 Act and rules
thereunder.
6. Services Not Exclusive. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a Trustee, officer or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
7. Expenses.
(a) During the term of this Contract, each Series will bear all
expenses, not specifically assumed by Mitchell Hutchins, incurred in its
operations and the offering of its shares.
(b) Expenses borne by each Series will include but not be limited to
the following (or each Series' proportionate share of the following): (i) the
cost (including brokerage commissions) of securities purchased or sold by the
Series and any losses incurred in connection therewith; (ii) fees payable to and
expenses incurred on behalf of the Series by Mitchell Hutchins under this
Contract; (iii) expenses of organizing the Trust and the Series; (iv) filing
fees and expenses relating to the registration and qualification of the Series'
shares and the Trust under federal and/or state securities laws and maintaining
such registrations and qualifications; (v) fees and salaries payable to the
Trust's Trustees who are not interested persons of the Trust or Mitchell
Hutchins; (vi) all expenses incurred in connection with the Trustees' services,
including travel expenses; (vii) taxes (including any income or franchise taxes)
and governmental fees; (viii) costs of any liability, uncollectible items of
deposit and other insurance and fidelity bonds; (ix) any costs, expenses or
losses arising out of a liability of or claim for damages or other relief
asserted against the Trust or Series for violation of any law; (x) legal,
accounting and auditing expenses, including legal fees of special counsel for
those Trustees of the Trust who are not interested persons of the Trust; (xi)
charges of custodians, transfer agents and other agents; (xii) costs of
preparing share certificates; (xiii) expenses of setting in type and printing
prospectuses and supplements thereto, statements of additional information and
supplements thereto, reports and proxy materials for existing shareholders;
(xiv) costs of mailing prospectuses and supplements thereto, statements of
additional information and supplements thereto, reports and proxy materials to
existing shareholders; (xv) any
3
<PAGE>
extraordinary expenses (including fees and disbursements of counsel, costs of
actions, suits or proceedings to which the Trust is a party and the expenses the
Trust may incur as a result of its legal obligation to provide indemnification
to its officers, Trustees, agents and shareholders) incurred by the Trust or
Series; (xvi) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; (xvii) costs of
mailing and tabulating proxies and costs of meetings of shareholders, the Board
and any committees thereof; (xviii) the cost of investment company literature
and other publications provided by the Trust to its Trustees and officers; and
(xix) costs of mailing, stationery and communications equipment.
(c) The Trust or a Series may pay directly any expense incurred by it
in its normal operations and, if any such payment is consented to by Mitchell
Hutchins and acknowledged as otherwise payable by Mitchell Hutchins pursuant to
this Contract, the Series may reduce the fee payable to Mitchell Hutchins
pursuant to Paragraph 8 hereof by such amount. To the extent that such
deductions exceed the fee payable to Mitchell Hutchins on any monthly payment
date, such excess shall be carried forward and deducted in the same manner from
the fee payable on succeeding monthly payment dates.
(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Trust received by the officers of the Trust and by
those Trustees who are interested persons of the Trust.
(e) The payment or assumption by Mitchell Hutchins of any expense of
the Trust or a Series that Mitchell Hutchins is not required by this Contract to
pay or assume shall not obligate Mitchell Hutchins to pay or assume the same or
any similar expense of the Trust or a Series on any subsequent occasion.
8. Compensation.
(a) For the services provided and the expenses assumed pursuant to this
Contract with respect to the GNMA Portfolio, the Investment Grade Bond Portfolio
and the High Yield Bond Portfolio, the Trust will pay to Mitchell Hutchins a
fee, computed daily and paid monthly, at an annual rate of 0.50% of each such
portfolio's average daily net assets.
(b) For the services provided and the expenses assumed pursuant to this
Contract with respect to any Series hereafter established, the Trust will pay to
Mitchell Hutchins from the assets of such Series a fee in an amount to be agreed
upon in a written fee agreement ("Fee Agreement") executed by the Trust on
behalf of such Series and by Mitchell Hutchins. All such Fee Agreements shall
provide that they are subject to all terms and conditions of this Contract.
(c) The fee shall be computed daily and paid monthly to Mitchell
Hutchins on or before the last business day of the next succeeding calendar
month.
(d) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
9. Limitation of Liability of Mitchell Hutchins. Mitchell Hutchins
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by any Series or the Trust in connection
4
<PAGE>
with the matters to which this Contract relates except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Contract. Any person, even though also an officer,
partner, employee, or agent of Mitchell Hutchins, who may be or become an
officer, Trustee, employee or agent of the Trust shall be deemed, when rendering
services to any Series or the Trust or acting with respect to any business of
such Series or the Trust, to be rendering such service to or acting solely for
the Series or the Trust and not as an officer, partner, employee, or agent or
one under the control or direction of Mitchell Hutchins even though paid by it.
10. Limitation of Liability of the Trustees and Shareholders of the
Trust. The Trustees of the Trust and the shareholders of any Series shall not be
liable for any obligations of any Series or the Trust under this Contract, and
Mitchell Hutchins agrees that, in asserting any rights or claims under this
Contract, it shall look only to the assets and property of the Trust in
settlement of such right or claim, and not to such Trustees or shareholders.
11. Duration and Termination.
(a) This Contract shall become effective upon the date hereabove
written provided that, with respect to any Series, this Contract shall not take
effect unless it has first been approved (i) by a vote of a majority of those
Trustees of the Trust who are not parties to this Contract or interested persons
of any such party, cast in person at a meeting called for the purpose of voting
on such approval, and (ii) by vote of a majority of that Series' outstanding
voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Contract shall continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of those Trustees of the Trust who
are not parties to this Contract or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or with respect to any given Series by vote of a majority of
the outstanding voting securities of such Series.
(c) Notwithstanding the foregoing, with respect to any Series this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of such Series on sixty days' written notice to Mitchell Hutchins or
by Mitchell Hutchins at any time, without the payment of any penalty, on sixty
days' written notice to the Trust. Termination of this Contract with respect to
any given Series shall in no way affect the continued validity of this Contract
or the performance thereunder with respect to any other Series. This Contract
will automatically terminate in the event of its assignment.
12. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Contract as to any
given Series shall be effective until approved by vote of a majority of such
Series' outstanding voting securities.
13. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Delaware and the 1940 Act, provided, however, that
Section 10 above will be construed in accordance with the laws of the
Commonwealth of Massachusetts. To the extent that the applicable laws
5
<PAGE>
of the State of Delaware or the Commonwealth of Massachusetts conflict with
the applicable provisions of the 1940 Act, the latter shall control.
14. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person,"
"assignment", "broker," "dealer," "investment adviser," "national securities
exchange," "net assets," "prospectus," "sale," "sell" and "security" shall have
the same meaning as such terms have in the 1940 Act, subject to such exemption
as may be granted by the Securities and Exchange Commission by any rule,
regulation or order. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Contract is relaxed by a rule, regulation or order of
the Securities and Exchange Commission, whether of special or general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.
Attest: PAINEWEBBER FIXED INCOME PORTFOLIOS
/s/ Abbe P. Stein By: /s/ Dianne E. O'Donnell
- ----------------------- --------------------------------------------
Attest: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/ Abbe P. Stein By: /s/ Ellen R. Harris
- ----------------------- --------------------------------------------
<PAGE>
Exhibit No. 5(b)
INVESTMENT ADVISORY AND ADMINISTRATION FEE AGREEMENT
Agreement made as of May 1, 1992, between PAINEWEBBER MANAGED
INVESTMENTS TRUST, a Massachusetts business trust ("Trust"), on behalf of
PaineWebber Utility Income and Growth Fund ("Fund"), a series of shares of
beneficial interest of the Trust, and MITCHELL HUTCHINS ASSET MANAGEMENT INC.,
("Mitchell Hutchins"), a Delaware corporation registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended, and as an investment
adviser under the Investment Advisers Act of 1940, as amended.
WHEREAS, the Trust has appointed Mitchell Hutchins as investment
adviser and administrator for each series of shares of beneficial interest of
the Trust as now exists and as hereafter may be established, pursuant to an
Investment Advisory and Administration Contract dated April 21, 1988 between the
Trust and Mitchell Hutchins ("Advisory Contract"); and
WHEREAS, the Fund has been established as a new series of shares of
the Trust;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. For the services provided and the expenses assumed pursuant to the
Advisory Contract with respect to the Fund, the Fund will pay to Mitchell
Hutchins a fee, computed daily and paid monthly, at the annual rate of 0.70% of
the Fund's average daily net assets.
2. This Fee Agreement shall be subject to all terms and conditions of
the Advisory Contract.
3. This Fee Agreement shall become effective upon the date written
above, provided that is it shall not take effect unless it has first been
approved (i) by a vote of a majority of the Trustees of the Trust who are not
parties to this Fee Agreement or the Advisory Contract or interested persons of
any such persons at a meeting called for the purpose of such approval and (ii)
by vote of a majority of the Fund's outstanding voting securities.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first written
above.
PAINEWEBBER MANAGED INVESTMENTS TRUST
By: /s/ Dianne E. O'Donnell
-----------------------------------------------
Dianne E. O'Donnell
Vice President and Secretary
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
By: /s/ Jack W. Murphy
-----------------------------------------------
Jack W. Murphy
First Vice President
2
<PAGE>
Exhibit No. 5(c)
INVESTMENT ADVISORY AND ADMINISTRATION FEE AGREEMENT
Agreement made as of March 29, 1993, between PAINEWEBBER MANAGED
INVESTMENTS TRUST, a Massachusetts Business Trust ("Trust"), on behalf of
PaineWebber Short-Term U.S. Government Income Fund ("Fund"), a series of shares
of beneficial interest of the Trust, and MITCHELL HUTCHINS ASSET MANAGEMENT
INC., ("Mitchell Hutchins"), a Delaware corporation registered as a
broker-dealer under the Securities Exchange Act of 1934, as amended, and as an
investment adviser under the Investment Advisers Act of 1940, as amended.
WHEREAS, the Trust has appointed Mitchell Hutchins as investment
adviser and administrator for each series of shares of beneficial interest of
the Trust as now exists and as hereafter may be established, pursuant to an
Investment Advisory and Administration Contract dated April 21, 1988 between the
Trust and Mitchell Hutchins ("Advisory Contract"); and
WHEREAS, the Fund has been established as a new series of the Trust;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. For the services provided and the expenses assumed pursuant to the
Advisory Contract with respect to the Fund, the Fund will pay to Mitchell
Hutchins a fee, computed daily and paid monthly, at the annual rate of 0.50% of
the Fund's average daily net assets.
2. This Fee Agreement shall be subject to all of the terms and
conditions of the Advisory Contract.
3. This Fee Agreement shall become effective upon the date written
above, provided that it shall not take effect unless it has first been approved
(i) by a vote of a majority of the Trustees of the Trust who are not parties to
this Fee Agreement or the Advisory Contract or interested persons of any such
persons at a meeting called for the purpose of such approval and (ii) by vote of
a majority of the Fund's outstanding voting securities.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first written
above.
PAINEWEBBER MANAGED INVESTMENTS TRUST
By: /s/ Dianne E. O'Donnell
------------------------------------
Dianne E. O'Donnell
Vice President and Secretary
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
By: /s/ Jack W. Murphy
------------------------------------
Jack W. Murphy
First Vice President
<PAGE>
Exhibit No. 6(a)
PAINEWEBBER MANAGED INVESTMENTS TRUST
DISTRIBUTION CONTRACT
CLASS A SHARES
CONTRACT made as of July 7, 1993, between PAINEWEBBER MANAGED
INVESTMENTS TRUST, a Massachusetts business trust ("Fund"), and MITCHELL
HUTCHINS ASSET MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins").
WHEREAS the Fund is registered under the Investment Company Act of
l940, as amended ("l940 Act"), as an open-end management investment company and
currently has five distinct series of shares of beneficial interest ("Series"),
which correspond to distinct portfolios and have been designated as the U.S.
Government Income Fund, Investment Grade Income Fund, High Income Fund,
PaineWebber Utility Income Fund and PaineWebber Short-Term U.S. Government
Income Fund; and
WHEREAS the Fund's board of trustees ("Board") has established an
unlimited number of shares of beneficial interest of the above-referenced Series
as Class A shares ("Class A Shares"); and
WHEREAS the Fund has adopted a Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act for its Class A Shares ("Plan") and desires to retain
Mitchell Hutchins as principal distributor in connection with the offering and
sale of the Class A Shares of the above-referenced Series and of such other
Series as may hereafter be designated by the Board and have Class A Shares
established; and
WHEREAS Mitchell Hutchins is willing to act as principal distributor of
the Class A Shares of each such Series on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Mitchell Hutchins as its
exclusive agent to be the principal distributor to sell and to arrange for the
sale of the Class A Shares on the terms and for the period set forth in this
Contract. Mitchell Hutchins hereby accepts such appointment and agrees to act
hereunder. It is understood, however, that this appointment does not preclude
sales of the Class A Shares directly through the Fund's transfer agent in the
manner set forth in the Registration Statement. As used in this Contract, the
term "Registration Statement" shall mean the currently effective registration
statement of the Fund, and any supplements thereto, under the Securities Act of
1933, as amended ("1933 Act"), and the 1940 Act.
<PAGE>
2. Services and Duties of Mitchell Hutchins.
(a) Mitchell Hutchins agrees to sell Class A Shares on a best
efforts basis from time to time during the term of this Contract as agent for
the Fund and upon the terms described in the Registration Statement.
(b) Upon the later of the date of this Contract or the initial
offering of the Class A Shares to the public by a Series, Mitchell Hutchins will
hold itself available to receive purchase orders, satisfactory to Mitchell
Hutchins, for Class A Shares of that Series and will accept such orders on
behalf of the Fund as of the time of receipt of such orders and promptly
transmit such orders as are accepted to the Fund's transfer agent. Purchase
orders shall be deemed effective at the time and in the manner set forth in the
Registration Statement.
(c) Mitchell Hutchins in its discretion may enter into
agreements to sell Class A Shares to such registered and qualified retail
dealers, including but not limited to PaineWebber Incorporated ("PaineWebber"),
as it may select. In making agreements with such dealers, Mitchell Hutchins
shall act only as principal and not as agent for the Fund.
(d) The offering price of the Class A Shares of each Series
shall be the net asset value per Share as next determined by the Fund following
receipt of an order at Mitchell Hutchins' principal office plus the applicable
initial sales charge, if any, computed as set forth in the Registration
Statement. The Fund shall promptly furnish Mitchell Hutchins with a statement of
each computation of net asset value.
(e) Mitchell Hutchins shall not be obligated to sell any
certain number of Class A Shares.
(f) To facilitate redemption of Class A Shares by shareholders
directly or through dealers, Mitchell Hutchins is authorized but not required on
behalf of the Fund to repurchase Class A Shares presented to it by shareholders
and dealers at the price determined in accordance with, and in the manner set
forth in, the Registration Statement. Such price shall reflect the subtraction
of the contingent deferred sales charge, if any, computed in accordance with and
in the manner set forth in the Registration Statement.
(g) Mitchell Hutchins shall provide ongoing shareholder
services, which include responding to shareholder inquiries, providing
shareholders with information on their investments in the Class A Shares and any
other services now or hereafter deemed to be appropriate subjects for the
payments of "service fees" under Section 26(d) of the National Association of
Securities Dealers, Inc. ("NASD") Rules of Fair Practice (collectively, "service
activities"). "Service activities" do not include the transfer agency-related
and other services for which PaineWebber receives compensation under the Service
Contract between PaineWebber and the Fund.
2
<PAGE>
(h) Mitchell Hutchins shall have the right to use any list of
shareholders of the Fund or any other list of investors which it obtains in
connection with its provision of services under this Contract; provided,
however, that Mitchell Hutchins shall not sell or knowingly provide such list or
lists to any unaffiliated person.
3. Authorization to Enter into Exclusive Dealer Agreements and to
Delegate Duties as Distributor. With respect to the Class A Shares of any or all
Series, Mitchell Hutchins may enter into an exclusive dealer agreement with
PaineWebber or any other registered and qualified dealer with respect to sales
of the Class A Shares or the provision of service activities. In a separate
contract or as part of any such exclusive dealer agreement, Mitchell Hutchins
also may delegate to PaineWebber or another registered and qualified dealer
("sub-distributor") any or all of its duties specified in this Contract,
provided that such separate contract or exclusive dealer agreement imposes on
the sub-distributor bound thereby all applicable duties and conditions to which
Mitchell Hutchins is subject under this Contract, and further provided that such
separate contract or exclusive dealer agreement meets all requirements of the
1940 Act and rules thereunder.
4. Services Not Exclusive. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a trustee, officer or employee of the Fund, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar or a dissimilar nature.
5. Compensation.
(a) As compensation for its service activities under this
contract with respect to the Class A Shares, Mitchell Hutchins shall receive
from the Fund a service fee at the rate and under the terms and conditions of
the Plan adopted by the Fund with respect to the Class A Shares of the Series,
as such Plan is amended from time to time, and subject to any further
limitations on such fee as the Board may impose.
(b) As compensation for its activities under this contract
with respect to the distribution of the Class A Shares, Mitchell Hutchins shall
retain the initial sales charge, if any, on purchases of Class A Shares as set
forth in the Registration Statement. Mitchell Hutchins is authorized to collect
the gross proceeds derived from the sale of the Class A Shares, remit the net
asset value thereof to the fund upon receipt of the proceeds and retain the
initial sales charge, if any.
(c) As compensation for its activities under this contract
with respect to the distribution of the Class A Shares, Mitchell Hutchins shall
receive all contingent deferred sales charges imposed on redemptions of Class A
Shares of each Series. Whether and at what rate a
3
<PAGE>
contingent deferred sales charge will be imposed with respect to a redemption
shall be determined in accordance with, and in the manner set forth in, the
Registration Statement.
(d) Mitchell Hutchins may reallow any or all of the initial
sales charges, contingent deferred sales charges, or service fees which it is
paid under this Contract to such dealers as Mitchell Hutchins may from time to
time determine.
6. Duties of the Fund.
(a) The Fund reserves the right at any time to withdraw
offering Class A Shares of any or all Series by written notice to Mitchell
Hutchins at its principal office.
(b) The Fund shall determine in its sole discretion whether
certificates shall be issued with respect to the Class A Shares. If the Fund has
determined that certificates shall be issued, the Fund will not cause
certificates representing Class A Shares to be issued unless so requested by
shareholders. If such request is transmitted by Mitchell Hutchins, the Fund will
cause certificates evidencing Class A Shares to be issued in such names and
denominations as Mitchell Hutchins shall from time to time direct.
(c) The Fund shall keep Mitchell Hutchins fully informed of
its affairs and shall make available to Mitchell Hutchins copies of all
information, financial statements, and other papers which Mitchell Hutchins may
reasonably request for use in connection with the distribution of Class A
Shares, including, without limitation, certified copies of any financial
statements prepared for the Fund by its independent public accountant and such
reasonable number of copies of the most current prospectus, statement of
additional information, and annual and interim reports of any Series as Mitchell
Hutchins may request, and the Fund shall cooperate fully in the efforts of
Mitchell Hutchins to sell and arrange for the sale of the Class A Shares of the
Series and in the performance of Mitchell Hutchins under this Contract.
(d) The Fund shall take, from time to time, all necessary
action, including payment of the related filing fee, as may be necessary to
register the Class A Shares under the 1933 Act to the end that there will be
available for sale such number of Class A Shares as Mitchell Hutchins may be
expected to sell. The Fund agrees to file, from time to time, such amendments,
reports, and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, nor any
omission of a material fact which omission would make the statements therein
misleading.
(e) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of Class A Shares of each
Series for sale under the securities laws of such states or other jurisdictions
as Mitchell Hutchins and the Fund may approve, and, if necessary or appropriate
in connection therewith, to qualify and maintain the qualification of the Fund
as a broker or dealer in such jurisdictions; provided that the Fund shall not be
required to amend its Declaration of Trust or By-Laws to comply with the laws of
any jurisdiction, to maintain an office in any jurisdiction, to change the terms
of the offering of the Class A Shares in
4
<PAGE>
any jurisdiction from the terms set forth in its Registration Statement, to
qualify as a foreign corporation in any jurisdiction, or to consent to service
of process in any jurisdiction other than with respect to claims arising out of
the offering of the Class A Shares. Mitchell Hutchins shall furnish such
information and other material relating to its affairs and activities as may be
required by the Fund in connection with such qualifications.
7. Expenses of the Fund. The Fund shall bear all costs and expenses of
registering the Class A Shares with the Securities and Exchange Commission and
state and other regulatory bodies, and shall assume expenses related to
communications with shareholders of each Series, including (i) fees and
disbursements of its counsel and independent public accountant; (ii) the
preparation, filing and printing of registration statements and/or prospectuses
or statements of additional information required under the federal securities
laws; (iii) the preparation and mailing of annual and interim reports,
prospectuses, statements of additional information and proxy materials to
shareholders; and (iv) the qualifications of Class A Shares for sale and of the
Fund as a broker or dealer under the securities laws of such jurisdictions as
shall be selected by the Fund and Mitchell Hutchins pursuant to Paragraph 6(e)
hereof, and the costs and expenses payable to each such jurisdiction for
continuing qualification therein.
8. Expenses of Mitchell Hutchins. Mitchell Hutchins shall bear all
costs and expenses of (i) preparing, printing and distributing any materials not
prepared by the Fund and other materials used by Mitchell Hutchins in connection
with the sale of Class A Shares under this Contract, including the additional
cost of printing copies of prospectuses, statements of additional information,
and annual and interim shareholder reports other than copies thereof required
for distribution to existing shareholders or for filing with any federal or
state securities authorities; (ii) any expenses of advertising incurred by
Mitchell Hutchins in connection with such offering; (iii) the expenses of
registration or qualification of Mitchell Hutchins as a broker or dealer under
federal or state laws and the expenses of continuing such registration or
qualification; and (iv) all compensation paid to Mitchell Hutchins' employees
and others for selling Class A Shares, and all expenses of Mitchell Hutchins,
its employees and others who engage in or support the sale of Class A Shares as
may be incurred in connection with their sales efforts.
9. Indemnification.
(a) The Fund agrees to indemnify, defend and hold Mitchell
Hutchins, its officers and directors, and any person who controls Mitchell
Hutchins within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which
Mitchell Hutchins, its officers, directors or any such controlling person may
incur under the 1933 Act, or under common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in the
Registration Statement or arising out of or based upon any alleged omission to
state a material fact required to be stated in the Registration Statement or
necessary to make the statements therein not misleading, except insofar as such
claims, demands, liabilities
5
<PAGE>
or expenses arise out of or are based upon any such untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in conformity
with information furnished in writing by Mitchell Hutchins to the Fund for use
in the Registration Statement; provided, however, that this indemnity agreement
shall not inure to the benefit of any person who is also an officer or trustee
of the Fund or who controls the Fund within the meaning of Section 15 of the
1933 Act, unless a court of competent jurisdiction shall determine, or it shall
have been determined by controlling precedent, that such result would not be
against public policy as expressed in the 1933 Act; and further provided, that
in no event shall anything contained herein be so construed as to protect
Mitchell Hutchins against any liability to the Fund or to the shareholders of
any Series to which Mitchell Hutchins would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations under this
Contract. The Fund shall not be liable to Mitchell Hutchins under this indemnity
agreement with respect to any claim made against Mitchell Hutchins or any person
indemnified unless Mitchell Hutchins or other such person shall have notified
the Fund in writing of the claim within a reasonable time after the summons or
other first written notification giving information of the nature of the claim
shall have been served upon Mitchell Hutchins or such other person (or after
Mitchell Hutchins or the person shall have received notice of service on any
designated agent). However, failure to notify the Fund of any claim shall not
relieve the Fund from any liability which it may have to Mitchell Hutchins or
any person against whom such action is brought otherwise than on account of this
indemnity agreement. The Fund shall be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of any suit
brought to enforce any claims subject to this indemnity agreement. If the Fund
elects to assume the defense of any such claim, the defense shall be conducted
by counsel chosen by the Fund and satisfactory to indemnified defendants in the
suit whose approval shall not be unreasonably withheld. In the event that the
Fund elects to assume the defense of any suit and retain counsel, the
indemnified defendants shall bear the fees and expenses of any additional
counsel retained by them. If the Fund does not elect to assume the defense of a
suit, it will reimburse the indemnified defendants for the reasonable fees and
expenses of any counsel retained by the indemnified defendants. The Fund agrees
to notify Mitchell Hutchins promptly of the commencement of any litigation or
proceedings against it or any of its officers or trustees in connection with the
issuance or sale of any of its Class A Shares.
(b) Mitchell Hutchins agrees to indemnify, defend, and hold
the Fund, its officers and trustees and any person who controls the Fund within
the meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its trustees or
officers, or any such controlling person may incur under the 1933 Act or under
common law or otherwise arising out of or based upon any alleged untrue
statement of a material fact contained in information furnished in writing by
Mitchell Hutchins to the Fund for use in the Registration Statement, arising out
of or based upon any alleged omission to state a material fact in connection
with such information required to be stated in the Registration Statement
necessary to make such information not misleading, or arising out of any
agreement between Mitchell Hutchins and any retail dealer, or arising out of any
supplemental sales literature or advertising
6
<PAGE>
used by Mitchell Hutchins in connection with its duties under this Contract.
Mitchell Hutchins shall be entitled to participate, at its own expense, in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce the claim, but if Mitchell Hutchins elects to assume the defense, the
defense shall be conducted by counsel chosen by Mitchell Hutchins and
satisfactory to the indemnified defendants whose approval shall not be
unreasonably withheld. In the event that Mitchell Hutchins elects to assume the
defense of any suit and retain counsel, the defendants in the suit shall bear
the fees and expenses of any additional counsel retained by them. If Mitchell
Hutchins does not elect to assume the defense of any suit, it will reimburse the
indemnified defendants in the suit for the reasonable fees and expenses of any
counsel retained by them.
10. Limitation of Liability of the Trustees and Shareholders of the
Fund. The trustees of the Fund and the shareholders of any Series shall not be
liable for any obligations of the Fund or any Series under this Contract, and
Mitchell Hutchins agrees that, in asserting any rights or claims under this
Contract, it shall look only to the assets and property of the Fund or the
particular Series in settlement of such right or claims, and not to such
trustees or shareholders.
11. Services Provided to the Fund by Employees of Mitchell Hutchins.
Any person, even though also an officer, director, employee or agent of Mitchell
Hutchins, who may be or become an officer, trustee, employee or agent of the
Fund, shall be deemed, when rendering services to the Fund or acting in any
business of the Fund, to be rendering such services to or acting solely for the
Fund and not as an officer, director, employee or agent or one under the control
or direction of Mitchell Hutchins even though paid by Mitchell Hutchins.
12. Duration and Termination.
(a) This Contract shall become effective upon the date
hereabove written, provided that, with respect to any Series, this Contract
shall not take effect unless such action has first been approved by vote of a
majority of the Board and by vote of a majority of those trustees of the Fund
who are not interested persons of the Fund, and have no direct or indirect
financial interest in the operation of the Plan relating to the Series or in any
agreements related thereto (all such trustees collectively being referred to
herein as the "Independent Trustees") cast in person at a meeting called for the
purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Contract
shall continue in effect for one year from the above written date. Thereafter,
if not terminated, this Contract shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or with respect to any given Series by vote of a
majority of the outstanding voting securities of the Class A Shares of such
Series.
(c) Notwithstanding the foregoing, with respect to any Series,
this Contract may be terminated at any time, without the payment of any penalty,
by vote of the Board, by vote of a
7
<PAGE>
majority of the Independent Trustees or by vote of a majority of the outstanding
voting securities of the Class A Shares of such Series on sixty days' written
notice to Mitchell Hutchins or by Mitchell Hutchins at any time, without the
payment of any penalty, on sixty days' written notice to the Fund or such
Series. This Contract will automatically terminate in the event of its
assignment.
(d) Termination of this Contract with respect to any given
Series shall in no way affect the continued validity of this Contract or the
performance thereunder with respect to any other Series.
13. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
14. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Delaware and the 1940 Act, provided, however, that
Section 10 above will be construed in accordance with the laws of the
Commonwealth of Massachusetts. To the extent that the applicable laws of the
State of Delaware or the Commonwealth of Massachusetts conflict with the
applicable provisions of the l940 Act, the latter shall control.
15. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient upon receipt in writing at the
other party's principal offices.
16. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person"
and "assignment" shall have the same meaning as such terms have in the l940 Act.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
ATTEST: PAINEWEBBER MANAGED INVESTMENTS TRUST
/s/ Jenny Ann Frank By:/s/ Dianne E. O'Donnell
----------------------- -------------------------------------
Dianne E. O'Donnell
Secretary and Vice President
ATTEST: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/ Jenny Ann Frank By: /s/ Jack W. Murphy
----------------------- -------------------------------------
Jack W. Murphy
First Vice President
<PAGE>
Exhibit No. 6(b)
PAINEWEBBER MANAGED INVESTMENTS TRUST
DISTRIBUTION CONTRACT
CLASS B SHARES
CONTRACT made as of July 7, 1993, between PAINEWEBBER MANAGED
INVESTMENTS TRUST, a Massachusetts business trust ("Fund") and MITCHELL HUTCHINS
ASSET MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins").
WHEREAS the Fund is registered under the Investment Company Act of
l940, as amended ("l940 Act"), as an open-end management investment company and
currently has five distinct series of shares of beneficial interest ("Series"),
which correspond to distinct portfolios and have been designated as the U.S.
Government Income Fund, Investment Grade Income Fund, High Income Fund,
PaineWebber Utility Income Fund and PaineWebber Short-Term U.S. Government
Income Fund; and
WHEREAS the Fund's board of trustees ("Board") has established an
unlimited number of shares of beneficial interest of the above-referenced Series
as Class B shares ("Class B Shares"); and
WHEREAS the Fund has adopted a Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act for its Class B Shares ("Plan") and desires to retain
Mitchell Hutchins as principal distributor in connection with the offering and
sale of the Class B Shares of the above-referenced Series and of such other
Series as may hereafter be designated by the Board and have Class B Shares
established; and
WHEREAS Mitchell Hutchins is willing to act as principal distributor of
the Class B Shares of each such Series on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Mitchell Hutchins as its
exclusive agent to be the principal distributor to sell and to arrange for the
sale of the Class B Shares on the terms and for the period set forth in this
Contract. Mitchell Hutchins hereby accepts such appointment and agrees to act
hereunder. It is understood, however, that this appointment does not preclude
sales of the Class B Shares directly through the Fund's transfer agent in the
manner set forth in the Registration Statement. As used in this Contract, the
term "Registration Statement" shall mean the currently effective registration
statement of the Fund, and any supplements thereto, under the Securities Act of
1933, as amended ("1933 Act"), and the 1940 Act.
<PAGE>
2. Services and Duties of Mitchell Hutchins.
(a) Mitchell Hutchins agrees to sell Class B Shares on a best
efforts basis from time to time during the term of this Contract as agent for
the Fund and upon the terms described in the Registration Statement.
(b) Upon the later of the date of this Contract or the initial
offering of the Class B Shares to the public by a Series, Mitchell Hutchins will
hold itself available to receive purchase orders, satisfactory to Mitchell
Hutchins, for Class B Shares of that Series and will accept such orders on
behalf of the Fund as of the time of receipt of such orders and promptly
transmit such orders as are accepted to the Fund's transfer agent. Purchase
orders shall be deemed effective at the time and in the manner set forth in the
Registration Statement.
(c) Mitchell Hutchins in its discretion may enter into
agreements to sell Class B Shares to such registered and qualified retail
dealers, including but not limited to PaineWebber Incorporated ("PaineWebber"),
as it may select. In making agreements with such dealers, Mitchell Hutchins
shall act only as principal and not as agent for the Fund.
(d) The offering price of the Class B Shares of each Series
shall be the net asset value per Share as next determined by the Fund following
receipt of an order at Mitchell Hutchins' principal office. The Fund shall
promptly furnish Mitchell Hutchins with a statement of each computation of net
asset value.
(e) Mitchell Hutchins shall not be obligated to sell any
certain number of Class B Shares.
(f) To facilitate redemption of Class B Shares by shareholders
directly or through dealers, Mitchell Hutchins is authorized but not required on
behalf of the Fund to repurchase Class B Shares presented to it by shareholders
and dealers at the price determined in accordance with, and in the manner set
forth in, the Registration Statement. Such price shall reflect the subtraction
of the contingent deferred sales charge, if any, computed in accordance with and
in the manner set forth in the Registration Statement.
(g) Mitchell Hutchins shall provide ongoing shareholder
services, which include responding to shareholder inquiries, providing
shareholders with information on their investments in the Class B Shares and any
other services now or hereafter deemed to be appropriate subjects for the
payments of "service fees" under Section 26(d) of the National Association of
Securities Dealers, Inc. ("NASD") Rules of Fair Practice (collectively, "service
activities"). "Service activities" do not include the transfer agency-related
and other services for which PaineWebber receives compensation under the Service
Contract between PaineWebber and the Fund.
(h) Mitchell Hutchins shall have the right to use any list of
shareholders of the Fund or any other list of investors which it obtains in
connection with its provision of services
2
<PAGE>
under this Contract; provided, however, that Mitchell Hutchins shall not sell or
knowingly provide such list or lists to any unaffiliated person.
3. Authorization to Enter into Exclusive Dealer Agreements and to
Delegate Duties as Distributor. With respect to the Class B Shares of any or all
Series, Mitchell Hutchins may enter into an exclusive dealer agreement with
PaineWebber or any other registered and qualified dealer with respect to sales
of the Class B Shares or the provision of service activities. In a separate
contract or as part of any such exclusive dealer agreement, Mitchell Hutchins
also may delegate to PaineWebber or another registered and qualified dealer
("sub-distributor") any or all of its duties specified in this Contract,
provided that such separate contract or exclusive dealer agreement imposes on
the sub-distributor bound thereby all applicable duties and conditions to which
Mitchell Hutchins is subject under this Contract, and further provided that such
separate contract or exclusive dealer agreement meets all requirements of the
1940 Act and rules thereunder.
4. Services Not Exclusive. The services furnished by Mitchell
Hutchins hereunder are not to be deemed exclusive and Mitchell Hutchins shall be
free to furnish similar services to others so long as its services under this
Contract are not impaired thereby. Nothing in this Contract shall limit or
restrict the right of any director, officer or employee of Mitchell Hutchins,
who may also be a trustee, officer or employee of the Fund, to engage in any
other business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar or a
dissimilar nature.
5. Compensation.
(a) As compensation for its service activities under this
contract with respect to the Class B Shares, Mitchell Hutchins shall receive
from the Fund a service fee at the rate and under the terms and conditions of
the Plan adopted by the Fund with respect to the Class B Shares of the Series,
as such Plan is amended from time to time, and subject to any further
limitations on such fee as the Board may impose.
(b) As compensation for its activities under this contract
with respect to the distribution of the Class B Shares, Mitchell Hutchins shall
receive from the Fund a distribution fee at the rate and under the terms and
conditions of the Plan adopted by the Fund with respect to the Class B Shares of
the Series, as such Plan is amended from time to time, and subject to any
further limitations on such fee as the Board may impose.
(c) As compensation for its activities under this contract
with respect to the distribution of the Class B Shares, Mitchell Hutchins shall
receive all contingent deferred sales charges imposed on redemptions of Class B
Shares of each Series. Whether and at what rate a contingent deferred sales
charge will be imposed with respect to a redemption shall be determined in
accordance with, and in the manner set forth in, the Registration Statement.
3
<PAGE>
(d) Mitchell Hutchins may reallow any or all of the
distribution fees, contingent deferred sales charges, or service fees which it
is paid under this Contract to such dealers as Mitchell Hutchins may from time
to time determine.
6. Duties of the Fund.
(a) The Fund reserves the right at any time to withdraw
offering Class B Shares of any or all Series by written notice to Mitchell
Hutchins at its principal office.
(b) The Fund shall determine in its sole discretion whether
certificates shall be issued with respect to the Class B Shares. If the Fund has
determined that certificates shall be issued, the Fund will not cause
certificates representing Class B Shares to be issued unless so requested by
shareholders. If such request is transmitted by Mitchell Hutchins, the Fund will
cause certificates evidencing Class B Shares to be issued in such names and
denominations as Mitchell Hutchins shall from time to time direct.
(c) The Fund shall keep Mitchell Hutchins fully informed of
its affairs and shall make available to Mitchell Hutchins copies of all
information, financial statements, and other papers which Mitchell Hutchins may
reasonably request for use in connection with the distribution of Class B
Shares, including, without limitation, certified copies of any financial
statements prepared for the Fund by its independent public accountant and such
reasonable number of copies of the most current prospectus, statement of
additional information, and annual and interim reports of any Series as Mitchell
Hutchins may request, and the Fund shall cooperate fully in the efforts of
Mitchell Hutchins to sell and arrange for the sale of the Class B Shares of the
Series and in the performance of Mitchell Hutchins under this Contract.
(d) The Fund shall take, from time to time, all necessary
action, including payment of the related filing fee, as may be necessary to
register the Class B Shares under the 1933 Act to the end that there will be
available for sale such number of Class B Shares as Mitchell Hutchins may be
expected to sell. The Fund agrees to file, from time to time, such amendments,
reports, and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, nor any
omission of a material fact which omission would make the statements therein
misleading.
(e) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of Class B Shares of each
Series for sale under the securities laws of such states or other jurisdictions
as Mitchell Hutchins and the Fund may approve, and, if necessary or appropriate
in connection therewith, to qualify and maintain the qualification of the Fund
as a broker or dealer in such jurisdictions; provided that the Fund shall not be
required to amend its Declaration of Trust or By-Laws to comply with the laws of
any jurisdiction, to maintain an office in any jurisdiction, to change the terms
of the offering of the Class B Shares in any jurisdiction from the terms set
forth in its Registration Statement, to qualify as a foreign corporation in any
jurisdiction, or to consent to service of process in any jurisdiction other than
with respect to claims arising out of the offering of the Class B Shares.
Mitchell Hutchins shall
4
<PAGE>
furnish such information and other material relating to its affairs and
activities as may be required by the Fund in connection with such
qualifications.
7. Expenses of the Fund. The Fund shall bear all costs and
expenses of registering the Class B Shares with the Securities and Exchange
Commission and state and other regulatory bodies, and shall assume expenses
related to communications with shareholders of each Series, including (i) fees
and disbursements of its counsel and independent public accountant; (ii) the
preparation, filing and printing of registration statements and/or prospectuses
or statements of additional information required under the federal securities
laws; (iii) the preparation and mailing of annual and interim reports,
prospectuses, statements of additional information and proxy materials to
shareholders; and (iv) the qualifications of Class B Shares for sale and of the
Fund as a broker or dealer under the securities laws of such jurisdictions as
shall be selected by the Fund and Mitchell Hutchins pursuant to Paragraph 6(e)
hereof, and the costs and expenses payable to each such jurisdiction for
continuing qualification therein.
8. Expenses of Mitchell Hutchins. Mitchell Hutchins shall bear
all costs and expenses of (i) preparing, printing and distributing any materials
not prepared by the Fund and other materials used by Mitchell Hutchins in
connection with the sale of Class B Shares under this Contract, including the
additional cost of printing copies of prospectuses, statements of additional
information, and annual and interim shareholder reports other than copies
thereof required for distribution to existing shareholders or for filing with
any federal or state securities authorities; (ii) any expenses of advertising
incurred by Mitchell Hutchins in connection with such offering; (iii) the
expenses of registration or qualification of Mitchell Hutchins as a broker or
dealer under federal or state laws and the expenses of continuing such
registration or qualification; and (iv) all compensation paid to Mitchell
Hutchins' employees and others for selling Class B Shares, and all expenses of
Mitchell Hutchins, its employees and others who engage in or support the sale of
Class B Shares as may be incurred in connection with their sales efforts.
9. Indemnification.
(a) The Fund agrees to indemnify, defend and hold Mitchell
Hutchins, its officers and directors, and any person who controls Mitchell
Hutchins within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which
Mitchell Hutchins, its officers, directors or any such controlling person may
incur under the 1933 Act, or under common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in the
Registration Statement or arising out of or based upon any alleged omission to
state a material fact required to be stated in the Registration Statement or
necessary to make the statements therein not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in writing by
Mitchell Hutchins to the Fund for use in the Registration Statement; pro-
5
<PAGE>
vided, however, that this indemnity agreement shall not inure to the benefit of
any person who is also an officer or trustee of the Fund or who controls the
Fund within the meaning of Section 15 of the 1933 Act, unless a court of
competent jurisdiction shall determine, or it shall have been determined by
controlling precedent, that such result would not be against public policy as
expressed in the 1933 Act; and further provided, that in no event shall anything
contained herein be so construed as to protect Mitchell Hutchins against any
liability to the Fund or to the shareholders of any Series to which Mitchell
Hutchins would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations under this Contract. The Fund shall not be
liable to Mitchell Hutchins under this indemnity agreement with respect to any
claim made against Mitchell Hutchins or any person indemnified unless Mitchell
Hutchins or other such person shall have notified the Fund in writing of the
claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon Mitchell Hutchins or such other person (or after Mitchell Hutchins
or the person shall have received notice of service on any designated agent).
However, failure to notify the Fund of any claim shall not relieve the Fund from
any liability which it may have to Mitchell Hutchins or any person against whom
such action is brought otherwise than on account of this indemnity agreement.
The Fund shall be entitled to participate at its own expense in the defense or,
if it so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity agreement. If the Fund elects to assume the defense of
any such claim, the defense shall be conducted by counsel chosen by the Fund and
satisfactory to indemnified defendants in the suit whose approval shall not be
unreasonably withheld. In the event that the Fund elects to assume the defense
of any suit and retain counsel, the indemnified defendants shall bear the fees
and expenses of any additional counsel retained by them. If the Fund does not
elect to assume the defense of a suit, it will reimburse the indemnified
defendants for the reasonable fees and expenses of any counsel retained by the
indemnified defendants. The Fund agrees to notify Mitchell Hutchins promptly of
the commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of any of its Class
B Shares.
(b) Mitchell Hutchins agrees to indemnify, defend, and hold
the Fund, its officers and trustees and any person who controls the Fund within
the meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its trustees or
officers, or any such controlling person may incur under the 1933 Act or under
common law or otherwise arising out of or based upon any alleged untrue
statement of a material fact contained in information furnished in writing by
Mitchell Hutchins to the Fund for use in the Registration Statement, arising out
of or based upon any alleged omission to state a material fact in connection
with such information required to be stated in the Registration Statement
necessary to make such information not misleading, or arising out of any
agreement between Mitchell Hutchins and any retail dealer, or arising out of any
supplemental sales literature or advertising used by Mitchell Hutchins in
connection with its duties under this Contract. Mitchell Hutchins shall be
entitled to participate, at its own expense, in the defense or, if it so elects,
to assume the defense of any suit brought to enforce the claim, but if Mitchell
Hutchins elects to assume the
6
<PAGE>
defense, the defense shall be conducted by counsel chosen by Mitchell Hutchins
and satisfactory to the indemnified defendants whose approval shall not be
unreasonably withheld. In the event that Mitchell Hutchins elects to assume the
defense of any suit and retain counsel, the defendants in the suit shall bear
the fees and expenses of any additional counsel retained by them. If Mitchell
Hutchins does not elect to assume the defense of any suit, it will reimburse the
indemnified defendants in the suit for the reasonable fees and expenses of any
counsel retained by them.
10. Limitation of Liability of the Trustees and Shareholders of
the Fund. The trustees of the Fund and the shareholders of any Series shall not
be liable for any obligations of the Fund or any Series under this Contract, and
Mitchell Hutchins agrees that, in asserting any rights or claims under this
Contract, it shall look only to the assets and property of the Fund or the
particular Series in settlement of such right or claims, and not to such
trustees or shareholders.
11. Services Provided to the Fund by Employees of Mitchell
Hutchins. Any person, even though also an officer, director, employee or agent
of Mitchell Hutchins, who may be or become an officer, trustee, employee or
agent of the Fund, shall be deemed, when rendering services to the Fund or
acting in any business of the Fund, to be rendering such services to or acting
solely for the Fund and not as an officer, director, employee or agent or one
under the control or direction of Mitchell Hutchins even though paid by Mitchell
Hutchins.
12. Duration and Termination.
(a) This Contract shall become effective upon the date
hereabove written, provided that, with respect to any Series, this Contract
shall not take effect unless such action has first been approved by vote of a
majority of the Board and by vote of a majority of those trustees of the Fund
who are not interested persons of the Fund, and have no direct or indirect
financial interest in the operation of the Plan relating to the Series or in any
agreements related thereto (all such trustees collectively being referred to
herein as the "Independent Trustees"), cast in person at a meeting called for
the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Contract
shall continue in effect for one year from the above written date. Thereafter,
if not terminated, this Contract shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or with respect to any given Series by vote of a
majority of the outstanding voting securities of the Class B Shares of such
Series.
(c) Notwithstanding the foregoing, with respect to any Series,
this Contract may be terminated at any time, without the payment of any penalty,
by vote of the Board, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding voting securities of the Class B Shares of
such Series on sixty days' written notice to Mitchell Hutchins or by Mitchell
Hutchins at any time, without the payment of any penalty, on sixty days' written
notice
7
<PAGE>
to the Fund or such Series. This Contract will automatically terminate in the
event of its assignment.
(d) Termination of this Contract with respect to any given
Series shall in no way affect the continued validity of this Contract or the
performance thereunder with respect to any other Series.
13. Amendment of this Contract. No provision of this Contract may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
14. Governing Law. This Contract shall be construed in accordance
with the laws of the State of Delaware and the 1940 Act, provided, however, that
Section 10 above will be construed in accordance with the laws of the
Commonwealth of Massachusetts. To the extent that the applicable laws of the
State of Delaware or the Commonwealth of Massachusetts conflict with the
applicable provisions of the l940 Act, the latter shall control.
15. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient upon receipt in writing at the
other party's principal offices.
16. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person"
and "assignment" shall have the same meaning as such terms have in the l940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
ATTEST: PAINEWEBBER MANAGED INVESTMENTS TRUST
/s/ Jenny Ann Frank By: /s/ Dianne E. O'Donnell
---------------------- -----------------------------------
Dianne E. O'Donnell
Secretary and Vice President
ATTEST: MITCHELL HUTCHINS ASSET MANAGEMENT INC.
/s/ Jenny Ann Frank By: /s/ Jack W. Murphy
---------------------- -----------------------------------
Jack W. Murphy
First Vice President
8
<PAGE>
Exhibit No. 6(e)
EXCLUSIVE DEALER AGREEMENT
CLASS A SHARES OF PAINEWEBBER MANAGED INVESTMENTS TRUST
AGREEMENT made as of July 7, 1993, between Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a Delaware corporation, and PaineWebber
Incorporated ("PaineWebber"), a Delaware corporation.
WHEREAS PaineWebber Managed Investments Trust ("Fund") is a
Massachusetts business trust registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company; and
WHEREAS the Fund currently has five distinct series of shares of
beneficial interest ("Series"), which correspond to distinct portfolios and have
been designated as the U.S. Government Income Fund, Investment Grade Income
Fund, High Income Fund, PaineWebber Utility Income Fund and PaineWebber
Short-Term U.S. Government Income Fund; and
WHEREAS the Fund's board of trustees ("Board") has established an
unlimited number of shares of beneficial interest of the above-referenced Series
as Class A shares ("Class A Shares") and has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the 1940 Act ("Plan") with respect to the Class A
Shares of the above-referenced Series and of such other Series as may hereafter
be designated by the Board and have Class A Shares established; and
WHEREAS Mitchell Hutchins has entered into a Distribution Contract with
the Fund ("Distribution Contract") pursuant to which Mitchell Hutchins serves as
principal distributor in connection with the offering and sale of the Class A
Shares of each such Series; and
WHEREAS Mitchell Hutchins desires to retain PaineWebber as its
exclusive agent in connection with the offering and sale of the Class A Shares
of each Series and to delegate to PaineWebber performance of certain of the
services which Mitchell Hutchins provides to the Fund under the Distribution
Contract; and
WHEREAS PaineWebber is willing to act as Mitchell Hutchins' exclusive
agent in connection with the offering and sale of such Class A Shares and to
perform such services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, Mitchell Hutchins and PaineWebber agree as follows:
<PAGE>
1. Appointment. Mitchell Hutchins hereby appoints PaineWebber as
its exclusive agent to sell and to arrange for the sale of the Class A Shares on
the terms and for the period set forth in this Agreement. Mitchell Hutchins also
appoints PaineWebber as its agent for the performance of certain other services
set forth herein which Mitchell Hutchins provides to the Fund under the
Distribution Contract. PaineWebber hereby accepts such appointments and agrees
to act hereunder. It is understood, however, that these appointments do not
preclude sales of Class A Shares directly through the Fund's transfer agent in
the manner set forth in the Registration Statement. As used in this Agreement,
the term "Registration Statement" shall mean the currently effective
Registration Statement of the Fund, and any supplements thereto, under the
Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act.
2. Services, Duties and Representations of PaineWebber.
(a) PaineWebber agrees to sell the Class A Shares on a best
efforts basis from time to time during the term of this Agreement as agent for
Mitchell Hutchins and upon the terms described in this Agreement and the
Registration Statement.
(b) Upon the later of the date of this Agreement or the
initial offering of Class A Shares by a Series to the public, PaineWebber will
hold itself available to receive orders, satisfactory to PaineWebber and
Mitchell Hutchins, for the purchase of Class A Shares and will accept such
orders on behalf of Mitchell Hutchins and the Fund as of the time of receipt of
such orders and will promptly transmit such orders as are accepted to the Fund's
transfer agent. Purchase orders shall be deemed effective at the time and in the
manner set forth in the Registration Statement.
(c) PaineWebber in its discretion may sell Class A Shares to
(i) its correspondent firms and customers of such firms and (ii) such other
registered and qualified retail dealers as it may select, subject to the
approval of Mitchell Hutchins. In making agreements with such dealers,
PaineWebber shall act only as principal and not as agent for Mitchell Hutchins
or the Fund.
(d) The offering price of the Class A Shares of each Series
shall be the net asset value per Share as next determined by the Fund following
receipt of an order at PaineWebber's principal office, plus the applicable
initial sales charge, if any, as set forth in the Registration Statement.
Mitchell Hutchins shall promptly furnish or arrange for the furnishing to
PaineWebber of a statement of each computation of net asset value.
(e) PaineWebber shall not be obligated to sell any certain
number of Class A Shares.
2
<PAGE>
(f) To facilitate redemption of Class A Shares by shareholders
directly or through dealers, PaineWebber is authorized but not required on
behalf of Mitchell Hutchins and the Fund to repurchase Class A Shares presented
to it by shareholders, its correspondent firms and other dealers at the price
determined in accordance with, and in the manner set forth in, the Registration
Statement. Such price shall reflect the subtraction of the applicable contingent
deferred sales charge, if any, computed in accordance with and in the manner set
forth in the Registration Statement.
(g) PaineWebber shall provide ongoing shareholder services,
which include responding to shareholder inquiries, providing shareholders with
information on their investments in the Class A Shares and any other services
now or hereafter deemed to be appropriate subjects for the payments of "service
fees" under Section 26(d) of the National Association of Securities Dealers,
Inc. ("NASD") Rules of Fair Practice (collectively, "service activities").
"Service activities" do not include the transfer agency-related and other
services for which PaineWebber receives compensation under the Service Contract
between PaineWebber and the Fund.
(h) PaineWebber represents and warrants that: (i) it is a
member in good standing of the NASD and agrees to abide by the Rules of Fair
Practice of the NASD; (ii) it is registered as a broker-dealer with the
Securities and Exchange Commission; (iii) it will maintain any filings and
licenses required by federal and state laws to conduct the business contemplated
under this Agreement; and (iv) it will comply with all federal and state laws
and regulations applicable to the offer and sale of the Class A Shares.
(i) PaineWebber shall not incur any debts or obligations on
behalf of Mitchell Hutchins or the Fund. PaineWebber shall bear all costs that
it incurs in selling the Class A Shares and in complying with the terms and
conditions of this Agreement as more specifically set forth in paragraph 8.
(j) PaineWebber shall not permit any employee or agent to
offer or sell Class A Shares to the public unless such person is duly licensed
under applicable federal and state laws and regulations.
(k) PaineWebber shall not (i) furnish any information or make
any representations concerning the Class A Shares other than those contained in
the Registration Statement or in sales literature or advertising that has been
prepared or approved by Mitchell Hutchins as provided in paragraph 6 or (ii)
offer or sell the Class A Shares in jurisdictions in which they have not been
approved for offer and sale.
3. Services Not Exclusive. The services furnished by PaineWebber
hereunder are not to be deemed exclusive and PaineWebber shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of PaineWebber who may also be a
director, trustee, officer or employee of Mitchell Hutchins or the Fund, to
engage in any
3
<PAGE>
other business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar or a
dissimilar nature.
4. Compensation.
(a) As compensation for its service activities under this
Agreement with respect to the Class A Shares, Mitchell Hutchins shall pay to
PaineWebber service fees with respect to Class A Shares maintained in
shareholder accounts serviced by PaineWebber employees, correspondent firms and
other dealers in such amounts as Mitchell Hutchins and PaineWebber may from time
to time agree upon.
(b) As compensation for its activities under this Agreement
with respect to the distribution of the Class A Shares, PaineWebber shall retain
that portion of the offering price constituting the Discount to Selected Dealers
("Discount"), if any, set forth in the Registration Statement for Class A shares
sold with an initial sales charge under this Agreement. PaineWebber is
authorized to collect the gross proceeds derived from the sale of such Class A
Shares; remit the net asset value thereof to the Fund's Transfer Agent; remit to
Mitchell Hutchins the difference between the offering price of the Class A
Shares and the applicable Discount; and retain said Discount. Whether the
offering price of the Class A Shares includes any initial sales charge out of
which a Discount may be retained by PaineWebber shall be determined in
accordance with the Registration Statement.
(c) Mitchell Hutchins shall pay to PaineWebber such
commissions and other compensation for sales of the Class A Shares by
PaineWebber employees, correspondent firms and other dealers as Mitchell
Hutchins and PaineWebber may from time to time agree upon.
(d) Mitchell Hutchins' obligation to pay compensation to
PaineWebber as agreed upon pursuant to this paragraph 4 is not contingent upon
receipt by Mitchell Hutchins of any compensation from the Fund or Series.
Mitchell Hutchins shall advise the Board of any agreements or revised agreements
as to compensation to be paid by Mitchell Hutchins to PaineWebber at their first
regular meeting held after such agreement but shall not be required to obtain
prior approval for such agreements from the Board.
(e) PaineWebber may reallow all or any part of the service
fees, commissions or other compensation which it is paid under this Agreement to
its correspondent firms or other dealers, in such amounts as PaineWebber may
from time to time determine.
5. Duties of Mitchell Hutchins.
(a) It is understood that the Fund reserves the right at any
time to withdraw all offerings of Class A Shares of any or all Series by written
notice to Mitchell Hutchins.
(b) Mitchell Hutchins shall keep PaineWebber fully informed of
the Fund's affairs and shall make available to PaineWebber copies of all
information, financial statements and other papers which PaineWebber may
reasonably request for use in connection with the
4
<PAGE>
distribution of Class A Shares, including, without limitation, certified copies
of any financial statements prepared for the Fund by its independent public
accountant and such reasonable number of copies of the most current prospectus,
statement of additional information, and annual and interim reports of any
Series as PaineWebber may request, and Mitchell Hutchins shall cooperate fully
in the efforts of PaineWebber to sell and arrange for the sale of the Class A
Shares and in the performance of PaineWebber under this Agreement.
(c) Mitchell Hutchins shall comply with all state and federal
laws and regulations applicable to a distributor of the Class A Shares.
6. Advertising. Mitchell Hutchins agrees to make available such
sales and advertising materials relating to the Class A Shares as Mitchell
Hutchins in its discretion determines appropriate. PaineWebber agrees to submit
all sales and advertising materials developed by it relating to the Class A
Shares to Mitchell Hutchins for approval. PaineWebber agrees not to publish or
distribute such materials to the public without first receiving such approval in
writing. Mitchell Hutchins shall assist PaineWebber in obtaining any regulatory
approvals of such materials that may be required of or desired by PaineWebber.
7. Records. PaineWebber agrees to maintain all records required
by applicable state and federal laws and regulations relating to the offer and
sale of the Class A Shares. Mitchell Hutchins and its representatives shall have
access to such records during normal business hours for review or copying.
8. Expenses of PaineWebber. PaineWebber shall bear all costs and
expenses of (i) preparing, printing, and distributing any materials not prepared
by the Fund or Mitchell Hutchins and other materials used by PaineWebber in
connection with its offering of Class A Shares for sale to the public; (ii) any
expenses of advertising incurred by PaineWebber in connection with such
offering; (iii) the expenses of registration or qualification of PaineWebber as
a dealer or broker under federal or state laws and the expenses of continuing
such registration or qualification; and (iv) all compensation paid to
PaineWebber's Investment Executives or other employees and others for selling
Class A Shares, and all expenses of PaineWebber, its Investment Executives and
employees and others who engage in or support the sale of Class A Shares as may
be incurred in connection with their sales efforts. PaineWebber shall bear such
additional costs and expenses as it and Mitchell Hutchins may agree upon, such
agreement to be evidenced in a writing signed by both parties. Mitchell Hutchins
shall advise the Board of any such agreement as to additional costs and expenses
borne by PaineWebber at their first regular meeting held after such agreement
but shall not be required to obtain prior approval for such agreements from the
Board.
5
<PAGE>
9. Indemnification.
(a) Mitchell Hutchins agrees to indemnify, defend, and hold
PaineWebber, its officers and directors, and any person who controls PaineWebber
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities, and expenses (including the
cost of investigating or defending such claims, demands, or liabilities and any
counsel fees incurred in connection therewith) which PaineWebber, its officers,
directors, or any such controlling person may incur under the 1933 Act, under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement; arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement thereof or necessary to make the
statements in the Registration Statement thereof not misleading; or arising out
of any sales or advertising materials with respect to the Class A Shares
provided by Mitchell Hutchins to PaineWebber. However, this indemnity agreement
shall not apply to any claims, demands, liabilities, or expenses that arise out
of or are based upon any such untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
furnished in writing by PaineWebber to Mitchell Hutchins or the Fund for use in
the Registration Statement or in any sales or advertising material; and further
provided, that in no event shall anything contained herein be so construed as to
protect PaineWebber against any liability to Mitchell Hutchins or the Fund or to
the shareholders of any Series to which PaineWebber would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement.
(b) PaineWebber agrees to indemnify, defend, and hold Mitchell
Hutchins and its officers and directors, the Fund, its officers and trustees,
and any person who controls Mitchell Hutchins or the Fund within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending against such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which Mitchell Hutchins or its officers or
directors or the Fund, its officers or trustees, or any such controlling person
may incur under the 1933 Act, under common law or otherwise arising out of or
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by PaineWebber to Mitchell Hutchins or the Fund
for use in the Registration Statement; arising out of or based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration Statement or necessary to make such information
not misleading; or arising out of any agreement between PaineWebber and a
correspondent firm or any other retail dealer; or arising out of any sales or
advertising material used by PaineWebber in connection with its duties under
this Agreement.
6
<PAGE>
10. Duration and Termination.
(a) This Agreement shall become effective upon the date
written above, provided that, with respect to any Series, this Contract shall
not take effect unless such action has first been approved by vote of a majority
of the Board and by vote of a majority of those trustees of the Fund who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related thereto (all
such trustees collectively being referred to herein as the "Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
action.
(b) Unless sooner terminated as provided herein, this
Agreement shall continue in effect for one year from the above written date.
Thereafter, if not terminated, this Agreement shall continue automatically for
successive periods of twelve months each, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board or with respect to any given
Series by vote of a majority of the outstanding voting securities of the Class A
Shares of such Series.
(c) Notwithstanding the foregoing, with respect to any Series
this Agreement may be terminated at any time, without the payment of any
penalty, by either party, upon the giving of 30 days' written notice. Such
notice shall be deemed to have been given on the date it is received in writing
by the other party or any officer thereof. This Agreement may also be terminated
at any time, without the payment of any penalty, by vote of the Board, by vote
of a majority of the Independent Trustees or by vote of a majority of the
outstanding voting securities of the Class A Shares of such Series on 30 days'
written notice to Mitchell Hutchins and PaineWebber.
(d) Termination of this Agreement with respect to any given
Series shall in no way affect the continued validity of this Agreement or the
performance thereunder with respect to any other Series. This Agreement will
automatically terminate in the event of its assignment or in the event that the
Distribution Contract is terminated.
(e) Notwithstanding the foregoing, Mitchell Hutchins may
terminate this Agreement without penalty, such termination to be effective upon
the giving of written notice to PaineWebber in the event that the Plan is
terminated or is amended to reduce the compensation payable to Mitchell Hutchins
thereunder or in the event that the Registration Statement is amended so as to
reduce the amount of compensation payable to Mitchell Hutchins under the
Distribution Contract, provided that Mitchell Hutchins gives notice of
termination pursuant to this provision within 90 days of such amendment or
termination of the Plan or amendment of the Registration Statement.
11. Amendment of this Agreement. No provision of this Agreement
may be amended, changed, waived, discharged or terminated orally, but only by an
instrument in writing
7
<PAGE>
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
12. Use of PaineWebber Name. PaineWebber hereby authorizes
Mitchell Hutchins to use the name "PaineWebber Incorporated" or any name derived
therefrom in any sales or advertising materials prepared and/or used by Mitchell
Hutchins in connection with its duties as distributor of the Class A Shares, but
only for so long as this Agreement or any extension, renewal or amendment hereof
remains in effect, including any similar agreement with any organization which
shall have succeeded to the business of PaineWebber.
13. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the 1940 Act, the latter shall control.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meaning as such terms
have in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first written
above.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: /s/ Jenny Ann Frank By: /s/ Dianne E. O'Donnell
-------------------- -------------------------------
Dianne E. O'Donnell
First Vice President
PAINEWEBBER INCORPORATED
Attest: /s/ Jenny Ann Frank By: /s/ Steven M. Joenk
-------------------- -------------------------------
Steven M. Joenk
Corporate Vice President
8
<PAGE>
Exhibit No. 6(f)
EXCLUSIVE DEALER AGREEMENT
CLASS B SHARES OF PAINEWEBBER MANAGED INVESTMENTS TRUST
AGREEMENT made as of July 7, 1993, between Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a Delaware corporation, and PaineWebber
Incorporated ("PaineWebber"), a Delaware corporation.
WHEREAS PaineWebber Managed Investments Trust ("Fund") is a
Massachusetts business trust registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company; and
WHEREAS the Fund currently has five distinct series of shares of
beneficial interest ("Series"), which correspond to distinct portfolio and have
been designated as the U.S. Government Income Fund, Investment Grade Income
Fund, High Income Fund, PaineWebber Utility Income Fund and PaineWebber
Short-Term U.S. Government Income Fund; and
WHEREAS the Fund's board of trustees ("Board") has established an
unlimited number of shares of beneficial interest of the above-referenced Series
as Class B shares ("Class B Shares") and has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the 1940 Act ("Plan") with respect to the Class B
Shares of the above-referenced Series and of such other Series as may hereafter
be designated by the Board and have Class B Shares established; and
WHEREAS Mitchell Hutchins has entered into a Distribution Contract with
the Fund ("Distribution Contract") pursuant to which Mitchell Hutchins serves as
principal distributor in connection with the offering and sale of the Class B
Shares of each such Series; and
WHEREAS Mitchell Hutchins desires to retain PaineWebber as its
exclusive agent in connection with the offering and sale of the Class B Shares
of each Series and to delegate to PaineWebber performance of certain of the
services which Mitchell Hutchins provides to the Fund under the Distribution
Contract; and
WHEREAS PaineWebber is willing to act as Mitchell Hutchins' exclusive
agent in connection with the offering and sale of such Class B Shares and to
perform such services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, Mitchell Hutchins and PaineWebber agree as follows:
<PAGE>
1. Appointment. Mitchell Hutchins hereby appoints PaineWebber as
its exclusive agent to sell and to arrange for the sale of the Class B Shares on
the terms and for the period set forth in this Agreement. Mitchell Hutchins also
appoints PaineWebber as its agent for the performance of certain other services
set forth herein which Mitchell Hutchins provides to the Fund under the
Distribution Contract. PaineWebber hereby accepts such appointments and agrees
to act hereunder. It is understood, however, that these appointments do not
preclude sales of Class B Shares directly through the Fund's transfer agent in
the manner set forth in the Registration Statement. As used in this Agreement,
the term "Registration Statement" shall mean the currently effective
Registration Statement of the Fund, and any supplements thereto, under the
Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act.
2. Services, Duties and Representations of PaineWebber.
(a) PaineWebber agrees to sell the Class B Shares on a best
efforts basis from time to time during the term of this Agreement as agent for
Mitchell Hutchins and upon the terms described in this Agreement and the
Registration Statement.
(b) Upon the later of the date of this Agreement or the
initial offering of Class B Shares by a Series to the public, PaineWebber will
hold itself available to receive orders, satisfactory to PaineWebber and
Mitchell Hutchins, for the purchase of Class B Shares and will accept such
orders on behalf of Mitchell Hutchins and the Fund as of the time of receipt of
such orders and will promptly transmit such orders as are accepted to the Fund's
transfer agent. Purchase orders shall be deemed effective at the time and in the
manner set forth in the Registration Statement.
(c) PaineWebber in its discretion may sell Class B Shares to
(i) its correspondent firms and customers of such firms and (ii) such other
registered and qualified retail dealers as it may select, subject to the
approval of Mitchell Hutchins. In making agreements with such dealers,
PaineWebber shall act only as principal and not as agent for Mitchell Hutchins
or the Fund.
(d) The offering price of the Class B Shares of each Series
shall be the net asset value per Share as next determined by the Fund following
receipt of an order at PaineWebber's principal office. Mitchell Hutchins shall
promptly furnish or arrange for the furnishing to PaineWebber of a statement of
each computation of net asset value.
(e) PaineWebber shall not be obligated to sell any certain
number of Class B Shares.
- 2 -
<PAGE>
(f) To facilitate redemption of Class B Shares by shareholders
directly or through dealers, PaineWebber is authorized but not required on
behalf of Mitchell Hutchins and the Fund to repurchase Class B Shares presented
to it by shareholders, its correspondent firms and other dealers at the price
determined in accordance with, and in the manner set forth in, the Registration
Statement. Such price shall reflect the subtraction of the applicable contingent
deferred sales charge, if any, computed in accordance with and in the manner set
forth in the Registration Statement.
(g) Painewebber shall provide ongoing shareholder services,
which include responding to shareholder inquiries, providing shareholders with
information on their investments in the Class B Shares and any other services
now or hereafter deemed to be appropriate subjects for the payments of "service
fees" under Section 26(d) of the National Association of Securities Dealers,
Inc. ("NASD") Rules of Fair Practice (collectively, "service activities").
"Service activities" do not include the transfer agency-related and other
services for which PaineWebber receives compensation under the Service Contract
between PaineWebber and the Fund.
(h) PaineWebber represents and warrants that: (i) it is a
member in good standing of the NASD and agrees to abide by the Rules of Fair
Practice of the NASD; (ii) it is registered as a broker-dealer with the
Securities and Exchange Commission; (iii) it will maintain any filings and
licenses required by federal and state laws to conduct the business contemplated
under this Agreement; and (iv) it will comply with all federal and state laws
and regulations applicable to the offer and sale of the Class B Shares.
(i) PaineWebber shall not incur any debts or obligations on
behalf of Mitchell Hutchins or the Fund. PaineWebber shall bear all costs that
it incurs in selling the Class B Shares and in complying with the terms and
conditions of this Agreement as more specifically set forth in paragraph 8.
(j) PaineWebber shall not permit any employee or agent to
offer or sell Class B Shares to the public unless such person is duly licensed
under applicable federal and state laws and regulations.
(k) PaineWebber shall not (i) furnish any information or make
any representations concerning the Class B Shares other than those contained in
the Registration Statement or in sales literature or advertising that has been
prepared or approved by Mitchell Hutchins as provided in paragraph 6 or (ii)
offer or sell the Class B Shares in jurisdictions in which they have not been
approved for offer and sale.
3. Services Not Exclusive. The services furnished by PaineWebber
hereunder are not to be deemed exclusive and PaineWebber shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of PaineWebber who may also be a
director, trustee, officer or employee of Mitchell Hutchins or the Fund, to
engage in any
- 3 -
<PAGE>
other business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar or a
dissimilar nature.
4. Compensation.
(a) As compensation for its service activities under this
Agreement with respect to the Class B Shares, Mitchell Hutchins shall pay to
PaineWebber service fees with respect to Class B Shares maintained in
shareholder accounts serviced by PaineWebber employees, correspondent firms and
other dealers in such amounts as Mitchell Hutchins and PaineWebber may from time
to time agree upon.
(b) As compensation for its activities under this Agreement
with respect to the distribution of the Class B Shares, Mitchell Hutchins shall
pay to PaineWebber such commissions for sales of the Class D shares by
PaineWebber employees, correspondent firms and other dealers and such other
compensation as Mitchell Hutchins and PaineWebber may from time to time agree
upon.
(c) Mitchell Hutchins' obligation to pay compensation to
PaineWebber as agreed upon pursuant to this paragraph 4 is not contingent upon
receipt by Mitchell Hutchins of any compensation from the Fund or Series.
Mitchell Hutchins shall advise the Board of any agreements or revised agreements
as to compensation to be paid by Mitchell Hutchins to PaineWebber at their first
regular meeting held after such agreement but shall not be required to obtain
prior approval for such agreements from the Board.
(d) PaineWebber may reallow all or any part of the service
fees, commissions or other compensation which it is paid under this Agreement to
its correspondent firms or other dealers, in such amounts as PaineWebber may
from time to time determine.
5. Duties of Mitchell Hutchins.
(a) It is understood that the Fund reserves the right at any
time to withdraw all offerings of Class B Shares of any or all Series by written
notice to Mitchell Hutchins.
(b) Mitchell Hutchins shall keep PaineWebber fully informed of
the Fund's affairs and shall make available to PaineWebber copies of all
information, financial statements and other papers which PaineWebber may
reasonably request for use in connection with the distribution of Class B
Shares, including, without limitation, certified copies of any financial
statements prepared for the Fund by its independent public accountant and such
reasonable number of copies of the most current prospectus, statement of
additional information, and annual and interim reports of any Series as
PaineWebber may request, and Mitchell Hutchins shall cooperate fully in the
efforts of PaineWebber to sell and arrange for the sale of the Class B Shares
and in the performance of PaineWebber under this Agreement.
- 4 -
<PAGE>
(c) Mitchell Hutchins shall comply with all state and federal
laws and regulations applicable to a distributor of the Class B Shares.
6. Advertising. Mitchell Hutchins agrees to make available such
sales and advertising materials relating to the Class B Shares as Mitchell
Hutchins in its discretion determines appropriate. PaineWebber agrees to submit
all sales and advertising materials developed by it relating to the Class B
Shares to Mitchell Hutchins for approval. PaineWebber agrees not to publish or
distribute such materials to the public without first receiving such approval in
writing. Mitchell Hutchins shall assist PaineWebber in obtaining any regulatory
approvals of such materials that may be required of or desired by PaineWebber.
7. Records. PaineWebber agrees to maintain all records required
by applicable state and federal laws and regulations relating to the offer and
sale of the Class B Shares. Mitchell Hutchins and its representatives shall have
access to such records during normal business hours for review or copying.
8. Expenses of PaineWebber. PaineWebber shall bear all costs and
expenses of (i) preparing, printing, and distributing any materials not prepared
by the Fund or Mitchell Hutchins and other materials used by PaineWebber in
connection with its offering of Class B Shares for sale to the public; (ii) any
expenses of advertising incurred by PaineWebber in connection with such
offering; (iii) the expenses of registration or qualification of PaineWebber as
a dealer or broker under federal or state laws and the expenses of continuing
such registration or qualification; and (iv) all compensation paid to
PaineWebber's Investment Executives or other employees and others for selling
Class B Shares, and all expenses of PaineWebber, its Investment Executives and
employees and others who engage in or support the sale of Class B Shares as may
be incurred in connection with their sales efforts. PaineWebber shall bear such
additional costs and expenses as it and Mitchell Hutchins may agree upon, such
agreement to be evidenced in a writing signed by both parties. Mitchell Hutchins
shall advise the Board of any such agreement as to additional costs and expenses
borne by PaineWebber at their first regular meeting held after such agreement
but shall not be required to obtain prior approval for such agreements from the
Board.
9. Indemnification.
(a) Mitchell Hutchins agrees to indemnify, defend, and hold
PaineWebber, its officers and directors, and any person who controls PaineWebber
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities, and expenses (including the
cost of investigating or defending such claims, demands, or liabilities and any
counsel fees incurred in connection therewith) which PaineWebber, its officers,
directors, or any such controlling person may incur under the 1933 Act, under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement; arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement thereof or necessary to make the
statements in the Registration Statement thereof not misleading; or arising out
of any
- 5 -
<PAGE>
sales or advertising materials with respect to the Class B Shares provided by
Mitchell Hutchins to PaineWebber. However, this indemnity agreement shall not
apply to any claims, demands, liabilities, or expenses that arise out of or are
based upon any such untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information furnished in
writing by PaineWebber to Mitchell Hutchins or the Fund for use in the
Registration Statement or in any sales or advertising material; and further
provided, that in no event shall anything contained herein be so construed as to
protect PaineWebber against any liability to Mitchell Hutchins or the Fund or to
the shareholders of any Series to which PaineWebber would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement.
(b) PaineWebber agrees to indemnify, defend, and hold Mitchell
Hutchins and its officers and directors, the Fund, its officers and trustees,
and any person who controls Mitchell Hutchins or the Fund within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending against such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which Mitchell Hutchins or its officers or
directors or the Fund, its officers or trustees, or any such controlling person
may incur under the 1933 Act, under common law or otherwise arising out of or
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by PaineWebber to Mitchell Hutchins or the Fund
for use in the Registration Statement; arising out of or based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration Statement or necessary to make such information
not misleading; or arising out of any agreement between PaineWebber and a
correspondent firm or any other retail dealer; or arising out of any sales or
advertising material used by PaineWebber in connection with its duties under
this Agreement.
10. Duration and Termination.
(a) This Agreement shall become effective upon the date
written above, provided that, with respect to any Series, this Contract shall
not take effect unless such action has first been approved by vote of a majority
of the Board and by vote of a majority of those trustees of the Fund who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related thereto (all
such trustees collectively being referred to herein as the "Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
action.
(b) Unless sooner terminated as provided herein, this
Agreement shall continue in effect for one year from the above written date.
Thereafter, if not terminated, this Agreement shall continue automatically for
successive periods of twelve months each, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board or with respect to any given
Series by vote of a majority of the outstanding voting securities of the Class B
Shares of such Series.
- 6 -
<PAGE>
(c) Notwithstanding the foregoing, with respect to any Series
this Agreement may be terminated at any time, without the payment of any
penalty, by either party, upon the giving of 30 days' written notice. Such
notice shall be deemed to have been given on the date it is received in writing
by the other party or any officer thereof. This Agreement may also be terminated
at any time, without the payment of any penalty, by vote of the Board, by vote
of a majority of the Independent Trustees or by vote of a majority of the
outstanding voting securities of the Class B Shares of such Series on 30 days'
written notice to Mitchell Hutchins and PaineWebber.
(d) Termination of this Agreement with respect to any given
Series shall in no way affect the continued validity of this Agreement or the
performance thereunder with respect to any other Series. This Agreement will
automatically terminate in the event of its assignment or in the event that the
Distribution Contract is terminated.
(e) Notwithstanding the foregoing, Mitchell Hutchins may
terminate this Agreement without penalty, such termination to be effective upon
the giving of written notice to PaineWebber in the event that the Plan is
terminated or is amended to reduce the compensation payable to Mitchell Hutchins
thereunder or in the event that the Registration Statement is amended so as to
reduce the amount of compensation payable to Mitchell Hutchins under the
Distribution Contract, provided that Mitchell Hutchins gives notice of
termination pursuant to this provision within 90 days of such amendment or
termination of the Plan or amendment of the Registration Statement.
11. Amendment of this Agreement. No provision of this Agreement
may be amended, changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
12. Use of PaineWebber Name. PaineWebber hereby authorizes
Mitchell Hutchins to use the name "PaineWebber Incorporated" or any name derived
therefrom in any sales or advertising materials prepared and/or used by Mitchell
Hutchins in connection with its duties as distributor of the Class B Shares, but
only for so long as this Agreement or any extension, renewal or amendment hereof
remains in effect, including any similar agreement with any organization which
shall have succeeded to the business of PaineWebber.
13. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Delaware and the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable provisions
of the 1940 Act, the latter shall control.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto
- 7 -
<PAGE>
and their respective successors. As used in this Agreement, the terms "majority
of the outstanding voting securities," "interested person" and "assignment"
shall have the same meaning as such terms have in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first written
above.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: /s/ Jenny Ann Frank By: /s/ Dianne E. O'Donnell
---------------------- -----------------------------
Dianne E. O'Donnell
First Vice President
PAINEWEBBER INCORPORATED
Attest: /s/ Jenny Ann Frank By: /s/ Steven M. Joenk
---------------------- -----------------------------
Steven M. Joenk
Corporate Vice President
- 8 -
<PAGE>
Exhibit No. 8
CUSTODIAN CONTRACT
Between
PAINEWEBBER FIXED INCOME PORTFOLIOS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Employment of Custodian and Property to be Held by It........................................................1
2. Duties of the Custodian with Respect to Property of the Fund Held By the Custodian...........................2
2.1 Holding Securities.......................................................................................2
2.2 Delivery of Securities...................................................................................2
2.3 Registration of Securities...............................................................................6
2.4 Bank Accounts............................................................................................7
2.5 Payments for Shares......................................................................................7
2.6 Investment and Availability of Federal Funds.............................................................8
2.7 Collection of Income.....................................................................................8
2.8 Payment of Fund Moneys...................................................................................9
2.9 Liability for Payment in Advance of Receipt of Securities Purchased.....................................11
2.10 Payments for Repurchases or Redemptions of Shares of the Portfolio.....................................11
2.11 Appointment of Agents..................................................................................12
2.12 Deposit of Fund Assets in Securities Systems...........................................................12
2.13 Segregated Account.....................................................................................14
2.14 Ownership Certificates for Tax Purposes................................................................15
2.15 Proxies................................................................................................16
2.16 Communications Relating to Portfolio Securities........................................................16
2.17 Proper Instructions....................................................................................17
2.18 Actions Permitted without Express Authority............................................................17
2.19 Evidence of Authority..................................................................................18
3. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset
Value and Net Income........................................................................................18
4. Records.....................................................................................................19
5. Opinion of Fund's Independent Certified Public Accountant...................................................19
6. Reports to Fund by Independent Certified Public Accountants.................................................20
7. Compensation of Custodian...................................................................................20
8. Responsibility of Custodian.................................................................................20
9. Effective Period, Termination and Amendment.................................................................21
10. Successor Custodian.........................................................................................22
11. Interpretive and Additional Provisions......................................................................23
</TABLE>
<PAGE>
<TABLE>
<S> <C>
12. Additional Funds............................................................................................24
13. Massachusetts Law to Apply..................................................................................24
14. Prior Contracts; Assignment.................................................................................24
15. Headings....................................................................................................24
16. Notices.....................................................................................................25
17. Limitation of Liability of the Trustees and Shareholders....................................................25
</TABLE>
2
<PAGE>
CUSTODIAN CONTRACT
This Contract between PaineWebber Fixed Income Portfolios, a
Massachusetts business trust organized and existing under the laws of
Massachusetts, having its principal place of business at 1285 Avenue of the
Americas, New York, New York 10019 hereinafter called the "Fund", and State
Street Bank and Trust Company, a Massachusetts corporation, having its principal
place of business at 225 Franklin Street, Boston, Massachusetts, 02110,
hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in three series,
the GNMA Portfolio, the Investment Grade Bond Portfolio, and the High Yield Bond
Portfolio (each such series together with any other series subsequently
established by the Fund and made subject to this Contract in accordance with
paragraph 12, being herein referred to as the "Portfolio");
NOW THEREFOR, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund pursuant to the provisions of the Declaration of
Trust. The Fund agrees to deliver to the Custodian all securities and cash owned
by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the
Portfolios from time to time, and the cash consideration received by it for such
new or treasury shares of
<PAGE>
beneficial interest ("Shares") of the Portfolios as may be issued or sold from
time to time. The Custodian shall not be responsible for any property of a
Portfolio held or received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.17), the Custodian shall from time to time employ ore or more sub-custodians,
but only in accordance with an applicable vote by the Trustees of the Fund, and
provided that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, including all
securities owned by such Portfolio, other than securities which are
maintained pursuant to Section 2.12 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as
"Securities System".
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such Securities
entered into by the Portfolio;
2
<PAGE>
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.12 hereof;
4) To the depository agent in connection with tender or
other similar offers for portfolio securities owned
by the Portfolio;
5) To the issuer thereof, or its agent, when such
Securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Portfolio or into the name of
any nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed pursuant
to Section 2.11 or into the name or nominee name of
any sub-custodian appointed pursuant to Article l; or
for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such Securities for the account of
the Portfolio, to the broker or its clearing agent,
against a receipt, for examination in accordance with
"street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of
such securities prior to receiving payment for such
securities except as may arise from the Custodian's
own negligence or willful misconduct;
3
<PAGE>
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities
and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Portfolio, but only against
receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Fund on behalf
of the Portfolio, which may be in the form of cash or
obligations issued by the United States government,
its agencies or instrumentalities, except that in
connection with any loans for which collateral is to
be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department
of the Treasury, the Custodian will not be held
liable or responsible for the delivery of Securities
owned by the Portfolio prior to the receipt of such
collateral;
4
<PAGE>
11) For delivery as security in connection with any
borrowings by the Portfolio requiring a pledge of
assets by the Portfolio, but only against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio,
the Custodian and a broker-dealer registered under
the Securities Exchange Act of 1934 ("Exchange Act")
and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or
organizations, regarding escrow or other arrangements
in connection with transactions by the Portfolio of
the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio,
the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating
to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market or any
similar organization or organizations, regarding
account deposits in connection with transactions by
the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in
connection with distributions in kind as may be
described from time to time in the Fund's currently
effective prospectus and statement of
5
<PAGE>
additional information ("prospectus"), in
satisfaction of requests by holders of Shares for
repurchase or redemption; and
15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Trustees or of
the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Portfolio or of any
nominee of the Custodian which nominee shall be assigned exclusively to
the Portfolio, unless the Fund has authorized in writing the
appointment of a nominee to be used in common with other registered
investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed
pursuant to Section 2.11 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Portfolio under the terms of this
Contract shall be in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of each Portfolio of the Fund, subject
only to draft or order by the
6
<PAGE>
Custodian acting pursuant to the terms of this Contract, and shall hold
in such account or accounts, subject to the provisions hereof, all cash
received by it from or for the accounts of the Portfolio, other than
cash maintained by the Portfolio in bank account(s) established and
used in accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for a Portfolio may be deposited by
it to its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however, that every
such bank or trust company shall be qualified to act as a custodian
under the Investment Company Act of 1940 and that each such bank or
trust company and the funds to be deposited with each such bank or
trust company shall be approved by vote of a majority of the Trustees
of the Fund. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only
in that capacity.
2.5 Payments for Shares. The Custodian shall receive from the distributor
for the Fund's Shares or from the Transfer Agent of the Fund and
deposit into the account of the appropriate Portfolio such payments as
are received for Shares of that Portfolio issued or sold from time to
time by the Fund. The Custodian will provide timely notification to the
Portfolio and the Transfer Agent of any receipt by it of payments for
Shares of such Portfolio.
2.6 Investment and Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall, upon the
receipt of Proper Instructions,
7
<PAGE>
1) invest in such instruments as may be set forth in
such instructions on the same day as received all
federal funds received after a time agreed upon
between the Custodian and the Fund; and
2) make federal funds available to a Portfolio as of
specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks
received in payment for Shares of such Portfolio
which are deposited into the Portfolio's accounts.
2.7 Collection of Income. The Custodian shall collect on a timely basis all
income and other payments with respect to registered securities held
hereunder to which each Portfolio shall be entitled either by law or
pursuant to custom in the securities business, and shall collect on a
timely basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
8
<PAGE>
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out moneys of a Portfolio in the following cases
only:
1) Upon the purchase of securities, options, futures
contracts or options on futures contracts for the
account of the Portfolio but only (a) against the
delivery of such securities or evidence of title to
such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States
or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as
its agent for this purpose) registered in the name of
the Portfolio or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in
accordance with the conditions set forth in Section
2.12 hereof; or (c) in the case of repurchase
agreements entered into between the Fund on behalf of
the Portfolio and the Custodian, or another bank, or
a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in
certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with
such securities (notwithstanding that the written
agreement to repurchase will be received
subsequently) or (ii) against delivery of the receipt
evidencing purchase by the Portfolio of securities
owned by the Custodian along with
9
<PAGE>
written evidence of the agreement by the Custodian to
repurchase such securities from the Portfolio;
2) In connection with conversion, exchange or surrender
of securities owned by the Portfolio as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by
the Portfolio as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred
by the Portfolio, including but not limited to the
following payments for the account of the Portfolio:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to
the governing documents of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions, a certified
copy of a resolution of the Trustees or of the
Executive Committee of the Fund signed by an officer
of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to
whom such payment is to be made.
10
<PAGE>
2.9 Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for purchase of securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from such Portfolio to so pay in advance, the Custodian
shall be absolutely liable to the Portfolio for such securities to the
same extent as if the securities had been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of the Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the
Trustees of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available
for payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares of a Portfolio,
the Custodian is authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a commercial bank designated
by the redeeming shareholders. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian shall honor checks
drawn on the Custodian by a holder of Shares, which checks have been
furnished by the Fund to the holder of Shares, when presented to the
Custodian in accordance with such procedures and controls as are
mutually agreed upon from time to time between the Fund and the
Custodian.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified
11
<PAGE>
under the Investment Company Act of 1940, as amended, to act as a
custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in
a Securities System provided that such securities are
represented in an account ("Account") of the
Custodian in the Securities System which shall not
include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to
securities of the Portfolio which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for
the account of the Portfolio upon (i) receipt of
advice from the Securities System that such
12
<PAGE>
securities have been transferred to the Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for
the account of the Portfolio. The Custodian shall
transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the
Securities System that payment for such securities
has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of
the Portfolio. Copies of all advices from the
Securities System of transfers of securities for the
account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the Fund on
behalf of the Portfolio confirmation of each transfer
to or from the account of the Portfolio in the form
of a written advice or notice and shall furnish to
the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions
in the Securities System for the account of the
Portfolio.
4) The Custodian shall provide the Fund for the
Portfolio with any report obtained by the Custodian
on the Securities System's accounting system,
internal accounting control and procedures for
safeguarding securities deposited in the Securities
System;
5) The Custodian shall have received the initial or
annual certificate, as the case may be, required by
Article 9 hereof;
13
<PAGE>
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for the benefit of the Portfolio for any loss or
damage to the Portfolio resulting from use of the
Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees or
from failure of the Custodian or any such agent to
enforce effectively such rights as it may have
against the Securities System; at the election of the
Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim
against the Securities System or any other person
which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss
or damage.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of each Portfolio, into which account or accounts may
be transferred cash and/or securities, including securities maintained
in an account by the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in
14
<PAGE>
connection with transactions by the Portfolio, (ii) for purposes of
segregating cash or government securities in connection with options
purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii)
for the purposes of compliance by the Portfolio with the procedures
required by Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in
the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Trustees or of
the Executive Committee signed by an officer of the Fund and certified
by the Secretary or an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and declaring such purposes to
be proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of each Portfolio held by it and
in connection with transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
15
<PAGE>
2.16 Communications Relating to Portfolio Securities. The Custodian shall
transmit promptly to the Fund for each Portfolio all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by
the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With
respect to tender or exchange offers, the Custodian shall transmit
promptly to the Portfolio all written information received by the
Custodian from issuers of the securities whose tender or exchange is
sought and from the party (or his agents) making the tender or exchange
offer. If the Portfolio desires to take action with respect to any
tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior
to the date on which the Custodian is to take such action.
2.17 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialed by one or more person or
persons as the Trustees shall have from time to time authorized. Each
such writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the purpose for
which such action is requested. Oral instructions will be considered
Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. Upon receipt of a certificate
of the Secretary or an Assistant Secretary as to the authorization by
the Trustees of the Fund accompanied by a detailed description of
procedures approved by the Trustees, Proper Instructions may
16
<PAGE>
include communications effected directly between electro-mechanical or
electronic devices provided that the Trustees and the Custodian are
satisfied that such procedures afford adequate safeguards for the
Portfolio's assets.
2.18 Actions Permitted without Express Authority. The Custodian may in its
discretion, without express authority from the Fund on behalf of the
Portfolio:
1) make payments to itself or others for minor expenses
of handling securities or other similar items
relating to its duties under this Contract, provided
that all such payments shall be accounted for to the
Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities
in definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details
in connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the
securities and property of the Portfolio except as
otherwise directed by the Trustees of the Fund.
2.19 Evidence of Authority. The Custodian shall be protected in acting upon
any instructions, notice, consent, certificate or other instrument
request, or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the Trustees of the
Fund as conclusive evidence (a) of the authority of any person to act
in accordance with such vote or (b) of any determination or of any
action by the Trustees pursuant to the Declaration of
17
<PAGE>
Trust as described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written notice
to the contrary.
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Trustees of the Fund to keep the books
of account of each Portfolio and/or compute the net asset value per Share of the
outstanding Shares of each Portfolio or, if directed in writing to do so by the
Portfolio, shall itself keep such books of account and/or compute such net asset
value per Share. Unless otherwise directed, the Custodian shall also calculate
daily the net income of each Portfolio as described in the Fund's currently
effective prospectus and shall advise the Fund and the Transfer Agent daily of
the total amounts of such net income and, if instructed in writing by an officer
of the Portfolio Manager to do so, shall advise the Transfer Agent periodically
of the division of such net income among its various components. The
calculations of the net asset value per Share and the daily income of each
Portfolio shall be made at the time or times described from time to time in the
Fund's currently effective prospectus.
4. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be the
property
18
<PAGE>
of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
5. Opinion of Fund's Independent Certified Public Accountant
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent certified public accountants with respect to its activities
hereunder in connection with the preparation of the Fund's Form N-1A, and Form
N-SAR or other annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
6. Reports to Fund by Independent Certified Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent certified public accountants on
the accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian under this Contract; such
reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
19
<PAGE>
7. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties.
The Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Contract, but shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted by it in good
faith without negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund or the Portfolio being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for
any purpose for the benefit of a Portfolio or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the
20
<PAGE>
performance of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Portfolio shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Portfolio's
assets to the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.12 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Trustees of the Fund has approved the initial use of a
particular Securities System and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Trustees has reviewed the use by
the Fund of such Securities System, as required in each case by Rule 17f-4 under
the Investment Company Act of 1940; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Declaration of Trust, and
further provided, that the Fund may at any time by action of its Trustees (i)
substitute another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this Contract in
the event of the appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
21
<PAGE>
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements as
contemplated by this Contract.
10. Successor Custodian
If a successor custodian shall be appointed by the Trustees of the
Fund, the Custodian shall, upon termination, deliver to such successor custodian
at the office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an account of the
successor custodian all of the Portfolio's securities held in a Securities
System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Trustees of
the Fund, deliver at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Trustees shall have been delivered to the
Custodian on or before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the Investment Company Act of 1940, doing
business in Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract and to transfer to an account of
such successor custodian all of the Portfolio's securities held in any
Securities System. Thereafter, such bank or trust company shall be the successor
of the Custodian under this Contract.
22
<PAGE>
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Trustees to appoint a successor custodian, the Custodian shall be entitled
to fair compensation for its services during such period as the Custodian
retains possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
12. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to the GNMA Portfolio, the Investment Grade Bond Portfolio, and the
High Yield Bond Portfolio with respect to which it desires to have the Custodian
render services as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide such
services, such series of Shares shall become a Portfolio hereunder.
23
<PAGE>
13. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
14. Prior Contracts; Assignment
This Contract supersedes and terminates, hereof, all prior contracts
between the Fund and as of the date the Custodian relating to the custody of the
Fund's assets. This Contract may not be assigned by the Custodian except as
expressly provided for in Section 10 hereof, without the prior written consent
of the Fund.
15. Headings
The Headings of the Sections of this Contract are inserted for
reference and convenience only, and shall not affect the construction of this
Contract.
16. Notices
All notices and communications, including Proper Instructions
(collectively referred to as "Notice" or "Notices" in this paragraph), hereunder
shall be in writing or by confirming telegram, cable or telex. Notices shall be
addressed (a) if to the Custodian at its address, 225 Franklin Street, Boston,
Massachusetts 02110, marked for the attention of the Insurance/Broker-Dealer
Services Division, (b) if to the Fund, at the address of the Fund, or (c) if to
neither of the foregoing, at such other address as shall have been notified to
the sender of any such Notice.
17. Limitation of Liability of the Trustees and Shareholders
A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Trustees of the Fund as Trustees
and not individually and that the obligations of this
24
<PAGE>
instrument are not binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of the Fund.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the __________________ day of
___________________, 1987.
ATTEST PAINEWEBBER FIXED INCOME PORTFOLIOS
Abbe P. Stein By /s/ Dianne E. O'Donnell
- ------------------------------ ---------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
By /s/
- ------------------------------ ---------------------------------
Assistant Secretary Vice President
25
<PAGE>
Exhibit No. 9
TRANSFER AGENCY AND RELATED SERVICES AGREEMENT
THIS AGREEMENT is made as of , 199 by and between PFPC INC.,
a Maryland corporation ("PFPC"), and PAINEWEBBER MANAGED INVESTMENTS TRUST, a
Massachusetts business trust(the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and related services agent to the Fund's
Portfolios (as hereinafter defined) and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Definitions. As Used in this Agreement:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Directors or Trustees ("Board") to
give Oral Instructions and Written Instructions on behalf of the Fund and listed
on the Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PFPC. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
<PAGE>
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received by
PFPC from an Authorized Person.
(f) "Portfolio" means a series or investment portfolio of the
Fund identified on Annex A hereto, as the same may from time to time be amended,
if the Fund consists of more than one series or investment portfolio; however,
if the Fund does not have separate series or investment portfolios, then this
term shall be deemed to refer to the Fund itself.
(g) "SEC" means the Securities and Exchange Commission.
(h) "Securities Laws" mean the 1933 Act, the 1934 Act, the
1940 Act and the CEA.
(i) "Shares" mean the shares of common stock or beneficial
interest of any series or class of the Fund.
(j) "Written Instructions" mean written instructions signed by
an Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PFPC to serve as transfer
agent, registrar, dividend disbursing agent and related services agent to the
Fund, and should the Fund have separate Portfolios, those Portfolios which are
listed on Annex A hereto, in accordance with the terms set forth in this
Agreement. PFPC accepts such appointment and agrees to furnish such services.
2
<PAGE>
3. Delivery of Documents. The Fund (or a particular Portfolio, as
appropriate) has provided or, where applicable, will provide PFPC with the
following:
(a) Certified or authenticated copies of the resolutions
of the Fund's Board approving the appointment of PFPC
to provide services to the Fund and approving this
Agreement;
(b) A copy of each executed broker-dealer agreement with
respect to each Fund; and
(c) Copies (certified or authenticated if requested by
PFPC) of any post-effective amendment to the Fund's
registration statement, advisory agreement,
distribution agreement, shareholder servicing
agreement and all amendments or supplements to the
foregoing upon request.
4. Compliance with Rules and Regulations. PFPC undertakes to comply
with all applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or any of
its Portfolios.
5. Instructions.
(a) Unless otherwise provided in this Agreement, PFPC shall
act only upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions
and Written Instructions it receives from an Authorized Person pursuant to this
Agreement. PFPC may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or of any vote, resolution or proceeding of the Fund's
Board or of the Fund's shareholders, unless and until PFPC receives
3
<PAGE>
Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the next day after such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by PFPC
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral Instructions or
Written Instructions reasonably appear to have been received from an Authorized
Person, PFPC shall incur no liability to the Fund in acting upon such Oral
Instructions or Written Instructions provided that PFPC's actions comply with
the other provisions of this Agreement.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any action
it should or should not take, PFPC may request directions or advice, including
Oral Instructions or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any
question of law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing (who may be
counsel for the Fund, the Fund's investment adviser or PFPC, at the option of
PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PFPC receives
from the Fund, and the advice it receives from counsel, PFPC may rely upon and
follow the advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of
4
<PAGE>
PFPC which constitutes willful misfeasance, bad faith, negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action
it takes or does not take in reliance upon directions, advice or Oral
Instructions or Written Instructions it receives from the Fund or from counsel
and which PFPC believes, in good faith, to be consistent with those directions,
advice or Oral Instructions or Written Instructions. Nothing in this section
shall be construed so as to impose an obligation upon PFPC (i) to seek such
directions, advice or Oral Instructions or Written Instructions, or (ii) to act
in accordance with such directions, advice or Oral Instructions or Written
Instructions unless, under the terms of other provisions of this Agreement, the
same is a condition of PFPC's properly taking or not taking such action. Nothing
in this subsection shall excuse PFPC when an action or omission on the part of
PFPC constitutes willful misfeasance, bad faith, negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
7. Records; Visits. PFPC shall prepare and maintain in complete and
accurate form all books and records necessary for it to serve as transfer agent,
registrar, dividend disbursing agent and related services agent to each
Portfolio, including (a) all those records required to be prepared and
maintained by the Fund under the 1940 Act, by other applicable Securities Laws,
rules and regulations and by state laws and (b) such books and records as are
necessary for PFPC to perform all of the services it agrees to provide in this
Agreement and the appendices attached hereto, including but not limited to the
books and records necessary to effect the conversion of Class B shares, the
calculation of any contingent deferred sales charges and the calculation of
5
<PAGE>
front-end sales charges. The books and records pertaining to the Fund, which are
in the possession or under the control of PFPC, shall be the property of the
Fund. The Fund and Authorized Persons shall have access to such books and
records in the possession or under the control of PFPC at all times during
PFPC's normal business hours. Upon the reasonable request of the Fund, copies of
any such books and records in the possession or under the control of PFPC shall
be provided by PFPC to the Fund or to an Authorized Person. Upon reasonable
notice by the Fund, PFPC shall make available during regular business hours its
facilities and premises employed in connection with its performance of this
Agreement for reasonable visits by the Fund, any agent or person designated by
the Fund or any regulatory agency having authority over the Fund.
8. Confidentiality. PFPC agrees to keep confidential all records of the
Fund and information relating to the Fund and its shareholders (past, present
and future), its investment adviser and its principal underwriter, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund prior to its release. The Fund agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed to civil
or criminal contempt proceedings or when required to divulge such information or
records to duly constituted authorities.
9. Cooperation with Accountants. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
6
<PAGE>
10. Disaster Recovery. PFPC shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for periodic backup of computer files and data with respect to the
Fund and emergency use of electronic data processing equipment. In the event of
equipment failures, PFPC shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions. PFPC shall have no liability
with respect to the loss of data or service interruptions caused by equipment
failure, provided such loss or interruption is not caused by PFPC's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations under this Agreement and provided further that PFPC has complied
with the provisions of this paragraph 10.
11. Compensation. As compensation for services rendered by PFPC during
the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to from time to time in writing by the Fund and PFPC.
12. Indemnification.
(a) The Fund agrees to indemnify and hold harmless PFPC and its
affiliates from all taxes, charges, expenses, assessments, penalties, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state and foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) reasonable
attorneys' fees and disbursements, arising directly or indirectly from (i) any
action or omission to act which PFPC takes (a) at the request or on the
direction of or in reliance on the advice of the Fund or (b) upon Oral
Instructions or Written Instructions or (ii) the acceptance, processing and/or
negotiation of checks or other methods utilized for the purchase of Shares.
7
<PAGE>
Neither PFPC, nor any of its affiliates, shall be indemnified against any
liability (or any expenses incident to such liability) arising out of PFPC's or
its affiliates' own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement. The Fund's
liability to PFPC for PFPC's acceptance, processing and/or negotiation of checks
or other methods utilized for the purchase of Shares shall be limited to the
extent of the Fund's policy(ies) of insurance that provide for coverage of such
liability, and the Fund's insurance coverage shall take precedence.
(b) PFPC agrees to indemnify and hold harmless the Fund from all taxes,
charges, expenses, assessments, penalties, claims and liabilities arising from
PFPC's obligations pursuant to this Agreement (including, without limitation,
liabilities arising under the Securities Laws, and any state and foreign
securities and blue sky laws, and amendments thereto) and expenses, including
(without limitation) reasonable attorneys' fees and disbursements arising
directly or indirectly out of PFPC's or its nominee's own willful misfeasance,
bad faith, negligence or reckless disregard of its duties and obligations under
this Agreement.
(c) In order that the indemnification provisions contained in this
Paragraph 12 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be
8
<PAGE>
required to indemnify it except with the other party's prior written consent.
(d) The members of the Board of the Fund, its officers and
Shareholders, or of any Portfolio thereof, shall not be liable for any
obligations of the Fund, or any such Portfolio, under this Agreement, and PFPC
agrees that in asserting any rights or claims under this Agreement, it shall
look only to the assets and property of the Fund or the particular Portfolio in
settlement of such rights or claims and not to such members of the Board, its
officers or Shareholders. PFPC further agrees that it will look only to the
assets and property of a particular Portfolio of the Fund, should the Fund have
established separate series, in asserting any rights or claims under this
Agreement with respect to services rendered with respect to that Portfolio and
will not seek to obtain settlement of such rights or claims from the assets of
any other Portfolio of the Fund.
13. Insurance. PFPC shall maintain insurance of the types and in the
amounts deemed by it to be appropriate. To the extent that policies of insurance
may provide for coverage of claims for liability or indemnity by the parties set
forth in this Agreement, the contracts of insurance shall take precedence, and
no provision of this Agreement shall be construed to relieve an insurer of any
obligation to pay claims to the Fund, PFPC or other insured party which would
otherwise be a covered claim in the absence of any provision of this Agreement.
14. Security.
(a) PFPC represents and warrants that, to the best of its knowledge,
the various procedures and systems which PFPC has implemented with regard to the
safeguarding from loss or damage attributable to fire, theft or any other cause
(including provision for twenty-four hours a day restricted access) of the
Fund's blank checks, certificates, records and other data and
9
<PAGE>
PFPC's equipment, facilities and other property used in the performance of its
obligations hereunder are adequate, and that it will make such changes therein
from time to time as in its judgment are required for the secure performance of
its obligations hereunder. PFPC shall review such systems and procedures on a
periodic basis, and the Fund shall have reasonable access to review these
systems and procedures.
(b) Y2K Compliance. PFPC further represents and warrants that any and
all electronic data processing systems and programs that it uses or retains in
connection with the provision of services hereunder on or before January 1, 1999
will be year 2000 compliant.
15. Responsibility of PFPC.
(a) PFPC shall be under no duty to take any action on behalf
of the Fund except as specifically set forth herein or as may be specifically
agreed to by PFPC in writing. PFPC shall be obligated to exercise care and
diligence in the performance of its duties hereunder, to act in good faith and
to use its best efforts in performing services provided for under this
Agreement. PFPC shall be liable for any damages arising out of PFPC's failure to
perform its duties under this Agreement to the extent such damages arise out of
PFPC's willful misfeasance, bad faith, negligence or reckless disregard of such
duties.
(b) Without limiting the generality of the foregoing or of any
other provision of this Agreement, PFPC shall not be under any duty or
obligation to inquire into and shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral Instruction or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PFPC reasonably believes to be
genuine; or (B) subject to Section 10,
10
<PAGE>
delays or errors or loss of data occurring by reason of circumstances beyond
PFPC's control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, flood, catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
(c) Notwithstanding anything in this Agreement to the
contrary, neither PFPC nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur or
suffer by or as a consequence of PFPC's or its affiliates' performance of the
services provided hereunder, whether or not the likelihood of such losses or
damages was known by PFPC or its affiliates.
(d) Notwithstanding anything in this Agreement to the
contrary, the Fund shall not be liable to PFPC nor its affiliates for any
consequential, special or indirect losses or damages which PFPC or its
affiliates may incur or suffer by or as a consequence of PFPC's performance of
the services provided hereunder, whether or not the likelihood of such losses or
damages was known by the Fund.
16. Description of Services.
(a) Services Provided on an Ongoing Basis, If Applicable.
(i) Calculate 12b-1 payments to financial
intermediaries, including brokers, and
financial intermediary trail commissions;
(ii) Develop, monitor and maintain, in
consultation with the Fund, all systems
necessary to implement and operate the
four-tier distribution system, including
Class B conversion feature, as described in
the registration statement and related
documents of the Fund, as they may be
amended from time to time;
11
<PAGE>
(iii) Calculate contingent deferred sales charge
amounts upon redemption of Fund shares and
deduct such amounts from redemption
proceeds;
(iv) Calculate front-end sales load amounts at
time of purchase of shares;
(v) Determine dates of Class B conversion and
effect the same;
(vi) Establish and maintain proper shareholder
registrations;
(vii) Review new applications and correspond with
shareholders to complete or correct
information;
(viii) Direct payment processing of checks or
wires;
(ix) Prepare and certify stockholder lists in
conjunction with proxy solicitations;
(x) Prepare and mail to shareholders
confirmation of activity;
(xi) Provide toll-free lines for direct
shareholder use, plus customer liaison staff
for on-line inquiry response;
(xii) Send duplicate confirmations to
broker-dealers of their clients' activity,
whether executed through the broker-dealer
or directly with PFPC;
(xiii) Provide periodic shareholder lists,
outstanding share calculations and related
statistics to the Fund;
(xiv) Provide detailed data for underwriter/broker
confirmations;
(xv) Prepare and mail required calendar and
taxable year-end tax and statement
information (including forms 1099-DIV and
1099-B and accompanying statements);
(xvi) Notify on a daily basis the investment
adviser, accounting agent, and custodian of
fund activity;
12
<PAGE>
(xvii) Perform, itself or through a delegate, such
of the services, whether or not included
within the scope of another paragraph of
this Paragraph 16(a), specified on Annex B
hereto as may be agreed upon from time to
time; and
(xviii) Perform other participating broker-dealer
shareholder services as may be agreed upon
from time to time.
13
<PAGE>
(b) Services Provided by PFPC Under Oral Instructions or
Written Instructions.
(i) Accept and post daily Fund and class
purchases and redemptions;
(ii) Accept, post and perform shareholder
transfers and exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Cancel certificates.
(c) Purchase of Shares. PFPC shall issue and credit an account
of an investor, in the manner described in the Fund's prospectus, once it
receives:
(i) A purchase order;
(ii) Proper information to establish a
shareholder account; and
(iii) Confirmation of receipt or crediting of
funds for such order to the Fund's
custodian.
(d) Redemption of Shares. PFPC shall redeem Shares only if
that function is properly authorized by the Fund's organizational documents or
resolutions of the Fund's Board. Shares shall be redeemed and payment therefor
shall be made in accordance with the Fund's or Portfolio's prospectus.
14
<PAGE>
(i) Broker-Dealer Accounts.
When a broker-dealer notifies PFPC of a
redemption desired by a customer, and the
Fund's or Portfolio's custodian (the
"Custodian") has provided PFPC with funds,
PFPC shall (a) transfer by Fedwire or other
agreed upon electronic means such redemption
payment to the broker-dealer for the credit
to, and for the benefit of, the customer's
account or (b) shall prepare and send a
redemption check to the broker-dealer, made
payable to the broker-dealer on behalf of
its customer.
(ii) Fund-Only Accounts.
If Shares (or appropriate instructions) are
received in proper form, at the Fund's
request Shares may be redeemed before the
funds are provided to PFPC from the
Custodian. If the recordholder has not
directed that redemption proceeds be wired,
when the Custodian provides PFPC with funds,
the redemption check shall be sent to and
made payable to the recordholder, unless:
(a) the surrendered certificate is
drawn to the order of an assignee
or holder and transfer
authorization is signed by the
recordholder; or
(b) transfer authorizations are signed
by the recordholder when
15
<PAGE>
Shares are held in book-entry form.
(e) Dividends and Distributions. Upon receipt of a resolution
of the Fund's Board authorizing the declaration and payment of dividends and
distributions, PFPC shall issue dividends and distributions declared by the Fund
in Shares, or, upon shareholder election, pay such dividends and distributions
in cash, if provided for in the appropriate Fund's or Portfolio's prospectus.
PFPC shall mail to the Fund's shareholders and the IRS and other appropriate
taxing authorities such tax forms, or permissible substitute forms, and other
information relating to dividends and distributions paid by the Fund (including
designations of the portions of distributions of net capital gain that are 20%
rate gain distributions and 28% rate gain distributions pursuant to IRS Notice
97-64) as are required to be filed and mailed by applicable law, rule or
regulation within the time required thereby. PFPC shall mail to the Fund's
shareholders such tax forms and other information, or permissible substitute
notice, relating to dividends and distributions paid by the Fund as are required
to be filed and mailed by applicable law, rule or regulation. PFPC shall
prepare, maintain and file with the IRS and other appropriate taxing authorities
reports relating to all dividends above a stipulated amount paid by the Fund to
its shareholders as required by tax or other law, rule or regulation.
(f) Shareholder Account Services.
(i) PFPC will arrange, in accordance with the
appropriate Fund's or Portfolio's
prospectus, for issuance of Shares obtained
through:
- The transfer of funds from shareholders'
accounts at financial institutions, provided
PFPC receives advance Oral or Written
Instruction of such transfer;
16
<PAGE>
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders,
checks and applications.
(ii) PFPC will arrange, in accordance with the
appropriate Fund's or Portfolio's
prospectus, for a shareholder's:
- Exchange of Shares for shares of another
fund with which the Fund has exchange
privileges;
- Automatic redemption from an account where
that shareholder participates in a
systematic withdrawal plan; and/or
- Redemption of Shares from an account with a
checkwriting privilege.
(g) Communications to Shareholders. Upon timely Written
Instructions, PFPC shall mail all communications by the Fund to its
shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund
shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax forms (including substitute forms) and
accompanying information containing the
information required by paragraph 16(e).
If requested by the Fund, PFPC will receive and tabulate the
proxy cards for the meetings of the Fund's shareholders and supply personnel to
serve as inspectors of election.
(h) Records. PFPC shall maintain those records required by the
Securities
17
<PAGE>
Laws and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PFPC hereunder
with respect to shareholder accounts or by transfer agents generally, including
records of the accounts for each shareholder showing the following information:
(i) Name, address and United States Taxpayer
Identification or Social Security number;
(ii) Number and class of Shares held and number
and class of Shares for which certificates,
if any, have been issued, including
certificate numbers and denominations;
(iii) Historical information regarding the account
of each shareholder, including dividends and
distributions paid, their character (e.g.
ordinary income, net capital gain (including
20% rate gain and 28% rate gain),
exempt-interest, foreign tax-credit and
dividends received deduction eligible) for
federal income tax purposes and the date and
price for all transactions on a
shareholder's account;
(iv) Any stop or restraining order placed against
a shareholder's account;
(v) Any correspondence relating to the current
maintenance of a shareholder's account;
(vi) Information with respect to withholdings;
and
H (vii) Any information required in order for the
transfer agent to perform any calculations
contemplated or required by this Agreement.
(i) Lost or Stolen Certificates. PFPC shall place a stop
notice against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. The lost or stolen certificate will be canceled and
uncertificated Shares will be issued to a shareholder's account only upon:
(i) The shareholder's pledge of a lost instrument bond or
such other
18
<PAGE>
appropriate indemnity bond issued by a surety company
approved by PFPC; and
(ii) Completion of a release and indemnification agreement
signed by the shareholder to protect PFPC and its
affiliates.
(j) Shareholder Inspection of Stock Records. Upon a request
from any Fund shareholder to inspect stock records, PFPC will notify the Fund,
and the Fund will issue instructions granting or denying each such request.
Unless PFPC has acted contrary to the Fund's instructions, the Fund agrees and
does hereby release PFPC from any liability for refusal of permission for a
particular shareholder to inspect the Fund's shareholder records.
(k) Withdrawal of Shares and Cancellation of Certificates.
Upon receipt of Written Instructions, PFPC shall cancel
outstanding certificates surrendered by the Fund to reduce the total amount of
outstanding shares by the number of shares surrendered by the Fund.
17. Duration and Termination.
(a) This Agreement shall be effective on the date first written above
and shall continue for a period of three (3) years (the "Initial Term"). Upon
the expiration of the Initial Term, this Agreement shall automatically renew for
successive terms of one (1) year ("Renewal Terms") each provided that it may be
terminated by either party during a Renewal Term upon written notice given at
least ninety (90) days prior to termination. During either the Initial Term or
the Renewal Terms, this Agreement may also be terminated on an earlier date by
either party for cause.
19
<PAGE>
(b) With respect to the Fund, cause includes, but is not limited to,
(i) PFPC's material breach of this Agreement causing it to fail to substantially
perform its duties under this Agreement. In order for such material breach to
constitute "cause" under this Paragraph, PFPC must receive written notice from
the Fund specifying the material breach and PFPC shall not have corrected such
breach within a 15-day period; (ii) financial difficulties of PFPC evidenced by
the authorization or commencement of a voluntary or involuntary bankruptcy under
the U.S. Bankruptcy Code or any applicable bankruptcy or similar law, or under
any applicable law of any jurisdiction relating to the liquidation or
reorganization of debt, the appointment of a receiver or to the modification or
alleviation of the rights of creditors; and (iii) issuance of an administrative
or court order against PFPC with regard to the material violation or alleged
material violation of the Securities Laws or other applicable laws related to
its business of performing transfer agency services;
(c) With respect to PFPC, cause includes, but is not limited to, the
failure of the Fund to pay the compensation set forth in writing pursuant to
Paragraph 11 of this Agreement.
(d) Any notice of termination for cause in conformity with
subparagraphs (a), (b) and (c) of this Paragraph by the Fund shall be effective
thirty (30) days from the date of any such notice. Any notice of termination for
cause by PFPC shall be effective 90 days from the date of such notice.
(e) Upon the termination hereof, the Fund shall pay to PFPC such
compensation as may be due for the period prior to the date of such termination.
In the event that the Fund designates a successor to any of PFPC's obligations
under this Agreement, PFPC shall, at the
20
<PAGE>
direction and expense of the Fund, transfer to such successor all relevant
books, records and other data established or maintained by PFPC hereunder
including, a certified list of the shareholders of the Fund or any Portfolio
thereof with name, address, and if provided, taxpayer identification or Social
Security number, and a complete record of the account of each shareholder. To
the extent that PFPC incurs expenses related to a transfer of responsibilities
to a successor, other than expenses involved in PFPC's providing the Fund's
books and records described in the preceding sentence to the successors, PFPC
shall be entitled to be reimbursed for such extraordinary expenses, including
any out-of-pocket expenses reasonably incurred by PFPC in connection with the
transfer.
(f) Any termination effected pursuant to this Paragraph shall not
affect the rights and obligations of the parties under Paragraph 12 hereof.
(g) Notwithstanding the foregoing, this Agreement shall terminate with
respect to the Fund or any Portfolio thereof upon the liquidation, merger, or
other dissolution of the Fund or Portfolio or upon the Fund's ceasing to be a
registered investment company.
18. Registration as a Transfer Agent. PFPC represents that it is
currently registered with the appropriate federal agency for the registration of
transfer agents, or is otherwise permitted to lawfully conduct its activities
without such registration and that it will remain so registered or able to so
conduct such activities for the duration of this Agreement. PFPC agrees that it
will promptly notify the Fund in the event of any material change in its status
as a registered transfer agent. Should PFPC fail to be registered with the SEC
as a transfer agent at any time during this Agreement, and such failure to
register does not permit PFPC to lawfully
21
<PAGE>
conduct its activities, the Fund may, on written notice to PFPC, terminate this
Agreement upon five days written notice to PFPC.
19. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to PFPC, at 400
Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at the address
of the Fund or (c) if to neither of the foregoing, at such other address as
shall have been given by like notice to the sender of any such notice or other
communication by the other party. If notice is sent by confirming telegram,
cable, telex or facsimile sending device during regular business hours, it shall
be deemed to have been given immediately; if sent at a time other than regular
business hours, such notice shall be deemed to have been given at the opening of
the next business day. If notice is sent by first-class mail, it shall be deemed
to have been given three days after it has been mailed. If notice is sent by
messenger, it shall be deemed to have been given on the day it is delivered. All
postage, cable, telegram, telex and facsimile sending device charges arising
from the sending of a notice hereunder shall be paid by the sender.
20. Amendments. This Agreement, or any term thereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
21. Additional Portfolios. In the event that the Fund establishes one
or more investment series in addition to and with respect to which it desires to
have PFPC render services as transfer agent, registrar, dividend disbursing
agent and related services agent under the terms
22
<PAGE>
set forth in this Agreement, it shall so notify PFPC in writing, and PFPC shall
agree in writing to provide such services, and such investment series shall
become a Portfolio hereunder, subject to such additional terms, fees and
conditions as are agreed to by the parties.
22. Delegation; Assignment.
(a) PFPC may, at its own expense, assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Fund
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Fund to comply with all relevant provisions of the Securities
Laws; and (iii) PFPC and such delegate (or assignee) promptly provide such
information as the Fund may request, and respond to such questions as the Fund
may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee). The assignment and
delegation of any of PFPC's duties under this subparagraph (a) shall not relieve
PFPC of any of its responsibilities or liabilities under this Agreement.
(b) PFPC may delegate to PaineWebber Incorporated its obligation to
perform the services described on Annex B hereto. In addition, PFPC may assign
its rights and delegate its other duties hereunder to PaineWebber Incorporated
or Mitchell Hutchins Asset Management Inc. or an affiliated person of either,
provided that (i) PFPC gives the Fund thirty (30) days' prior written notice;
(ii) the delegate (or assignee) agrees with PFPC and the Fund to comply with all
relevant provisions of the Securities Laws; and (iii) PFPC and such delegate (or
assignee) promptly provide such information as the Fund may request, and respond
to such questions as
23
<PAGE>
the Fund may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee). In assigning its
rights and delegating its duties under this paragraph, PFPC may impose such
conditions or limitations as it determines appropriate including the condition
that PFPC be retained as a sub-transfer agent.
(c) In the event that PFPC assigns its rights and delegates its duties
under this section, no amendment of the terms of this Agreement shall become
effective without the written consent of PFPC.
23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24
<PAGE>
24. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
25. Miscellaneous.
(a) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their agreement,
if any, with respect to services to be performed and fees payable under this
Agreement.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a
contract made in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party
to this Agreement shall constitute the valid and binding execution hereof by
such party.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By:
-------------------------------
Title:
----------------------------
PAINEWEBBER MANAGED
INVESTMENTS TRUST
By:
-------------------------------
Title:
----------------------------
26
<PAGE>
ANNEX A
Portfolios
PaineWebber High Income Fund
PaineWebber Investment Grade Income Fund
PaineWebber Low Duration U.S. Government Income Fund
PaineWebber U.S. Government Income Fund
PaineWebber Utility Income Fund
PaineWebber Asia Pacific Growth Fund
27
<PAGE>
AUTHORIZED PERSONS APPENDIX
Name (Type) Signature
- -------------------- --------------------------------
- -------------------- --------------------------------
- -------------------- --------------------------------
- -------------------- --------------------------------
- -------------------- --------------------------------
- -------------------- --------------------------------
28
<PAGE>
ANNEX B
a. Establish and maintain a dedicated service center with sufficient
facilities, equipment and skilled personnel to address all shareholder
inquiries received by telephone, mail or in-person regarding the Funds
and their accounts
b. Provide timely execution of redemptions, exchanges and non-financial
transactions directed to investment executives and specifically
requested by Fund shareholders
c. Issue checks from proceeds of Fund share redemptions to shareholders as
directed by the shareholders or their agents
d. Process and maintain shareholder account registration information
e. With respect to customer accounts maintained through PaineWebber
Incorporated ("PaineWebber"), review new applications and correspond
with shareholders to complete or correct information
f. Prepare and mail monthly or quarterly consolidated account statements
that reflect PaineWebber Mutual Fund balances and transactions (such
information to be combined with other activity and holdings in
investors' brokerage accounts if this responsibility is delegated to
PaineWebber)
g. Establish and maintain a dedicated service center with sufficient
facilities, equipment and skilled personnel to address all branch
inquiries regarding operational issues and performance
h. Capture, process and mail required tax information to shareholders and
report this information to the Internal Revenue Service
i. Provide the capability to margin PaineWebber Mutual Funds held within
the client's brokerage account (if this responsibility is delegated to
PaineWebber)
j. Prepare and provide shareholder registrations for mailing of proxies,
reports and other communications to shareholders
k. Develop, maintain and issue checks from the PaineWebber systematic
withdrawal plan offered within the client's brokerage account (if this
responsibility is delegated to PaineWebber)
l. Maintain duplicate shareholder records and reconcile those records with
those at the
29
<PAGE>
transfer agent (if this responsibility is delegated to PaineWebber)
m. Process and mail duplicate PaineWebber monthly or quarterly statements
to PaineWebber Investment Executives
n. Establish and maintain shareholder distribution options (i.e., election
to have dividends paid in cash, rather than reinvested in Fund shares)
o. Process and mail purchase, redemption and exchange confirmations to
Fund shareholders and PaineWebber Investment Executives
p. Issue dividend checks to shareholders that select cash distributions to
their brokerage account (if this responsibility is delegated to
PaineWebber)
q. Develop and maintain the automatic investment plan offered within the
client's brokerage account (if this responsibility is delegated to
PaineWebber)
r. Provide bank-to-bank wire transfer capabilities related to transactions
in Fund shares
s. Maintain computerized compliance programs for blue sky and non-resident
alien requirements (only with respect to PaineWebber Cashfund, Inc.)
30
<PAGE>
Exhibit No. 10
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D. C. 20036-1800
Telephone 202-778-9000
February 27, 1998
PaineWebber Managed Investments Trust
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
You have requested our opinion, as counsel to PaineWebber Managed
Investments Trust ("Trust"), as to certain matters regarding the issuance of
certain Shares of the Trust. As used in this letter, the term "Shares" means the
Class A, Class B, Class C and Class Y shares of beneficial interest of
PaineWebber Asia Pacific Growth Fund, a series of the Trust, during the time
that Post-Effective Amendment No. 52 to the Trust's Registration Statement on
Form N-1A ("PEA") is effective and has not been superseded by another
post-effective amendment.
As such counsel, we have examined certified or other copies, believed
by us to be genuine, of the Trust's Declaration of Trust and by-laws and such
resolutions and minutes of meetings of the Trust's Board of Trustees as we have
deemed relevant to our opinion, as set forth herein. Our opinion is limited to
the laws and facts in existence on the date hereof, and it is further limited to
the laws (other than the conflict of law rules) in the Commonwealth of
Massachusetts that in our experience are normally applicable to the issuance of
shares by unincorporated voluntary associations and to the Securities Act of
1933 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the
regulations of the Securities and Exchange Commission ("SEC") thereunder.
Based on the foregoing, we are of the opinion that the issuance of the
Shares has been duly authorized by the Trust and that, when sold in accordance
with the terms contemplated by the PEA, including receipt by the Trust of full
payment for the Shares and compliance with the 1933 Act and the 1940 Act, the
Shares will have been validly issued, fully paid and non-assessable.
We note, however, that the Trust is an entity of the type commonly
known as a "Massachusetts business trust." Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for the
obligations of the Trust. The Declaration of Trust states that creditors of,
contractors with and claimants against the Trust or any series shall look
<PAGE>
PaineWebber Managed Investments Trust
February 27, 1998
Page 2
only to the assets of the Trust for the appropriate series for payment. It also
requires that notice of such disclaimer be given in each note, bond, contract,
certificate undertaking or instrument made or issued by the officers or the
trustees of the Trust on behalf of the Trust. The Declaration of Trust further
provides: (1) for indemnification from the assets of the Trust or the
appropriate series for all loss and expense of any shareholder held personally
liable for the obligations of the Trust or any series by virtue of ownership of
shares of the Trust or such series; and (2) for the Trust or appropriate series
to assume the defense of any claim against the shareholder for any act or
obligation of the Trust or series. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust or series would be unable to meet its obligations.
We hereby consent to this opinion accompanying the PEA when it is filed
with the SEC and to the reference to our firm in the statement of additional
information that is being filed as part of the PEA.
Very truly yours,
/s/ Kirkpatrick & Lockhart LLP
KIRKPATRICK & LOCKHART LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information and to the incorporation by reference of our report dated
December 19, 1997 on PaineWebber Asia Pacific Growth Fund in this Registration
Statement (Form N-1A No. 2-91362) of PaineWebber Managed Investments Trust.
ERNST & YOUNG LLP
New York, New York
February 23, 1998
<PAGE>
Exhibit No. 13
PAINEWEBBER INCORPORATED
140 Broadway
New York, N.Y. 10005
(212) 437-2121
July 12, 1984
PaineWebber Fixed Income Portfolios, Inc.
140 Broadway
New York, New York 10005
Gentlemen:
Please be advised that Paine Webber Incorporated herewith tenders
$100,000 to purchase shares of PaineWebber Fixed Income Portfolios, Inc.
("Fund") valued at $100,000 minimum initial capital required by the Investment
Company Act of 1940. We intend to purchase the shares as an investment and have
no present intention of redeeming or selling such shares.
Very truly yours,
/s/ Carl A. Merz
--------------------------
Carl A. Merz
Vice President - Finance
<PAGE>
Exhibit No. 15(a)
PAINEWEBBER FIXED INCOME PORTFOLIOS--CLASS A SHARES
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, PaineWebber Fixed Income Portfolios ("Trust") is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as an
open-end management investment company, and currently offers for public sale
three distinct series of shares of beneficial interest ("Series"), which
correspond to distinct portfolios and have been designated as the U.S.
Government Income Fund, the Investment Grade Income Fund and the High Income
Fund; and
WHEREAS, the Trust desires to adopt a Plan of Distribution ("Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Class A shares of
the above-referenced Series and of such other Series as may hereafter be
designated by the Trust's board of trustees ("Board") and have Class A shares
established; and
WHEREAS, the Trust has entered into a Distribution Contract
("Contract") with Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins")
pursuant to which Mitchell Hutchins has agreed to serve as Distributor of the
Class A shares of each such Series;
NOW, THEREFORE, the Trust hereby adopts this Plan with respect to the
Class A shares of each Series in accordance with Rule 12b-1 under the 1940 Act.
1. A. Each Series is authorized to pay to Mitchell Hutchins, as
compensation for Mitchell Hutchins' services as Distributor of the Series' Class
A shares, a service fee at the rate of 0.25% on an annualized basis of the
average daily net assets of the Series' Class A shares. Such fee shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Board shall determine.
B. Any Series may pay a service fee to Mitchell Hutchins at a
lesser rate than the fee specified in paragraph 1A of this Plan, as agreed upon
by the Board and Mitchell Hutchins and as approved in the manner specified in
paragraph 4 of this Plan.
2. As Distributor of the Class A shares of each Series, Mitchell
Hutchins may spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of the Series' Class A shares
or the servicing and maintenance of shareholder accounts, including, but not
limited to, compensation to employees of Mitchell Hutchins; compensation to and
expenses, including overhead and telephone and other communication expenses, of
Mitchell Hutchins, PaineWebber Incorporated ("PaineWebber") and other selected
dealers who engage in or support the distribution of shares or who service
shareholder accounts; the printing of prospectuses, statements of additional
information, and reports for other than existing
<PAGE>
shareholders; and the preparation, printing and distribution of sales literature
and advertising materials.
3. This Plan shall take effect with respect to the Class A shares
of the U.S. Government Income Fund, the Investment Grade Income Fund and the
High Income Fund Series on the date set forth below, provided that it has first
been approved by the Board as set forth in paragraph 4, but shall not take
effect with respect to the Class A shares of any other Series unless it first
has been approved by a vote of the then sole shareholder of the Class A shares
of such Series.
4. This Plan shall not take effect with respect to any Series
unless it first has been approved, together with any related agreements, by
votes of a majority of both (a) the Board and (b) those Trustees of the Trust
who are not "interested persons" of the Trust and have no direct or indirect
financial interest in the operation of this Plan or any agreements related
thereto ("Independent Trustees"), cast in person at a meeting (or meetings)
called for the purpose of voting on such approval; and until the Trustees who
approve the Plan's taking effect with respect to such Series' Class A shares
have reached the conclusion required by Rule 12b-1(e) under the 1940 Act.
5. With respect to any Series for which this Plan was approved as
set forth in paragraphs 3 and 4 prior to the commencement of operations of such
Series, this Plan shall continue in full force and effect until the first
meeting of the Class A shareholders held after the initial offering of such
shares of such Series to the public. If approved at such meeting by a vote of a
majority of the outstanding voting securities of the Class A shares of such
Series, the Plan shall continue in full force and effect with respect to such
Series for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 4.
6. Mitchell Hutchins shall provide to the Board and the Board
shall review, at least quarterly, a written report of the amounts expended with
respect to the Class A shares of each Series by Mitchell Hutchins under this
Plan and the Contract and the purposes for which such expenditures were made.
Mitchell Hutchins shall submit only information regarding amounts expended for
"service activities," as defined in this Paragraph 6, to the Board in support of
the service fee payable hereunder.
For purposes of this Plan, "service activities" shall mean
activities in connection with the provision by Mitchell Hutchins or PaineWebber
of personal, continuing services to investors in the Class A Shares of the
Series; provided, however, that if the National Association of Securities
Dealers, Inc. ("NASD") adopts a definition of "service fee" for purposes of
Section 26(d) of the NASD Rules of Fair Practice that differs from the
definition of "service activities" hereunder, or if the NASD adopts a related
definition intended to define the same concept, the definition of "service
activities" in this Paragraph shall be automatically amended, without further
action of the parties, to conform to such NASD definition. Overhead and other
expenses of Mitchell Hutchins and PaineWebber related to their "service
activities," including telephone
-2-
<PAGE>
and other communications expenses, may be included in the information regarding
amounts expended for such activities.
7. This Plan may be terminated with respect to the Class A shares
of any Series at any time by vote of the Board, by vote of a majority of the
Independent Trustees, or by vote of a majority of the outstanding voting
securities of the Class A shares of that Series.
8. This Plan may not be amended to increase materially the amount
of service fees provided for in paragraph 1A hereof unless such amendment is
approved by a vote of a majority of the outstanding voting securities of each
Series, and no material amendment to the Plan shall be made unless approved in
the manner provided for approval and annual renewal in paragraph 5 hereof.
9. The amount of the service fees payable by any Series to
Mitchell Hutchins under paragraph 1A hereof and the Contract is not related
directly to expenses incurred by Mitchell Hutchins on behalf of such Series in
serving as Distributor of the Class A shares, and paragraph 2 hereof and the
Contract do not obligate the Series to reimburse Mitchell Hutchins for such
expenses. The service fees set forth in paragraph 1A hereof will be paid by the
Series to Mitchell Hutchins until either the Plan or the Contract is terminated
or not renewed. If either the Plan or the Contract is terminated or not renewed
with respect to the Class A shares of any Series, any distribution expenses
incurred by Mitchell Hutchins on behalf of the Series in excess of payments of
the service fees specified in paragraph 1A hereof and the Contract which
Mitchell Hutchins has received or accrued through the termination date are the
sole responsibility and liability of Mitchell Hutchins, and are not obligations
of the Series.
10. While this Plan is in effect, the selection and nomination of
the Trustees who are not interested persons of the Trust shall be committed to
the discretion of the Trustees who are not interested persons of the Trust.
11. As used in this Plan, the terms "majority of the outstanding
voting securities" and "interested person" shall have the same meaning as those
terms have in the 1940 Act.
12. The Trust shall preserve copies of this Plan (including any
amendments thereto) and any related agreements and all reports made pursuant to
paragraph 6 hereof for a period of not less than six years from the date of this
Plan, the first two years in an easily accessible place.
13. The Trustees of the Trust and the shareholders of each Series
shall not be liable for any obligations of the Trust or any Series under this
Plan, and Mitchell Hutchins or any other person, in asserting any rights or
claims under this Plan, shall look only to the assets and property of the Trust
or such Series in settlement of such right or claim, and not to such Trustees or
shareholders.
-3-
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this Plan of Distribution on
the day and year set forth below in New York, New York.
Date: July 1, 1991
ATTEST: PAINEWEBBER FIXED INCOME PORTFOLIOS
/s/ Jack W. Murphy By: /s/ Dianne E. O'Donnell
- ------------------------- --------------------------------
-4-
<PAGE>
Exhibit No. 15(b)
PAINEWEBBER FIXED INCOME PORTFOLIOS--CLASS B SHARES
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, PaineWebber Fixed Income Portfolios ("Trust") is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as an
open-end management investment company, and currently offers for public sale
three distinct series of shares of beneficial interest ("Series"), which
correspond to distinct portfolios and have been designated as the U.S.
Government Income Fund, the Investment Grade Income Fund and the High Income
Fund; and
WHEREAS, the Trust desires to adopt a Plan of Distribution ("Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Class B shares of
the above-referenced Series and of such other Series as may hereafter be
designated by the Trust's board of trustees ("Board") and have Class B shares
established; and
WHEREAS, the Trust has entered into a Distribution Contract
("Contract") with Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins")
pursuant to which Mitchell Hutchins has agreed to serve as Distributor of the
Class B shares of each such Series;
NOW, THEREFORE, the Trust hereby adopts this Plan with respect to the
Class B shares of each Series in accordance with Rule 12b-1 under the 1940 Act.
1. A. Each Series is authorized to pay to Mitchell Hutchins,
as compensation for Mitchell Hutchins' services as Distributor of the Series'
Class B shares, a distribution fee at the rate of 0.75% on an annualized basis
of the average daily net assets of the Series' Class B shares. Such fee shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Board shall determine.
B. Each Series is authorized to pay to Mitchell Hutchins, as
compensation for Mitchell Hutchins' services as Distributor of the Series' Class
B shares, a service fee at the rate of 0.25% on an annualized basis of the
average daily net assets of the Series Class B shares. Such fee shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Board shall determine.
C. Any Series may pay a distribution or service fee to
Mitchell Hutchins at a lesser rate than the fees specified in Paragraphs 1A and
1B, respectively, of this Plan, in either case as agreed upon by the Board and
Mitchell Hutchins and as approved in the manner specified in Paragraph 4 of this
Plan.
<PAGE>
2. As Distributor of the Class B shares of each Series, Mitchell
Hutchins may spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of the Class B shares of the
Series or the servicing and maintenance of shareholder accounts, including, but
not limited to, compensation to employees of Mitchell Hutchins; compensation to
and expenses, including overhead and telephone and other communication expenses,
of Mitchell Hutchins, PaineWebber Incorporated ("PaineWebber") and other
selected dealers who engage in or support the distribution of shares or who
service shareholder accounts; the printing of prospectuses, statements of
additional information, and reports for other than existing shareholders; and
the preparation, printing and distribution of sales literature and advertising
materials.
3. This Plan shall not take effect with respect to the Class B
shares of any Series unless it first has been approved by a vote of the then
sole shareholder of the Class B shares of the Series.
4. This Plan shall not take effect with respect to the Class B
shares of any Series unless it first has been approved, together with any
related agreements, by votes of a majority of both (a) the Board and (b) those
Trustees of the Trust who are not "interested persons" of the Trust and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related thereto ("Independent Trustees"), cast in person at a meeting
(or meetings) called for the purpose of voting on such approval; and until the
Trustees who approve the Plan's taking effect with respect to such Series' Class
B shares have reached the conclusion required by Rule 12b-1(e) under the 1940
Act.
5. After approval as set forth in paragraphs 3 and 4, this Plan
shall take effect and continue in full force and effect until a meeting of the
Class B shareholders held after the initial offering of such shares of such
Series to the public. If approved at such meeting by a vote of a majority of the
outstanding voting securities of the Class B shares of such Series, the Plan
shall continue in full force and effect with respect to the Class B shares of
such Series for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in Paragraph 4.
6. Mitchell Hutchins shall provide to the Board and the Board
shall review, at least quarterly, a written report of the amounts expended with
respect to the Class B shares of each Series by Mitchell Hutchins under this
Plan and the Contract and the purposes for which such expenditures were made.
Mitchell Hutchins shall submit only information regarding amounts expended for
"distribution activities," as defined in this Paragraph 6, to the Board in
support of the distribution fee payable hereunder and shall submit only
information regarding amounts expended for "service activities," as defined in
this Paragraph 6, to the Board in support of the service fee payable hereunder.
For purposes of this Plan, "distribution activities" shall
mean any activities in connection with Mitchell Hutchins' performance of its
obligations under this Plan or the Contract that are not deemed "service
activities." "Service activities" shall mean activities in connection with the
provision by Mitchell Hutchins or PaineWebber of personal, continuing services
to
2
<PAGE>
investors in the Class B shares of the Series; provided, however, that if the
National Association of Securities Dealers, Inc. ("NASD") adopts a definition of
"service fee" for purposes of Section 26(d) of the NASD Rules of Fair Practice
that differs from the definition of "service activities" hereunder, or if the
NASD adopts a related definition intended to define the same concept, the
definition of "service activities" in this Paragraph shall be automatically
amended, without further action of the parties, to conform to such NASD
definition. Overhead and other expenses of Mitchell Hutchins and PaineWebber
related to their "distribution activities" or "service activities," including
telephone and other communications expenses, may be included in the information
regarding amounts expended for such activities.
7. This Plan may be terminated with respect to the Class B shares
of any Series at any time by vote of the Board, by vote of a majority of the
Independent Trustees, or by vote of a majority of the outstanding voting
securities of the Class B shares of that Series.
8. This Plan may not be amended to increase materially the amount
of distribution fees provided for in Paragraph 1A hereof or the amount of
service fees provided for in Paragraph 1B hereof unless such amendment is
approved in the manner provided for initial approval in paragraphs 3 and 4
hereof, and no material amendment to the Plan shall be made unless approved in
the manner provided for approval and annual renewal in Paragraph 5 hereof.
9. The amount of the distribution and service fees payable by the
Series to Mitchell Hutchins under Paragraphs 1A and 1B hereof and the Contract
is not related directly to expenses incurred by Mitchell Hutchins on behalf of
such Series in serving as Distributor of the Class B shares, and Paragraph 2
hereof and the Contract do not obligate the Series to reimburse Mitchell
Hutchins for such expenses. The distribution and service fees set forth in
Paragraphs 1A and 1B hereof will be paid by the Series to Mitchell Hutchins
until either the Plan or the Contract is terminated or not renewed. If either
the Plan or the Contract is terminated or not renewed with respect to the Class
B shares of any Series, any distribution expenses incurred by Mitchell Hutchins
on behalf of the Class B shares of the Series in excess of payments of the
distribution and service fees specified in Paragraphs 1A and 1B hereof and the
Contract which Mitchell Hutchins has received or accrued through the termination
date are the sole responsibility and liability of Mitchell Hutchins, and are not
obligations of the Series.
10. While this Plan is in effect, the selection and nomination of
the Trustees who are not interested persons of the Trust shall be committed to
the discretion of the Trustees who are not interested persons of the Trust.
11. As used in this Plan, the terms "majority of the outstanding
voting securities" and "interested person" shall have the same meaning as those
terms have in the 1940 Act.
12. The Trust shall preserve copies of this Plan (including any
amendments thereto) and any related agreements and all reports made pursuant to
Paragraph 6 hereof for a period of not less than six years from the date of this
Plan, the first two years in an easily accessible place.
3
<PAGE>
13. The Trustees of the Trust and the shareholders of each Series
shall not be liable for any obligations of the Trust or any Series under this
Plan, and Mitchell Hutchins or any other person, in asserting any rights or
claims under this Plan, shall look only to the assets and property of the Trust
or such Series in settlement of such right or claim, and not to such Trustees or
shareholders.
IN WITNESS WHEREOF, the Trust has executed this Plan of Distribution on
the day and year set forth below in New York, New York.
Date: July 1, 1991
ATTEST: PAINEWEBBER FIXED INCOME PORTFOLIOS
/s/ Jack W. Murphy By: /s/ Dianne E. O'Donnell
- ------------------------------ --------------------------------
4
<PAGE>
Exhibit No. 15(c)
PAINEWEBBER MANAGED INVESTMENTS TRUST -- CLASS D SHARES
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, PaineWebber Managed Investments Trust ("Fund") is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as an
open-end management investment company, and currently has four distinct series
of shares of beneficial interest ("Series"), which correspond to distinct
portfolios and have been designated as the U.S. Government Income Fund,
Investment Grade Income Fund, High Income Fund and PaineWebber Utility Income
and Growth Fund; and
WHEREAS, the Fund desires to adopt a Plan of Distribution ("Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Class D shares of
the above-referenced Series and of such other Series as may hereafter be
designated by the Fund's board of trustees ("Board") and have Class D shares
established; and
WHEREAS, the Fund has entered into a Distribution Contract ("Contract")
with Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") pursuant to
which Mitchell Hutchins has agreed to serve as Distributor of the Class D shares
of each such Series;
NOW, THEREFORE, the Fund hereby adopts this Plan with respect to the
Class D shares of each Series in accordance with Ru1e 12b-1 under the 1940 Act.
1. A. The following Series of the Fund are authorized to pay to
Mitchell Hutchins, as compensation for Mitchell Hutchins' services as
Distributor of the Series' Class D shares, distribution fees at the rate (on an
annualized basis) set forth below of the average daily net assets of the Series'
Class D shares. Such fee shall be calculated and accrued daily and paid monthly
or at such other intervals as the Board shall determine.
U.S. Government Income Fund 0.50%
Investment Grade Income Fund 0.50%
High Income Fund 0.50%
PaineWebber Utility Income and
Growth Fund 0.75%
B. Any Series hereafter established is authorized to pay to
Mitchell Hutchins, as compensation for Mitchell Hutchins' services as
Distributor of the Series' Class D Shares, a distribution fee in the amount to
be agreed upon in a written distribution fee addendum to this Plan
("Distribution Fee Addendum") executed by the Fund on behalf of such Series. All
such
<PAGE>
Distribution Fee Addenda shall provide that they are subject to all terms
and conditions of this Plan.
C. Each series is authorized to pay to Mitchell Hutchins, as
compensation for Mitchell Hutchins' services as Distributor of the Series' Class
D shares, a service fee at the rate of 0.25%, on an annualized basis, of the
average daily net assets of the Series' Class D shares. Such fee shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Board shall determine.
D. Any Series may pay a distribution or service fee to
Mitchell Hutchins at a lesser rate than the fees specified above, as agreed upon
by the Board and Mitchell Hutchins and as approved in the manner specified in
Paragraph 4 of this Plan.
2. As Distributor of the Class D shares of each Series, Mitchell
Hutchins may spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of the Class D shares of the
Series or the servicing and maintenance of shareholder accounts, including, but
not limited to, compensation to employees of Mitchell Hutchins; compensation to
and expenses, including overhead and telephone and other communication expenses,
of Mitchell Hutchins, PaineWebber Incorporated ("PaineWebber") and other
selected dealers who engage in or support the distribution of shares or who
service shareholder accounts; the printing of prospectuses, statements of
additional information, and reports for other than existing shareholders; and
the preparation, printing and distribution of sales literature and advertising
materials.
3. This Plan shall not take effect with respect to the Class D
shares of any Series unless it first has been approved by a vote of the then
sole shareholder of the Class D shares of the Series.
4. This Plan shall not take effect with respect to the Class D
shares of any Series unless it first has been approved, together with any
related agreements, by votes of a majority of both (a) the Board and (b) those
Trustees of the Fund who are not "interested persons" of the Fund and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related thereto ("Independent Trustees"), cast in person at a meeting
(or meetings) called for the purpose of voting on such approval; and until the
Trustees who approve the Plan's taking effect with respect to such Series' Class
D shares have reached the conclusion required by Rule 12b-l(e) under the 1940
Act.
5. After approval as set forth in paragraphs 3 and 4, this Plan
shall take effect and continue in full force and effect until a meeting of the
Class D shareholders held after the initial offering of such shares of such
Series to the public. If approved at such meeting by a vote of a majority of the
outstanding voting securities of the Class D shares of such Series, the Plan
shall continue in full force and effect with respect to the Class D shares of
such Series for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in Paragraph 4.
<PAGE>
6. Mitchell Hutchins shall provide to the Board and the Board
shall review, at least quarterly, a written report of the amounts expended with
respect to the Class D shares of each Series by Mitchell Hutchins under this
Plan and the Contract and the purposes for which such expenditures were made.
Mitchell Hutchins shall submit only information regarding amounts expended for
"distribution activities," as defined in this Paragraph 6, to the Board in
support of the distribution fee payable hereunder and shall submit only
information regarding amounts expended for "service activities," as defined in
this Paragraph 6, to the Board in support of the service fee payable hereunder.
For purposes of this Plan, "distribution activities" shall mean any
activities in connection with Mitchell Hutchins' performance of its obligations
under this Plan or the Contract that are not deemed "services activities."
"Service activities" shall mean activities in connection with the provision by
Mitchell Hutchins or PaineWebber of personal, continuing services to investors
in the Class D shares of the Series; provided, however, that if the National
Association of Securities Dealers, Inc. ("NASD") adopts a definition of "service
fee" for purposes of Section 26(d) of the NASD Rules of Fair Practice that
differs from the definition of "service activities" hereunder, or if the NASD
adopts a related definition intended to define the same concept, the definition
of "service activities" in this Paragraph shall be automatically amended,
without further action of the parties, to conform to such NASD definition.
Overhead and other expenses of Mitchell Hutchins and PaineWebber related to
their "distribution activities" or "service activities," including telephone and
other communications expenses, may be included in the information regarding
amounts expended for such activities.
7. This Plan may be terminated with respect to the Class D shares
of any Series at any time by vote of the board, by vote of a majority of the
Independent Trustees, or by vote of a majority of the outstanding voting
securities of the Class D shares of that Series.
8. This Plan may not be amended to increase materially the amount
of distribution fees provided for in Paragraph lA or lB hereof or the amount of
service fees provided for in Paragraph lC hereof unless such amendment is
approved in the manner provided for initial approval in paragraphs 3 and 4
hereof, and no material amendment to the Plan shall be made unless approved in
the manner provided for approval and annual renewal in Paragraph 5 hereof.
9. The amount of the distribution and service fees payable by the
Series to Mitchell Hutchins under Paragraphs 1 hereof and the Contract is not
related directly to expenses incurred by Mitchell Hutchins on behalf of such
Series in serving as Distributor of the Class D shares, and Paragraph 2 hereof
and the Contract do not obligate the Series to reimburse Mitchell Hutchins for
such expenses. The distribution and service fees set forth in Paragraph 1 hereof
will be paid by the Series to Mitchell Hutchins until either the Plan or the
Contract is terminated or not renewed. If either the Plan or the Contract is
terminated or not renewed with respect to the Class D shares of any Series, any
distribution expenses incurred by Mitchell Hutchins on behalf of the Class D
shares of the Series in excess of payments of the distribution and service fees
specified in Paragraphs 1 hereof and the Contract which Mitchell Hutchins has
received or accrued through the termination date are the sole responsibility and
liability of Mitchell Hutchins, and are not obligations of the Series.
<PAGE>
10. While this Plan is in effect, the selection and nomination of
the Trustees who are not interested persons of the Fund shall be committed to
the discretion of the Trustees who are not interested persons of the Fund.
11. As used in this Plan, the terms "majority of the outstanding
voting securities" and "interested person" shall have the same meaning as those
terms have in the 1940 Act.
12. The Fund shall preserve copies of this Plan (including any
amendments thereto) and any related agreements and all reports made pursuant to
Paragraph 6 hereof for a period of not less than six years from the date of this
Plan, the first two years in an easily accessible place.
13. The Trustees of the Fund and the shareholders of each Series
shall not be liable for any obligations of the Fund or any Series under this
Plan, and Mitchell Hutchins or any other person, in asserting any rights or
claims under this Plan, shall look only to the assets and property of the Fund
or such Series in settlement of such right or claim, and not to such Trustees or
shareholders.
IN WITNESS WHEREOF, the Fund has caused this Plan of Distribution to be
executed on the day and year set forth below in New York, New York.
Date: July 1, 1992
ATTEST: PAINEWEBBER MANAGED
INVESTMENTS TRUST
/s/ Michelle Ehrler By: /s/ Dianne E. O'Donnell
- ------------------------------------ -----------------------
Michelle Ehrler Dianne E. O'Donnell
Secretary and Vice President
<PAGE>
Exhibit No. 15(d)
PAINEWEBBER MANAGED INVESTMENTS TRUST - CLASS D SHARES
ADDENDUM TO
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, PaineWebber Managed Investments Trust ("Fund") is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as an
open-end management investment company; and
WHEREAS, the Fund has adopted a Plan of Distribution ("Plan") pursuant
to Rule 12b-1 under the 1940 Act with respect to the Class D shares of each
series of shares of beneficial interest as now exists and as may hereafter be
designated by the Fund's board of trustees ("Board") and have Class D shares
established; and
WHEREAS, the Fund has entered into a Distribution Contract ("Contract")
with Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") pursuant to
which Mitchell Hutchins has agreed to serve as Distributor of the Class D shares
of each such series; and
WHEREAS, the Fund has established a new series of shares of beneficial
interest designated as the PaineWebber Short-Term U.S. Government Income Fund
("Short-Term Government Series") and has established Class D shares with respect
to such Short-Term Government Series;
NOW, THEREFORE, the Fund hereby adopts the Plan with respect to the
Class D shares of the Short-Term Government Series in accordance with Rule 12b-1
under the 1940 Act.
1. The Short-Term Government Series is authorized to pay to Mitchell
Hutchins, as compensation for Mitchell Hutchins' services as Distributor of its
Class D shares, distribution fees at the rate of 0.50% (on an annualized basis)
of the average daily net assets of the Short-Term Government Series' Class D
shares. Such fee shall be calculated and accrued daily and paid monthly or at
such other intervals as the Board shall determine.
2. This Addendum shall be subject to all other terms and conditions of
the Plan, including the authorization of the payment to Mitchell Hutchins of a
service fee at the rate of 0.25% (on an annualized basis) of the average daily
net assets of the Short-Term Government Series.
<PAGE>
3. This Addendum shall not become effective unless (a) it first has
been approved, together with any related agreements, by votes of a majority of
both (i) the Board and (ii) those Trustees of the Fund who are not "interested
persons" of the Fund and have no direct or indirect financial interest in the
operation of the Plan, this Addendum or any agreements related thereto
("Independent Trustees"), cast in person at a meeting (or meetings) called for
the purpose of voting on such approval; and until the Trustees who approve the
Plan's taking effect with respect to the Class D shares of the Short-Term
Government Series have reached the conclusion required by Rule 12b-l(e) under
the 1940 Act and (b) it has been approved by a vote of the then sole shareholder
of the Class D shares of the Short-Term Government Series.
IN WITNESS WHEREOF, the Fund has caused this Plan of Distribution to be
executed on the day and year set forth below in New York, New York.
Date: March 29, 1993
ATTEST: PAINEWEBBER MANAGED
INVESTMENTS TRUST
/s/ Jack W. Murphy By: /s/ Dianne E. O'Donnell
- ---------------------------------- -----------------------------
Jack W. Murphy Dianne E. O'Donnell
Assistant Secretary Vice President and Secretary
<PAGE>
Exhibit 16
FUND NAME: ASIA PACIFIC GROWTH FUND--CLASS A
1 Year Inception 5 Years
Days in Period N/A 220 N/A
Ending Value (ex Sales Charge) N/A 818.17 N/A
Ending Value (w/ Sales Charge) N/A 795.74 N/A
Return (ex Sales Charge) N/A -28.32% N/A Non-Standardized
Return (w/ Sales Charge) N/A -31.55% N/A Standardized
INCEPTION RETURN:
Non-Standardized Standardized
P(1 + t)^n=ERV P(1 + t)^n=ERV
1000(1 + T)(220 / 365)= 716.80 1000(1 + T)(220 / 365)= 684.50
(1 + T)(220 / 365)= 0.7168 (1 + T)(220 / 365)= 0.6845
(1 + T)(220 / 365)= 0.7168 (1 + T)(220 / 365)= 0.6845
(1 + T)= 0.7168 (1 + T)= 0.6845
T= -0.283 T= -0.3155
or T= -28.32% or T= -31.55%
<PAGE>
FUND NAME: ASIA PACIFIC GROWTH FUND--CLASS B
1 Year Inception 5 Years
Days in Period N/A 220 N/A
Ending Value (ex Sales Charge) N/A 815.96 N/A
Ending Value (w/ Sales Charge) N/A 781.01 N/A
Return (ex Sales Charge) N/A -23.64% N/A Non-Standardized
Return (w/ Sales Charge) N/A -33.64% N/A Standardized
INCEPTION RETURN:
Non-Standardized Standardized
P(1 + t)^n=ERV P(1 + t)^n=ERV
1000(1 + T)(220 / 365)= 815.96 1000(1 + T)(220 / 365)= 781.01
(1 + T)(220 / 365)= 0.8160 (1 + T)(220 / 365)= 0.7815
(1 + T)(220 / 365)= 0.8160 (1 + T)(220 / 365)= 0.7815
(1 + T)= 0.7136 (1 + T)= 0.7136
T= -0.286 T= -0.3364
or T= -28.64% or T= -33.64%
<PAGE>
FUND NAME: ASIA PACIFIC GROWTH FUND--CLASS C
1 Year Inception 5 Years
Days in Period N/A 220 N/A
Ending Value (ex Sales Charge) N/A 815.96 N/A
Ending Value (w/ Sales Charge) N/A 809.05 N/A
Return (ex Sales Charge) N/A -28.64% N/A Non-Standardized
Return (w/ Sales Charge) N/A -29.64% N/A Standardized
INCEPTION RETURN:
Non-Standardized Standardized
P(1 + t)^n=ERV P(1 + t)^n=ERV
1000(1 + T)(220 / 365)= 815.96 1000(1 + T)(220 / 365)= 809.05
(1 + T)(220 / 365)= 0.8160 (1 + T)(220 / 365)= 0.8095
(1 + T)(220 / 365)= 0.8160 (1 + T)(220 / 365)= 0.8095
(1 + T)= 0.7136 (1 + T)= 0.7136
T= -0.286 T= -0.2964
or T= -28.64% or T= -29.64%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000746703
<NAME> PAINEWEBBER MANAGED INVESTMENTS TRUST
<SERIES>
<NUMBER> 001
<NAME> PAINEWEBBER ASIA PACIFIC GROWTH FUND - A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> MAR-25-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 33030
<INVESTMENTS-AT-VALUE> 24892
<RECEIVABLES> 781
<ASSETS-OTHER> 122
<OTHER-ITEMS-ASSETS> 83
<TOTAL-ASSETS> 25878
<PAYABLE-FOR-SECURITIES> 306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4106
<TOTAL-LIABILITIES> 4412
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30393
<SHARES-COMMON-STOCK> 2397
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (789)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8139)
<NET-ASSETS> 21466
<DIVIDEND-INCOME> 327
<INTEREST-INCOME> 113
<OTHER-INCOME> 0
<EXPENSES-NET> 387
<NET-INVESTMENT-INCOME> 53
<REALIZED-GAINS-CURRENT> (821)
<APPREC-INCREASE-CURRENT> (8138)
<NET-CHANGE-FROM-OPS> (8906)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3054
<NUMBER-OF-SHARES-REDEEMED> (657)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 21466
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 196
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 387
<AVERAGE-NET-ASSETS> 29100
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (3.57)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.96
<EXPENSE-RATIO> 2.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000746703
<NAME> PAINEWEBBER MANAGED INVESTMENTS TRUST
<SERIES>
<NUMBER> 002
<NAME> PAINEWEBBER ASIA PACIFIC GROWTH FUND - B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> MAR-25-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 35310
<INVESTMENTS-AT-VALUE> 26610
<RECEIVABLES> 835
<ASSETS-OTHER> 131
<OTHER-ITEMS-ASSETS> 89
<TOTAL-ASSETS> 27665
<PAYABLE-FOR-SECURITIES> 327
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4390
<TOTAL-LIABILITIES> 4717
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32492
<SHARES-COMMON-STOCK> 2574
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (843)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8702)
<NET-ASSETS> 22948
<DIVIDEND-INCOME> 350
<INTEREST-INCOME> 121
<OTHER-INCOME> 0
<EXPENSES-NET> 535
<NET-INVESTMENT-INCOME> (64)
<REALIZED-GAINS-CURRENT> (877)
<APPREC-INCREASE-CURRENT> (8701)
<NET-CHANGE-FROM-OPS> (9642)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3355
<NUMBER-OF-SHARES-REDEEMED> (781)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 22948
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 210
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 535
<AVERAGE-NET-ASSETS> 27846
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> (3.55)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.92
<EXPENSE-RATIO> 3.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000746703
<NAME> PAINEWEBBER MANAGED INVESTMENTS TRUST
<SERIES>
<NUMBER> 003
<NAME> PAINEWEBBER ASIA PACIFIC GROWTH FUND - C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> MAR-25-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 21367
<INVESTMENTS-AT-VALUE> 16102
<RECEIVABLES> 505
<ASSETS-OTHER> 79
<OTHER-ITEMS-ASSETS> 54
<TOTAL-ASSETS> 16740
<PAYABLE-FOR-SECURITIES> 198
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2656
<TOTAL-LIABILITIES> 2854
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19661
<SHARES-COMMON-STOCK> 1557
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (510)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5265)
<NET-ASSETS> 13886
<DIVIDEND-INCOME> 212
<INTEREST-INCOME> 73
<OTHER-INCOME> 0
<EXPENSES-NET> 323
<NET-INVESTMENT-INCOME> (38)
<REALIZED-GAINS-CURRENT> (531)
<APPREC-INCREASE-CURRENT> (5265)
<NET-CHANGE-FROM-OPS> (5834)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2006
<NUMBER-OF-SHARES-REDEEMED> (449)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13886
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 127
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 323
<AVERAGE-NET-ASSETS> 16802
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> (3.55)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.92
<EXPENSE-RATIO> 3.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
