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(File Nos. 2-91362 and 811-4040)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PaineWebber Managed Investments Trust
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PAINEWEBBER HIGH INCOME FUND
(A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
December 20, 2000
Dear Shareholder,
The enclosed proxy materials relate to a special meeting of the
shareholders of PaineWebber High Income Fund ("Fund"), a series of PaineWebber
Managed Investments Trust ("Trust"), to be held on February 8, 2001. The Board
of Trustees of the Trust ("Board") has called this meeting to request
shareholder approval of several proposals relating to the management and
operation of the Fund. With respect to the Fund's investment management
arrangements, the Board seeks shareholder approval of: (a) a new investment
management and administration contract between the Fund and Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins") and (b) a sub-advisory contract
under which Massachusetts Financial Services Company ("MFS") would serve as
sub-adviser for the Fund's investment portfolio. Your Board has approved these
new investment management arrangements, including the appointment of MFS as
the Fund's sub-adviser.
The Board also asks shareholder approval to implement an exemptive order
issued by the Securities and Exchange Commission that would permit Mitchell
Hutchins and the Board, in the future, to replace MFS with a new, unaffiliated
sub-adviser and amend the Fund's sub-advisory contracts without seeking
additional shareholder approval.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THESE PROPOSALS.
YOUR VOTE IS VERY IMPORTANT. Please take the time to review the enclosed
proxy statement and vote your shares today by signing and returning the
enclosed proxy card or by voting via telephone or the Internet. We have
retained an outside firm that specializes in proxy solicitation to assist us
with any necessary follow-up. If we have not received your vote as the meeting
date approaches, you may receive a telephone call from Shareholder
Communications Corporation to ask for your vote.
Thank you for your attention to this matter and for your continuing
investment in the Fund.
Very truly yours,
/s/ Brian M. Storms
------------------------------
Brian M. Storms
President
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PAINEWEBBER HIGH INCOME FUND
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 8, 2001
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To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders ("Meeting")
of PaineWebber High Income Fund ("Fund"), a series of PaineWebber Managed
Investments Trust ("Trust"), will be held on February 8, 2001, at 1285 Avenue
of the Americas, 14th Floor, New York, New York, 10019-6028, at 10:00 a.m.,
Eastern time, for the following purposes:
1. To approve or disapprove a new Investment Management and Administration
Contract between Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins") and the Fund;
2. To approve or disapprove a Sub-Advisory Contract between Mitchell
Hutchins and Massachusetts Financial Services Company; and
3. To approve or disapprove a policy to permit Mitchell Hutchins and the
Fund's Board of Trustees to appoint and replace sub-advisers, enter
into sub-advisory contracts, and approve amendments to sub-advisory
contracts on behalf of the Fund without further shareholder approval.
Shareholders of record as of the close of business on November 30, 2000,
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
Please execute and return promptly in the enclosed envelope the
accompanying proxy card, which is being solicited by the Trust's Board of
Trustees, or vote your shares by telephone or the Internet. Returning your
proxy promptly is important to ensure a quorum at the Meeting. You may revoke
your proxy at any time before it is exercised by the subsequent execution and
submission of a revised proxy, by giving written notice of revocation to the
Fund at any time before the proxy is exercised or by voting in person at the
Meeting.
By Order of the Board of Trustees,
Dianne E. O'Donnell
December 20, 2000
51 West 52nd Street
New York, New York 10019-6114
<PAGE>
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
Please indicate your voting instructions on the enclosed proxy card, sign
and date the card and return it in the envelope provided. IF YOU SIGN, DATE
AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL
BE VOTED "FOR" THE INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT, THE
SUB-ADVISORY CONTRACT, AND THE SUB-ADVISER POLICY, AND "FOR" OR "AGAINST"
ANY OTHER BUSINESS WHICH MAY PROPERLY ARISE AT THE MEETING, IN THE PROXIES'
DISCRETION. In order to avoid the additional expense of further
solicitation, we ask your cooperation in mailing your proxy card promptly.
As an alternative to using the paper proxy card to vote, you may vote shares
that are registered in your name, as well as shares held in "street name"
through a broker, via the Internet or telephone. To vote in this manner, you
will need the 14-digit "control" number(s) that appear on your proxy
card(s).
To vote via the Internet, please access https://vote.proxy-direct.com on
the World Wide Web and follow the on-screen instructions.
You may also call 1-800-597-7836 and vote by telephone. If you have any
questions regarding the Meeting agenda or the execution of your proxy,
please call toll-free 1-877-748-9131.
If we do not receive your completed proxy cards after several weeks, our
proxy solicitor, Shareholder Communications Corporation, may contact you.
Our proxy solicitor will remind you to vote your shares or will record your
vote over the phone if you choose to vote in that manner.
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INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense involved in validating your vote if you
fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on
the proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of
registration. For example:
<TABLE>
<CAPTION>
VALID SIGNATURE
REGISTRATION ---------------
------------
<S> <C>
Corporate Accounts
(1) ABC Corp.................................. ABC Corp.
John Doe, Treasurer
(2) ABC Corp.................................. John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer......... John Doe
(4) ABC Corp. Profit Sharing Plan............. John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership....................... Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership...... Jane B. Smith, General Partner
Trust Accounts
(1) ABC Trust Account......................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78....... Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o
John B. Smith, Jr.,
UGMA/UTMA................................. John B. Smith
(2) Estate of John B. Smith................... John B. Smith, Jr., Executor
</TABLE>
iii
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PAINEWEBBER HIGH INCOME FUND
(A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
1-800-647-1568
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PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 8, 2001
This Proxy Statement is being furnished to the shareholders of PaineWebber
High Income Fund ("Fund"), a series of PaineWebber Managed Investments Trust
("Trust"), in connection with the solicitation of proxies made by, and on
behalf of, the Trust's Board of Trustees ("Board") to be used at the Special
Meeting of Shareholders to be held on February 8, 2001, at 1285 Avenue of the
Americas, 14th Floor, New York, New York, 10019-6028, at 10:00 a.m., Eastern
time (such meeting and any adjournments thereof are referred to collectively
as the "Meeting"). This Proxy Statement and the accompanying proxy card are
first being mailed to shareholders on or about December 20, 2000.
The presence, in person or by proxy, of Fund shareholders entitled to cast
a majority of all votes entitled to be cast at the Meeting will constitute a
quorum. In the absence of a quorum or in the event that a quorum is present at
the Meeting, but votes sufficient to approve the proposals are not received,
the persons named as proxies may propose one or more adjournments of the
Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote "FOR" the proposals in favor of such an
adjournment and will vote those proxies required to be voted "AGAINST" the
proposals against such adjournment. A shareholder vote may be taken on one or
more of the proposals in this Proxy Statement prior to any such adjournment if
sufficient votes have been received and it is otherwise appropriate.
Broker non-votes are shares held in "street name" for which the broker
indicates that instructions have not been received from the beneficial owners
or other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be
counted as shares present at the Meeting for quorum purposes but will not be
voted for or against any adjournment or proposal. Accordingly, abstentions and
broker non-votes effectively will be votes against Proposals 1, 2 and 3
because these proposals require the affirmative vote of a specified majority
of the Fund's outstanding shares.
All properly executed and unrevoked proxies received in time for the
Meeting will be voted as instructed by shareholders. Approval of each proposal
requires the affirmative vote of the lesser of (1) 67% or more of the shares
of the Fund present at the Meeting, if more than 50% of the outstanding shares
are represented at the Meeting in person or by proxy, or (2) more than 50% of
the outstanding shares entitled to vote at the Meeting. If you execute your
proxy but give no voting instructions, your shares that are represented by
proxies will be voted "FOR" the Investment Management and Administration
Contract, "FOR" the Sub-Advisory Contract, "FOR" the Sub-Adviser Policy and
"FOR" or "AGAINST" any other business which may properly arise at the Meeting,
in the proxies' discretion. Any person giving a proxy has the power to revoke
it at any time prior to its exercise by executing a superseding proxy or by
submitting a written notice of revocation to the Secretary of the Fund
("Secretary"). To be effective, such revocation must be received by the
Secretary prior to the Meeting and must indicate the shareholder's name and
account number. In addition, although mere attendance at the Meeting will not
revoke a proxy, a shareholder present at the Meeting may withdraw his or her
proxy by voting in person.
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Shareholders of record as of the close of business on November 30, 2000
("Record Date"), are entitled to vote at the Meeting. On the Record Date, the
Fund had 42,664,535.132 shares issued and outstanding, consisting of
26,720,266.079 Class A shares, 7,900,370.342 Class B shares, 7,924,567.394
Class C shares, and 119,331.317 Class Y shares. Shareholders are entitled to
one vote for each full share held and a fractional vote for each fractional
share held. Except as set forth in Appendix A, as of the Record Date, Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), the investment adviser,
administrator, and distributor of the Fund, does not know of any person who
owns beneficially or of record more than 5% of any class of shares of the
Fund. As of that same date, the Trustees and officers of the Fund, as a group,
owned less than 1% of any class of the Fund's outstanding shares.
The solicitation of proxies, the cost of which will be borne by Mitchell
Hutchins, will be made by mail, telephone and via the Internet. The Fund's
officers and employees of Mitchell Hutchins who assist in the proxy
solicitation will not receive any additional or special compensation for any
such efforts. The Fund has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the
Meeting. SCC will be paid approximately $28,000 for proxy solicitation
services. The Fund will request broker/dealer firms, custodians, nominees and
fiduciaries to forward proxy materials to the beneficial owners of the shares
held of record by such persons. Mitchell Hutchins may reimburse such
broker/dealer firms, custodians, nominees and fiduciaries for their reasonable
expenses incurred in connection with such proxy solicitation.
COPIES OF THE FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS, INCLUDING
FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS MAY REQUEST COPIES OF THE FUND'S ANNUAL AND SEMI-ANNUAL REPORTS
BY WRITING THE FUND AT 51 WEST 52ND STREET, NEW YORK, NEW YORK 10019-6114, OR
BY CALLING 1-800-647-1568.
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INTRODUCTION
The Board of Trustees has approved proposals by Mitchell Hutchins to
restructure the manner in which the Fund's assets are managed. To implement
new investment management arrangements for the Fund, the Board, effective
October 6, 2000, terminated the existing investment advisory and
administration contract between the Fund and Mitchell Hutchins and approved a
new interim investment management and administration contract with Mitchell
Hutchins ("Interim Management Contract") and an interim sub-advisory contract
("Interim Sub-Advisory Contract") between Mitchell Hutchins and Massachusetts
Financial Services Company ("MFS"). Under the Interim Management Contract,
Mitchell Hutchins serves as investment manager for the Fund and provides
portfolio management oversight of MFS as sub-adviser, instead of directly
managing the Fund's portfolio. The Fund pays Mitchell Hutchins the same annual
fee, 0.50% of the Fund's average daily net assets, under the Interim
Management Contract that it paid under the preceding investment advisory and
administration contract. Under the Interim Sub-Advisory Contract, MFS provides
the Fund with a continuous investment program for which Mitchell Hutchins, not
the Fund, pays MFS the annual fee of 0.45% of the Fund's average daily net
assets. The Interim Management Contract and Interim Sub-Advisory Contract will
terminate automatically on the earlier of 150 days from their effective date
or the date Fund shareholders approve the new Investment Management and
Administration Contract and the Sub-Advisory Contract.
Under the proposals, MFS, an entity unaffiliated with Mitchell Hutchins,
would continue to manage the Fund's assets as its investment sub-adviser and
Mitchell Hutchins would continue to oversee MFS' activities as sub-adviser and
evaluate its performance. Mitchell Hutchins would continue to provide
administrative services to the Fund. The Board is asking the Fund's
shareholders to approve a new Investment Management and Administration
Contract with Mitchell Hutchins to incorporate updated language about Mitchell
Hutchins' ability to appoint sub-advisers, as described further below. In
addition, the Board is asking the Fund's shareholders to approve a policy that
permits Mitchell Hutchins and the Board to appoint and replace sub-advisers,
enter into sub-advisory contracts, and amend sub-advisory contracts without
further shareholder approval.
PROPOSAL 1: TO APPROVE OR DISAPPROVE A NEW INVESTMENT MANAGEMENT AND
ADMINISTRATION CONTRACT BETWEEN MITCHELL HUTCHINS AND THE FUND.
Mitchell Hutchins proposed to the Board, and the Board approved at its
meeting on November 8, 2000, an amended Investment Management and
Administration Contract ("Proposed Management Contract") between the Fund and
Mitchell Hutchins. The Proposed Management Contract is substantially similar
to the Fund's current Interim Management Contract and the Fund's recently
terminated Investment Advisory and Administration Contract ("Old Advisory
Contract"). Under the Proposed Management Contract, Mitchell Hutchins will
have the same duties and responsibilities and will receive the same
compensation as under the Interim Management Contract and the Old Advisory
Contract. A form of the Proposed Management Contract is attached as
Appendix B.
COMPARISON BETWEEN (1) THE OLD ADVISORY CONTRACT AND (2) THE INTERIM
MANAGEMENT CONTRACT AND THE PROPOSED MANAGEMENT CONTRACT
The main difference between the Interim Management Contract and the
Proposed Management Contract (collectively, the "New Contracts") on the one
hand, and the Old Advisory Contract, on the other hand, is the change of
Mitchell Hutchins' role under the New Contracts. Under the Old Advisory
Contract, Mitchell Hutchins' role was to provide a continuous investment
program for the Fund, including investment research and management with
respect to all securities, investments and cash equivalents in the Fund, and
to determine what securities and other investments would be purchased,
retained or sold by the Fund. Under the New Contracts, the role of Mitchell
Hutchins is to oversee the management of the Fund's portfolio by one or more
investment sub-advisers, rather than managing the Fund itself. Such oversight
includes reviewing prospective sub-advisers, selecting such sub-advisers, and
monitoring and evaluating their performance. Mitchell Hutchins will report to
the Trust's Board the results of its evaluation, supervision, and monitoring
duties and will make recommendations to the Board concerning the renewal,
modification or termination of sub-advisory agreements.
3
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The Old Advisory Contract and the New Contracts all permit Mitchell
Hutchins to delegate its duties under the Contracts to a sub-adviser. However,
the New Contracts now specifically anticipate that Mitchell Hutchins will
delegate all of its portfolio management duties to a sub-adviser. Furthermore,
the New Contracts explicitly permit Mitchell Hutchins to delegate its duties
to more than one sub-adviser. Under the New Contracts, Mitchell Hutchins also
has the power to allocate and reallocate responsibility for the management of
a specific portion of the Fund's assets among the sub-advisers. In addition,
the New Contracts have been amended to acknowledge that Mitchell Hutchins can
engage a sub-adviser subject only to approval of the sub-advisory contract by
the Board of Trustees and to any requirements of the securities laws
pertaining thereto, which would permit Mitchell Hutchins to implement Proposal
3, if approved by shareholders. As described in Proposal 3, Mitchell Hutchins
and the Fund have received an order from the Securities and Exchange
Commission ("SEC") permitting the engagement of unaffiliated sub-advisers by
the Board of Trustees acting alone and without the need for approval by the
vote of the holders of a majority of the outstanding shares of the Fund. See
Proposal 3 for more information.
As administrator, under both the Old Advisory Contract and the New
Contracts, Mitchell Hutchins will manage the affairs of the Fund, subject to
the supervision of the Board. Mitchell Hutchins will provide the Fund with
such corporate, administrative and clerical personnel (including officers of
the Fund) and services as are deemed reasonably necessary or advisable by the
Board, including the maintenance of certain books and records of the Fund.
Mitchell Hutchins will arrange, but not pay, for the periodic preparation,
updating, filing and dissemination (as applicable) of reports to the Fund's
shareholders and the SEC and other appropriate federal or state regulatory
authorities. Mitchell Hutchins will provide the Fund 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. 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.
Under the New Contracts, for both the services provided and the expenses
assumed, with respect to the Fund, the Fund will pay to Mitchell Hutchins a
fee, computed daily and paid monthly, at an annual rate of 0.50% of the
average daily net assets of the Fund. This fee is identical to the fee payable
to Mitchell Hutchins under the Old Advisory Contract.
Under both the Old Advisory Contract and the New Contracts, Mitchell
Hutchins will not be liable for any error in judgment or mistake of law or for
any loss suffered by the Fund or its shareholders in connection with the
matters to which the Contract relates, 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 by it of its
obligations and duties under the Contract. The only difference between the
Contracts with respect to liability is that the New Contracts both
specifically extend the limitation of liability to Mitchell Hutchins'
officers, directors, employees and delegates and to any sub-advisers to the
Fund. The Proposed Management Contract also extends this limitation to any
sub-administrator to the Fund, unlike the Old Advisory Contract. Both the Old
Advisory Contract and the New Contracts provide that the Trustees of the Trust
and Fund shareholders will not be liable for any obligations of the Fund or
the Trust under the Contracts, and that Mitchell Hutchins will look only to
the assets and property of the Trust in settlement of any rights or claims
under the Contracts.
Both the Old Advisory Contract and the Proposed Management Contract
terminate automatically upon assignment and are terminable at any time without
penalty by the 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, without penalty, by Mitchell Hutchins on 60 days' written notice to the
Fund.
If approved by the Fund's shareholders, the Proposed Management Contract
will become effective on the date of approval and will remain in effect for an
initial two-year term. Thereafter, the Proposed Management Contract will
continue in effect if it is approved at least annually by a vote of the Fund's
shareholders or by the Board, provided that, in either event, continuance is
approved by the vote of a majority of those Trustees who
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are not "interested persons," as defined by the Investment Company Act of
1940, as amended ("1940 Act"), of the Fund or Mitchell Hutchins ("Independent
Trustees"), which vote must be cast in person at a meeting called for the
purpose of voting on such approval.
The Old Advisory Contract is dated April 21, 1988 and was last submitted to
a vote of shareholders of the Fund on April 21, 1988 in connection with the
determination that Mitchell Hutchins should provide advisory and
administrative services directly to the Fund, rather than through a delegation
from PaineWebber Incorporated ("PaineWebber"). Under the Old Advisory
Contract, the Fund paid (or accrued) investment advisory and administrative
fees to Mitchell Hutchins in the amount of $2,408,964 during the fiscal year
ended November 30, 1999.
Further information about Mitchell Hutchins is set forth in Appendix C.
COMPARISON OF THE INTERIM MANAGEMENT CONTRACT AND THE PROPOSED MANAGEMENT
CONTRACT
The Interim Management Contract and the Proposed Management Contract are
substantially similar, with most of the differences stemming from the
provisional nature of the Interim Management Contract pursuant to the
requirements of Rule 15a-4 under the 1940 Act. The Interim Management Contract
is only effective for 150 days from the termination date of the Old Advisory
Contract, not two years from the date of adoption as under the Proposed
Management Contract, and only 10 days' written notice is required for
termination of the Interim Management Contract by the Fund, rather than the 60
days' written notice required under the Proposed Management Contract. In
addition, the Proposed Management Contract provides that Mitchell Hutchins may
perform direct portfolio management with respect to any portion of the Fund's
assets for which no sub-advisory arrangements are in effect upon Board
request. To effect such requests, the Proposed Management Contract also
includes provisions related to Mitchell Hutchins' authorization to pay higher
commissions to brokers who provide research, analysis and other services to
the Fund, selection of brokers, principal transactions, aggregation and
allocation of orders, maintenance of books and records, net asset value and
net income computation, and authorization of transactions on national
securities exchanges by members of such exchanges and retention of
compensation from such transactions. Finally, the Proposed Management
Contract, but not the Interim Management Contract, includes any sub-
administrators to the Fund in its limitation on liability section and provides
that the Contract is terminable upon assignment.
EVALUATION BY THE BOARD
In considering the Proposed Management Contract, the Board reviewed and
analyzed the factors they deemed relevant, including (1) the services now
being provided by Mitchell Hutchins; (2) the nature, quality, and scope of
such services as well as the Fund's investment performance; (3) the nature and
scope of the services to be provided to the Fund by Mitchell Hutchins under
the Proposed Management Contract; (4) the ability of Mitchell Hutchins to
provide such services; and (5) the potential effect of the Proposed Management
Contract on shareholders. The Trustees reviewed the proposed fees payable to
Mitchell Hutchins under the Proposed Management Contract. The Board also
considered the management, advisory and/or administration fees paid by other
investment companies with similar objectives and characteristics.
After full consideration of these and other factors, the Board, including
the Independent Trustees, approved the Proposed Management Contract and
authorized the submission of the Proposed Management Contract to the Fund's
shareholders for their approval at the Meeting.
REQUIRED VOTE
Approval of Proposal 1 requires the affirmative vote of the lesser of (1)
67% or more of the shares of the Fund present at the Meeting, if more than 50%
of the outstanding shares are represented at the Meeting in person or by
proxy, or (2) more than 50% of the outstanding shares entitled to vote at the
Meeting. If Proposal 1 is not approved by shareholders, the Interim Management
Contract will continue in effect for the remainder of its
5
<PAGE>
original 150-day term, and the Board will consider what measures are necessary
or appropriate to ensure the continuation of advisory services to the Fund.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 1.
----------------
PROPOSAL 2: TO APPROVE OR DISAPPROVE A SUB-ADVISORY CONTRACT BETWEEN
MITCHELL HUTCHINS AND MFS.
Mitchell Hutchins proposed to the Board, and the Board approved at its
meeting on November 8, 2000, a sub-advisory contract between Mitchell Hutchins
and MFS (" Proposed Sub-Advisory Contract"). The Proposed Sub-Advisory
Contract is substantially similar to the Interim Sub-Advisory Contract adopted
by the Board on October 6, 2000. A form of the Proposed Sub-Advisory Contract
is attached as Appendix D.
Further information about MFS is set forth in Appendix E.
PROPOSED SUB-ADVISORY CONTRACT
Under the Proposed Sub-Advisory Contract, MFS would be responsible, subject
to the supervision of the Board and Mitchell Hutchins, for the actual
investment management of all or a designated portion of the assets of the
Fund, including placing purchase and sell orders for investments and for other
related transactions. MFS agrees to provide a continuous investment program
for the Fund's assets, including investment research and management. The
Proposed Sub-Advisory Contract recognizes that MFS may, under certain
circumstances, pay higher brokerage commissions by executing portfolio
transactions with brokers that provide the sub-adviser with research,
analysis, advice or similar services. The Proposed Sub-Advisory Contract also
provides that MFS will (1) maintain all books and records required to be
maintained by it pursuant to the 1940 Act and the rules and regulations
promulgated thereunder with respect to transactions the sub-adviser effects on
behalf of the Fund, and will furnish the Board and Mitchell Hutchins with such
periodic and special reports as the Board or Mitchell Hutchins may reasonably
request; (2) provide the Board or Mitchell Hutchins with economic and
investment analyses and reports, as well as quarterly reports, setting forth
the Fund's performance with respect to its investments and make available to
the Board and Mitchell Hutchins any economic, statistical and investment
services that MFS normally makes available to its institutional investors or
other customers; and (3) provide assistance in the fair valuation of, and use
reasonable efforts to arrange for the provision of a price or prices from one
or more parties independent of MFS, for each portfolio security for which the
custodian does not obtain prices in the ordinary course of business from an
automated pricing service.
The Proposed Sub-Advisory Contract provides that MFS will not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund,
its shareholders, the Trust or Mitchell Hutchins in connection with the
matters to which the Contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of MFS in the
performance of its duties or from reckless disregard by it of its obligations
and duties under the Contract. In addition, MFS will not have any
responsibilities for any other series of the Trust, for any portion of the
Fund's assets that it does not manage or for the acts or omissions of any
other sub-adviser for the Fund or the Trust. In particular, if at any time MFS
only manages a portion of the Fund's assets, MFS will have no responsibility
for the Fund being in violation of any law or regulation or Fund policy or
restriction, or for the Fund's failure to qualify as a "regulated investment
company" for federal tax purposes, if the portion of the Fund's portfolio
managed by MFS would not be in such violation or fail to so qualify if such
portion were deemed a separate series of the Trust or a separate "regulated
investment company."
Mitchell Hutchins has agreed to indemnify, defend and hold harmless MFS,
its affiliates, and each of their officers, directors, employees,
shareholders, agents, and representatives from and against any and all losses,
claims, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) arising from or related to the services contemplated under
the Proposed Sub-Advisory Contract, except to the extent that such losses,
6
<PAGE>
claims, damages, liabilities, costs and expenses result from MFS' willful
misfeasance, bad faith, or gross negligence in the performance of its duties
or from reckless disregard by MFS of its obligations and duties under the
Contract.
The Proposed Sub-Advisory Contract provides that the Fund, by the vote of a
majority of the Board of Trustees or a majority of its outstanding voting
securities, may terminate the Contract, without penalty, on 60 days' written
notice to MFS and MFS may terminate the Contract, without penalty, on 60 days'
written notice to Mitchell Hutchins. The Proposed Sub-Advisory Contract also
permits Mitchell Hutchins to terminate the Contract, without penalty, upon
material breach by MFS of any of certain specific representations and
warranties in the Contract. These representations and warranties concern
failure to be registered as an investment adviser, failure to adopt a code of
ethics, failure to notify Mitchell Hutchins of changes in control and failure
to obtain written consent from Mitchell Hutchins before referring to MFS'
relationship with the Fund, the Trust, Mitchell Hutchins or any of their
affiliates in promotional materials. MFS may cure such breach within a 20 day
period after notice thereof. Additionally, Mitchell Hutchins may terminate the
Proposed Sub-Advisory Contract without penalty if, in the reasonable judgment
of Mitchell Hutchins, MFS becomes unable to discharge its duties and
obligations under the Contract, including circumstances such as financial
insolvency of MFS or any other circumstances which could adversely affect the
Fund. In addition, the Proposed Sub-Advisory Contract is automatically
terminable upon assignment.
Under the Proposed Sub-Advisory Contract, for the services performed and
the expenses assumed, MFS would receive a sub-advisory fee from Mitchell
Hutchins (not the Fund), computed daily and paid monthly, at an annual rate of
0.45% of the portion of the Fund's average daily net assets under MFS'
management.
If approved by the Fund's shareholders, the Proposed Sub-Advisory Contract
will become effective on the date of approval and will remain in effect for an
initial two-year term. Thereafter, the Proposed Sub-Advisory Contract will
continue in effect if it is approved at least annually by a vote of the Fund's
shareholders or by the Board, provided that, in either event, continuance is
approved by the vote of a majority of the Independent Trustees, which vote
must be cast in person at a meeting called for the purpose of voting on such
approval.
COMPARISON OF THE INTERIM SUB-ADVISORY CONTRACT AND THE PROPOSED SUB-ADVISORY
CONTRACT
The Interim Sub-Advisory Contract and the Proposed Sub-Advisory Contract
are substantially similar. Some of the differences between the two Contracts
stem from the provisional nature of the Interim Sub-Advisory Contract and the
requirements of Rule 15a-4 of the 1940 Act. The Interim Sub-Advisory Contract
is only effective for 150 days from the termination date of the Old Advisory
Contract, not for two years from the date of adoption as under the Proposed
Sub-Advisory Contract, and only 10 days' written notice is required for
termination of the Interim Sub-Advisory Contract by the Fund, rather than the
60 days' written notice required under the Proposed Sub-Advisory Contract.
Another difference is an additional provision in the Proposed Sub-Advisory
Contract that reflects the Board's ability to amend the Contract without
shareholder approval in accordance with the SEC exemptive order discussed in
Proposal 3 (if such Proposal is approved by shareholders). In addition, the
Proposed Sub-Advisory Contract specifically states that the Contract will
terminate upon its assignment or the termination of the Proposed Management
Contract.
EVALUATION BY BOARD
In determining to approve the Proposed Sub-Advisory Contract, the Board
analyzed the factors it deemed relevant, particularly Mitchell Hutchins'
decision to refocus its business to the exclusion of providing portfolio
advisory services to bond funds, MFS' particular experience in managing fixed
income assets and high income assets, its reputation, the past performance of
other funds managed by MFS that invest in high income securities, its overall
capabilities to perform the services under the Proposed Sub-Advisory Contract
and its willingness to perform those services for the Fund. The Board also
considered the sub-advisory fees that would be payable to MFS. The Board
reviewed the services provided by MFS to its other investment company clients,
the ability of MFS to provide these services to the Fund, including its
personnel, operations and financial condition, and other
7
<PAGE>
factors that would affect the provision of those services. After full
consideration of these and other factors, the Board of Trustees, including a
majority of the Independent Trustees, approved the Proposed Sub-Advisory
Contract and recommended that it be submitted to Fund shareholders for
approval.
REQUIRED VOTE
Approval of Proposal 2 requires the affirmative vote of the lesser of (1)
67% or more of the shares of the Fund present at the Meeting, if more than 50%
of the outstanding shares are represented at the Meeting in person or by
proxy, or (2) more than 50% of the outstanding shares entitled to vote at the
Meeting. If Proposal 2 is not approved by shareholders, the Interim Sub-
Advisory Contract will continue in effect for the remainder of its original
150-day term, and the Board and Mitchell Hutchins will consider what sub-
advisory services should be provided to the Fund.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 2.
----------------
PROPOSAL 3: TO APPROVE A POLICY TO PERMIT MITCHELL HUTCHINS AND THE BOARD
TO APPOINT AND REPLACE SUB-ADVISERS, TO ENTER INTO SUB-ADVISORY CONTRACTS
AND TO APPROVE AMENDMENTS TO SUB-ADVISORY CONTRACTS ON BEHALF OF THE FUND
WITHOUT FURTHER SHAREHOLDER APPROVAL.
At its meeting on November 8, 2000, the Board approved, and recommended
that the shareholders of the Fund also be asked to approve, a policy to permit
Mitchell Hutchins, subject to the approval of the Board, to appoint and
replace sub-advisers, to enter into sub-advisory contracts and to amend sub-
advisory contracts on behalf of the Fund without further shareholder approval
("Sub-Adviser Approval Policy"). Shareholders are being asked to approve this
Policy at the Meeting to permit Mitchell Hutchins to make changes in the sub-
advisory arrangements for the Fund in the future without having to incur the
expense of another shareholder meeting. If approved by the Fund's
shareholders, the Policy would apply only to sub-advisers that are not
affiliated with Mitchell Hutchins and thus would not permit Mitchell Hutchins
and the Board to appoint any Mitchell Hutchins affiliate to serve as sub-
adviser to the Fund without shareholder approval.
THE EXEMPTIVE ORDER
On January 19, 1999, the Fund and Mitchell Hutchins received an exemptive
order from the SEC that permits Mitchell Hutchins and the Fund's Board of
Trustees to appoint and replace sub-advisers that are not affiliated with
Mitchell Hutchins and to amend sub-advisory contracts with these sub-advisers
without obtaining shareholder approval. The Fund's shareholders must approve
the Sub-Adviser Approval Policy before Mitchell Hutchins and the Board may
implement it. Without the exemptive order, the provisions of the 1940 Act
require that the Fund's shareholders approve all new sub-advisory contracts,
as well as material amendments to any existing sub-advisory contract. If
shareholders approve this proposal, Mitchell Hutchins will be authorized,
subject to approval by the Board, including a majority of the Independent
Trustees, to evaluate, select and retain unaffiliated sub-advisers for the
Fund and to modify the sub-advisory contracts without obtaining further
approval of the Fund's shareholders whenever Mitchell Hutchins and the Board
believe these actions would benefit the Fund and its shareholders. As
explained below, shareholders would receive detailed information regarding any
new sub-adviser.
CURRENT SUB-ADVISER APPROVAL PROCESS
Currently, the holders of a majority of the Fund's outstanding shares must
approve any sub-advisory contract between Mitchell Hutchins and another
investment adviser pursuant to which the other adviser provides the Fund with
investment management services. Shareholder approval is required in addition
to approval by the Board and a majority of the Independent Trustees.
8
<PAGE>
PROPOSED SUB-ADVISER APPROVAL POLICY
The proposed Sub-Adviser Approval Policy would permit Mitchell Hutchins,
subject to the approval of the Board of Trustees, including a majority of the
Independent Trustees, to appoint and replace sub-advisers and to amend sub-
advisory contracts without obtaining shareholder approval. The Sub-Adviser
Approval Policy thus would permit Mitchell Hutchins to change sub-advisers or
sub-advisory arrangements in the following types of situations: (1) the sub-
adviser has a record of substandard performance; (2) the individual employees
responsible for portfolio management of the Fund move from the sub-adviser to
another investment advisory firm; (3) there is a change of control of the sub-
adviser; (4) Mitchell Hutchins decides to diversify the Fund's management by
adding another sub-adviser; or (5) there is a change in investment style of
the Fund. The Sub-Adviser Approval Policy will not be used to approve any sub-
adviser that is affiliated with Mitchell Hutchins, as that term is used in the
1940 Act, or materially amend any sub-advisory contract with an affiliated
sub-adviser.
Approval of the Sub-Adviser Approval Policy will not affect any of the
requirements under the federal securities laws that govern the Fund, Mitchell
Hutchins, any sub-adviser, or any sub-advisory contract, other than the
requirement to call and hold a meeting of the Fund's shareholders for the
purpose of approving a sub-advisory contract. The Board, including the
Independent Trustees, will continue to evaluate and approve all new sub-
advisory contracts between Mitchell Hutchins and any sub-adviser as well as
all changes to existing sub-advisory contracts. In addition, the Fund and
Mitchell Hutchins will be subject to several conditions imposed by the SEC to
ensure that the interests of the Fund's shareholders are adequately protected
whenever Mitchell Hutchins acts under the Sub-Adviser Approval Policy.
Finally, within 90 days of the appointment of a new sub-adviser, the Fund will
provide its shareholders with an information statement that contains
substantially the same relevant information about the sub-adviser, the sub-
advisory contract and the sub-advisory fee that the Fund's shareholders would
receive in a proxy statement. If the Fund's shareholders are not satisfied
with the sub-advisory arrangements that Mitchell Hutchins and the Board
implement under the Sub-Adviser Approval Policy, they would, of course, be
able to exchange or sell their shares.
Shareholder approval of this Proposal 3 will not change the total amount of
management fees paid by the Fund to Mitchell Hutchins or Mitchell Hutchins'
duties and responsibilities toward the Fund under the Proposed Management
Contract.
BENEFITS OF THE SUB-ADVISER APPROVAL POLICY
The Board believes that it is in the best interests of the Fund's
shareholders to give Mitchell Hutchins the maximum flexibility to select,
supervise and evaluate sub-advisers without incurring the expense and
potential delay of seeking specific shareholder approval. While Rule 15a-4
under the 1940 Act provides a limited exception to the shareholder approval
requirements for an interim advisory contract (pursuant to which the Fund's
Interim Management Contract and Interim Sub-Advisory Contract were adopted), a
fund's current advisory contract must be terminated before the Rule can apply
and a fund's shareholders still must approve both the resultant interim
advisory and sub-advisory contracts no later than 150 days after their
effective date. Thus, even when a change in investment management arrangements
involving one or more sub-advisers can be put into place promptly on a
temporary basis, the Fund must still call and hold a meeting of the Fund's
shareholders, create and distribute proxy materials, and arrange for the
solicitation of voting instructions from shareholders. This process is time-
intensive, slow and costly. These costs are generally borne entirely by the
Fund (although in the case of this solicitation, they are being borne by
Mitchell Hutchins). If Mitchell Hutchins and the Board can rely on the Sub-
Adviser Approval Policy, the Board would be able to act more quickly and with
less expense to appoint an unaffiliated sub-adviser when the Board and
Mitchell Hutchins believe that the appointment would benefit the Fund and its
shareholders.
Also, the Board believes that it is appropriate to vest the selection,
supervision and evaluation of the sub-advisers in Mitchell Hutchins, subject
to review by the Board, in light of Mitchell Hutchins' significant experience
and expertise in this area. The Board believes that investors may choose to
invest in the Fund because of Mitchell Hutchins' experience in this respect.
9
<PAGE>
Finally, the Board will oversee the sub-adviser selection process to ensure
that shareholders' interests are protected whenever Mitchell Hutchins selects
a sub-adviser or modifies a sub-advisory contract. The Board, including a
majority of the Independent Trustees, will continue to evaluate and approve
all new sub-advisory contracts as well as any modification to existing sub-
advisory contracts. In each review, the Board will analyze all factors that it
considers to be relevant to the determination, including the nature, quality
and scope of services provided by the sub-advisers. The Board will compare the
investment performance of the assets managed by the sub-adviser with other
accounts with similar investment objectives managed by other advisers and will
review the sub-adviser's compliance with federal securities laws and
regulations. The Board believes that its review will ensure that Mitchell
Hutchins continues to act in the best interests of the Fund and its
shareholders.
REQUIRED VOTE
Approval of Proposal 3 requires the affirmative vote of the lesser of (1)
67% or more of the shares of the Fund present at the Meeting, if more than 50%
of the outstanding shares are represented at the Meeting in person or by
proxy, or (2) more than 50% of the outstanding shares entitled to vote at the
Meeting. If the Fund's shareholders do not approve the Sub-Adviser Approval
Policy, the Fund will continue to be required to call a special meeting to
obtain shareholder approval of changes in the Fund's sub-advisory
arrangements.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 3.
----------------
INFORMATION ABOUT CERTAIN TRUSTEES AND OFFICERS OF THE TRUST
Officers are appointed by the Trustees and serve at the pleasure of the
Board. Information regarding officers and Trustees of the Fund who are
employees or directors of Mitchell Hutchins, PaineWebber or UBS AG ("UBS") is
provided below.
MARGO N. ALEXANDER: age 53, trustee. Mrs. Alexander is chairman (since
March 1999) and a director (since January 1995) of Mitchell Hutchins, and an
executive vice president and a director of PaineWebber (since March 1984). She
was chief executive officer of Mitchell Hutchins from January 1995 to October
2000. Mrs. Alexander is a director or trustee of 30 investment companies for
which Mitchell Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.
E. GARRETT BEWKES JR.: age 74, trustee and chairman of the Board of
Trustees. Mr. Bewkes serves as a consultant to PaineWebber (since May 1999).
Prior to November 2000, he was a director of Paine Webber Group Inc. ("PW
Group," formerly the holding company of PaineWebber and Mitchell Hutchins),
and prior to 1996, 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 a director of Interstate Bakeries Corporation.
Mr. Bewkes is a director or trustee of 40 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment
adviser.
BRIAN M. STORMS: age 46, president and trustee. Mr. Storms is chief
executive officer (since October 2000) and president (since March 1999) of
Mitchell Hutchins. He was president of Prudential Investments (1996-1999).
Prior to joining Prudential, he was a managing director at Fidelity
Investments. Mr. Storms is president and a director or trustee of 30
investment companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
T. KIRKHAM BARNEBY: age 54, vice president. Mr. Barneby is a managing
director and chief investment officer--quantitative investments of Mitchell
Hutchins. Mr. Barneby is a vice president of 14 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates services as
investment adviser.
10
<PAGE>
THOMAS DISBROW: age 34, vice president and assistant treasurer. Mr. Disbrow
is a first vice president and a senior manager of the mutual fund finance
department of Mitchell Hutchins. Prior to November 1999, he was a vice
president of Zweig/Glaser Advisers. Mr. Disbrow is a vice president and
assistant treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
AMY R. DOBERMAN: age 38, vice president. Ms. Doberman is senior vice
president and general counsel of Mitchell Hutchins. From December 1996 through
July 2000, she was general counsel of Aeltus Investment Management, Inc. Prior
to working at Aeltus, Ms. Doberman was a Division of Investment Management
Assistant Chief Counsel at the SEC. Ms. Doberman is a vice president of 29
investment companies and a vice president and secretary of one investment
company for which Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
ELBRIDGE T. GERRY III: age 43, vice president. Mr. Gerry is a managing
director and chief investment officer--short-term strategies and municipals of
Mitchell Hutchins. Prior to January 1996, he was with J.P. Morgan Private
Banking where he was responsible for managing municipal assets, including
several municipal bond funds. Mr. Gerry is a vice president of 20 investment
companies for which Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
JOHN J. LEE: age 32, vice president and assistant treasurer. Mr. Lee is a
vice president and a manager of the mutual fund finance department of Mitchell
Hutchins. Prior to September 1997, he was an audit manager in the financial
services practice of Ernst & Young LLP. Mr. Lee is a vice president and
assistant treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
KEVIN J. MAHONEY: age 35, vice president and assistant treasurer. Mr.
Mahoney is a first vice president and a senior manager of the mutual fund
finance department of Mitchell Hutchins. From August 1996 through March 1999,
he was the manager of the mutual fund internal control group of Salomon Smith
Barney. Prior to August 1996, he was an associate and assistant treasurer for
BlackRock Financial Management L.P. Mr. Mahoney is a vice president and
assistant treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
ANN E. MORAN: age 43, vice president and assistant treasurer. Ms. Moran is
a vice president and a manager of the mutual fund finance department of
Mitchell Hutchins. Ms. Moran is a vice president and assistant treasurer of 30
investment companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
DIANNE E. O'DONNELL: age 48, vice president and secretary. Ms. O'Donnell is
a senior vice president and deputy general counsel of Mitchell Hutchins. Ms.
O'Donnell is a vice president and secretary of 29 investment companies and
vice president and assistant secretary of one investment company for which
Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment
adviser.
PAUL H. SCHUBERT: age 37, vice president and treasurer. Mr. Schubert is a
senior vice president and the director of the mutual fund finance department
of Mitchell Hutchins. Mr. Schubert is a vice president and treasurer of 30
investment companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
BARNEY A. TAGLIALATELA: age 39, vice president and assistant treasurer. Mr.
Taglialatela is a vice president and a manager of the mutual fund finance
department of Mitchell Hutchins. Mr. Taglialatela is a vice president and
assistant treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
KEITH A. WELLER: age 39, vice president and assistant secretary. Mr. Weller
is a first vice president and senior associate general counsel of Mitchell
Hutchins. Mr. Weller is a vice president and assistant secretary of 30
investment companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
11
<PAGE>
OTHER INFORMATION
Shareholder Proposals. As a general matter, the Fund does not hold regular
annual or other regular meetings of shareholders. Any shareholder who wishes
to submit proposals to be considered at a special meeting of the Fund's
shareholders should send such proposals to the Fund at 51 West 52nd Street,
New York, New York 10019-6114. Proposals must be received a reasonable period
of time prior to any meeting to be included in the proxy materials or
otherwise to be considered at the meeting. Moreover, inclusion of such
proposals is subject to limitations under the federal securities laws. Persons
named as proxies for any subsequent shareholders' meeting will vote in their
discretion with respect to proposals submitted on an untimely basis.
Other Business. The Fund's management knows of no other business to be
presented to the Meeting other than the matters set forth in this Proxy
Statement, but should any other matter requiring a vote of the Fund's
shareholders arise, the proxies will vote thereon according to their best
judgment in the interests of the Fund.
By Order of the Board of Trustees,
Dianne E. O'Donnell
Secretary
December 20, 2000
12
<PAGE>
APPENDIX A
As of November 30, 2000, the following shareholders are shown on the Fund's
records as owning more than 5% of a class of its shares:
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF SHARES
BENEFICIALLY OWNED AS OF NOVEMBER
NAME AND ADDRESS 30, 2000
-----------------------------------------------------------------------------------
<S> <C> <C>
Jerry M. Zeigler (Class Y) 14.88% 17,764.006
-----------------------------------------------------------------------------------
Gertrude A. Tormey (Class Y) 23.56% 28,124.341
-----------------------------------------------------------------------------------
Mary Estes (Class Y) 9.98% 11,917.934
</TABLE>
----------------
Each shareholder listed may be contacted c/o Mitchell Hutchins Asset Management
Inc., 51 West 52nd Street, New York, NY 10019-6114.
A-1
<PAGE>
APPENDIX B
FORM OF INVESTMENT MANAGEMENT AND
ADMINISTRATION CONTRACT
Contract made as of , , between PAINEWEBBER MANAGED INVESTMENTS TRUST,
a Massachusetts business trust ("Trust"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation registered as an
investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act"), and as a broker-dealer under the Securities Exchange Act of
1934, as amended ("1934 Act");
WHEREAS the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company, and is
authorized to offer for public sale distinct series of shares of beneficial
interest; and
WHEREAS the Trust desires and intends to have one or more investment
advisers ("Sub-Advisers") provide investment advisory and portfolio management
services with respect to the series of shares of beneficial interest of the
Trust designated as PaineWebber High Income Fund and each such other series as
to which this Contract may apply (each a "Series"); and
WHEREAS the Trust desires to retain Mitchell Hutchins as investment manager
and administrator to furnish certain administrative and portfolio management
services to the Trust with respect to the Series, 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
manager 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 Manager; Appointment of Sub-Advisers
(a) Subject to the oversight and direction of the Trust's Board of
Trustees ("Board"), Mitchell Hutchins will provide to the Trust investment
management evaluation services principally by performing initial reviews of
prospective Sub-Advisers for each Series and overseeing and monitoring
performance of the Sub-Advisers thereafter. Mitchell Hutchins agrees to
report to the Trust the results of its evaluation, oversight and monitoring
functions and to keep books and records of the Trust in connection
therewith. Upon the request of the Board, Mitchell Hutchins will provide
portfolio management services with respect to any portion of Series' assets
for which no Sub-Adviser is responsible. Mitchell Hutchins further agrees
to communicate performance expectations and evaluations to the Sub-
Advisers, and to recommend to the Trust whether agreements with Sub-
Advisers should be renewed, modified or terminated.
(b) Mitchell Hutchins is responsible for informing the Sub-Advisers of
the investment objective(s), policies and restrictions of the Series for
which the Sub-Adviser is responsible, for informing or ascertaining that it
is aware of other legal and regulatory responsibilities applicable to the
Sub-Adviser with respect to the Series for which the Sub-Adviser is
responsible, and for monitoring the Sub-Advisers' discharge of their
duties; but Mitchell Hutchins is not responsible for the specific actions
(or inactions) of a Sub-Adviser in the performance of the duties assigned
to it.
(c) With respect to each Sub-Adviser for a Series, Mitchell Hutchins
shall enter into an agreement ("Sub-Advisory Agreement") with the Sub-
Adviser in substantially the form previously approved by the
B-1
<PAGE>
Board and shall seek approval of the Board or a Series' shareholders in a
manner consistent with the 1940 Act, the rules thereunder or any applicable
exemptive order.
(d) Mitchell Hutchins shall be responsible for the fees payable to and
shall pay the Sub-Adviser of a Series the fee as specified in the Sub-
Advisory Agreement relating thereto.
(e) In the event that the Board shall request that Mitchell Hutchins
provide any portfolio management services to one or more Series, Mitchell
Hutchins shall comply with this paragraph 2(e). Mitchell Hutchins agrees
that in placing orders with brokers, 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, use brokers who provide
the Series with research, analysis, advice and similar services to execute
portfolio transactions on behalf of the Series, and Mitchell Hutchins may
pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to Mitchell
Hutchins' determining in good faith that such commission 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 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. Mitchell Hutchins may
aggregate sales and purchase orders with respect to the assets of the
Series with similar orders being made simultaneously for other accounts
advised by Mitchell Hutchins or its affiliates. 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 believed to be equitable over time to each
account; the Trust recognizes that in some cases this procedure may
adversely affect the results obtained for the Series. In providing any
portfolio management services, 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. In providing any portfolio
management services, 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 the 1940 Act and any supplements
thereto ("Registration Statement") or as more frequently requested by the
Board. The Fund hereby authorizes Mitchell Hutchins and any entity or
persons associated with Mitchell Hutchins which is a member of a national
securities exchange to effect any transaction on such exchange for the
account of the Fund, which transaction is permitted by Section 11(a) of the
1934 Act and Rule 11a2-2(T) thereunder, and the Fund hereby consents to the
retention of compensation by Mitchell Hutchins or any entity or persons
associated with Mitchell Hutchins for such transactions.
3. Duties as Administrator. Mitchell Hutchins will administer the affairs
of the Trust and Series subject to the oversight and direction of the Board
and the following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations of
the Trust and the Series, including 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 any of its responsibilities with respect to the
conduct of the affairs of the Trust and the 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
B-2
<PAGE>
advisable by the Board, including the maintenance of certain books and
records of the Trust and Series in connection with the administration of
the Trust.
(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 shareholders of each Series 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.
(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 the currently effective Registration Statement and with the
instructions and directions of the Board and will comply with the requirements
of the 1940 Act, the Advisers Act, and the rules under each, and all other
applicable federal and state laws and regulations.
5. 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.
6. 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 the 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 Series; (iv)
filing fees and expenses relating to the registrations and qualification of
the Series' shares and the Trust under federal and/or state securities laws
and maintaining such registration and qualifications; (v) fees and salaries
payable to the Trust's Trustees and officers 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 the 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
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
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incur as a result of its legal obligation to provide indemnification to its
officers, Trustees, agents and shareholders) incurred by the Trust or the
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; (xix) costs of mailing, stationery and
communications equipment; (xx) expenses incident to any dividend,
withdrawal or redemption options; (xxi) charges and expenses of any outside
pricing service used to value portfolio securities; (xxii) interest on
borrowings of the Trust; and (xxiii) any fees or expenses related to
license agreements with respect to securities indices.
(c) The Trust or a Series may pay directly any expenses 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, a Series may reduce the fee payable to
Mitchell Hutchins pursuant to Paragraph 7 thereof 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 expenses 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.
7. Compensation.
(a) For the services provided and the expenses assumed pursuant to this
Contract, the Trust will pay to Mitchell Hutchins a fee with respect to
PaineWebber High Income Fund, computed daily and paid monthly, at an annual
rate of 0.50% of 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 day 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.
8. Limitation of Liability of Mitchell Hutchins. Mitchell Hutchins and its
officers, directors, employees and delegates, including any Sub-Adviser or
Sub-Administrator to a Series, shall not be liable for any error of judgment
or mistake of law or for any loss suffered by any Series, the Trust or any of
its shareholders, in connection with the matters to which this Contract
relates, except to the extent that such a loss results 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, director,
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 a Series or the Trust or acting with respect to any business of
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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, director, employee, or agent or
one under the control or direction of Mitchell Hutchins even though paid by
it.
9. 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 Agreement
and Mitchell Hutchins agrees that, in asserting any rights or claims under
this Agreement, 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.
10. Duration and Termination.
(a) This Contract shall become effective for each Series upon the day
and year first written above, 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 a 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 the Series on sixty days' written notice to Mitchell Hutchins
and may be terminated 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 a 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 terminate automatically in the event of
its assignment.
11. 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 a
Series shall be effective until approved by vote of a majority of the Series'
outstanding voting securities.
12. Governing Law. This Contract shall be construed in accordance with the
laws of the State of New York, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act, provided, however,
that section 9 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 New York or the Commonwealth of Massachusetts conflict with the
applicable provisions of the 1940 Act, the latter shall control.
13. 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,"
"affiliated person," "interested person," "assignment," "broker," "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
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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.
PaineWebber Managed Investments
Trust
Attest: By: _________________________________
Mitchell Hutchins Asset Management
Inc.
Attest: By: _________________________________
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APPENDIX C
MORE INFORMATION ABOUT MITCHELL HUTCHINS
Mitchell Hutchins serves as the Fund's investment adviser and
administrator. Mitchell Hutchins, a Delaware corporation, is a wholly owned
asset management subsidiary of PaineWebber, which is a wholly owned indirect
subsidiary of UBS, an internationally diversified organization with operations
in many areas of the financial services industry. Mitchell Hutchins is located
at 51 West 52nd Street, New York, New York 10019-6114. The principal business
offices of PaineWebber are located at 1285 Avenue of the Americas, New York,
New York 10019-6028. The principal business address of UBS is Bahnhofstrasse
45, Zurich, Switzerland. As of October 31, 2000, Mitchell Hutchins was the
adviser or sub-adviser of 31 investment companies with 75 separate portfolios
and aggregate assets of approximately $58.3 billion.
Since November 30, 1999, purchases and sales of the securities of any
parent or subsidiary of Mitchell Hutchins or MFS by the trustees of the Fund
did not exceed 1% of the outstanding securities of any class of securities of
such entities.
Mitchell Hutchins also serves as the distributor for the Fund's shares
under distribution contracts that require Mitchell Hutchins to use its best
efforts to sell the Fund's shares. During its fiscal year ended November 30,
1999, the Fund paid no brokerage commissions to PaineWebber or any other
affiliated broker-dealer.
The following is a list of the directors and principal executive officers
of Mitchell Hutchins:
PRINCIPAL
NAME POSITION(S) WITH MITCHELL HUTCHINS OCCUPATION
---- ------------------------------------- ----------
Margo N. Alexander............. Chairman and Director Same
Brian M. Storms................ President and Chief Executive Officer Same
Julian Sluyters................ Director Same
----------------
The business address of each person listed above is 51 West 52nd Street, New
York, New York 10019-6114.
OTHER INVESTMENT COMPANY CLIENTS
Mitchell Hutchins also serves as investment adviser to the following
investment companies, which have investment objectives similar to the Fund's,
at the fee rates set forth below.
APPROXIMATE NET
ASSETS AS OF
OCTOBER 31, 2000 ANNUAL INVESTMENT
FUND (IN MILLIONS) ADVISORY FEE
---- ---------------- ----------------------
Mitchell Hutchins Series Trust-- 0.75% of average daily
Global Income Portfolio............ $ 6.2 net assets
Mitchell Hutchins Series Trust-- 0.50% of average daily
High Grade Fixed Income Portfolio.. $ 2.5 net assets
Mitchell Hutchins Series Trust-- 0.50% of average daily
High Income Portfolio.............. $10.7 net assets
Mitchell Hutchins Series Trust-- 0.75% of average daily
Strategic Income Portfolio......... $13.4 net assets
Mitchell Hutchins Series Trust-- 0.50% of average daily
Strategic Fixed Income Portfolio... $ 4.3 net assets
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APPROXIMATE NET
ASSETS AS OF
OCTOBER 31, 2000 ANNUAL INVESTMENT
FUND (IN MILLIONS) ADVISORY FEE
---- ---------------- ------------------------
PACE Global Fixed Income $ 96.7 0.60% of average daily
Investments........................ net assets (subject to a
waiver of the advisory
fee and/or a
reimbursement to the
extent the Fund's "Net
Expenses" exceed 0.95%)
PACE Government Securities Fixed
Income Investments................. $202.6 0.50% of average daily
net assets (subject to a
waiver of the advisory
fee and/or a
reimbursement to the
extent the Fund's "Net
Expenses" exceed 0.87%)
PACE Intermediate Fixed Income
Investments........................ $134.2 0.40% of average daily
net assets
PACE Municipal Fixed Income
Investments........................ $ 53.1 0.40% of average daily
net assets (subject to a
waiver of the advisory
fee and/or a
reimbursement to the
extent the Fund's "Net
Expenses" exceed 0.85%)
PACE Strategic Fixed Income
Investments........................ $238.6 0.50% of average daily
net assets (subject to a
waiver of the advisory
fee and/or a
reimbursement to the
extent the Fund's "Net
Expenses" exceed 0.85%)
PaineWebber California Tax-Free
Income Fund........................ $123.0 0.50% of average daily
net assets (subject to a
waiver of 0.20%)
0.75% of average daily
PaineWebber Global Income Fund...... $253.3 net assets
PaineWebber Investment Grade 0.50% of average daily
Income Fund........................ $219.0 net assets
PaineWebber Municipal High 0.60% of average daily
Income Fund........................ $ 83.5 net assets
PaineWebber National Tax-Free 0.50% of average daily
Income Fund........................ $239.5 net assets
PaineWebber New York Tax-Free 0.60% of average daily
Income Fund........................ $ 35.6 net
PaineWebber Low Duration U.S. 0.50% of average daily
Government Income Fund............. $164.1 net assets
0.75% of average daily
PaineWebber Strategic Income Fund... $ 77.7 net assets
PaineWebber U.S. Government 0.50% of average daily
Income Fund........................ $231.2 net assets
2002 Target Term Trust Inc. 0.50% of average weekly
(closed-end fund).................. $109.9 net assets
All American Term Trust Inc. 0.90% of average weekly
(closed-end fund).................. $159.4 net assets
Global High Income Dollar Fund Inc. 1.25% of average weekly
(closed-end fund).................. $282.0 net assets
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APPROXIMATE NET
ASSETS AS OF
OCTOBER 31, 2000 ANNUAL INVESTMENT
FUND (IN MILLIONS) ADVISORY FEE
---- ---------------- -----------------------
Insured Municipal Income Fund Inc. 0.90% of average weekly
(closed-end fund).................. $455.3 net assets
Investment Grade Municipal Income 0.90% of average weekly
Fund Inc. (closed-end fund)........ $244.9 net assets
Managed High Yield Plus Fund Inc. 0.70% of average weekly
(closed-end fund).................. $311.8 net assets
Strategic Global Income Fund, Inc. 1.00% of average weekly
(closed-end fund).................. $220.4 net assets
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APPENDIX D
FORM OF SUB-ADVISORY CONTRACT
Agreement made as of , 2001 ("Contract") between MITCHELL HUTCHINS
ASSET MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"), and
Massachusetts Financial Services Company, a Delaware corporation ("Sub-
Adviser").
RECITALS
(1) Mitchell Hutchins has entered into an Investment Management and
Administration Agreement, dated , 2001 ("Management Agreement"),
with PaineWebber Managed Investments Trust ("Trust"), an open-end
management investment company registered under the Investment Company
Act of 1940, as amended ("1940 Act"), with respect to the series of
the Trust designated as PaineWebber High Income Fund ("Series");
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish certain
investment advisory services to Mitchell Hutchins and the Series; and
(3) The Sub-Adviser is willing to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, Mitchell Hutchins and the Sub-Adviser agree as follows:
1. Appointment. Mitchell Hutchins hereby appoints the Sub-Adviser as an
investment sub-adviser with respect to the Series for the period and on the
terms set forth in this Contract. The Sub-Adviser accepts that appointment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. Duties as Sub-Adviser.
(a) Subject to the supervision and direction of the Trust's Board of
Trustees ("Board") and review by Mitchell Hutchins, and any written
guidelines adopted by the Board or Mitchell Hutchins and furnished to the
Sub-Adviser, the Sub-Adviser will provide a continuous investment program
for all or a designated portion of the assets ("Segment") of the Series,
including investment research and discretionary management with respect to
all securities and investments and cash equivalents in the Series or
Segment. The Sub-Adviser will determine from time to time what investments
will be purchased, retained or sold by the Series or Segment. The Sub-
Adviser will be responsible for placing purchase and sell orders for
investments and for other related transactions for the Series or Segment.
The Sub-Adviser will be responsible for voting proxies of issuers of
securities held by the Series or Segment. The Sub-Adviser understands that
the Series' assets need to be managed so as to permit it to qualify or to
continue to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code, as amended ("Code"). The Sub-Adviser will
provide services under this Contract in accordance with the Series'
investment objective, policies and restrictions as stated in the Trust's
currently effective registration statement under the 1940 Act, and any
amendments or supplements thereto ("Registration Statement").
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
seek to obtain the best net result in terms of price and execution;
provided that, on behalf of the Series, the Sub-Adviser may, in its
discretion, use brokers that provide the Sub-Adviser with research,
analysis, advice and similar services to execute portfolio transactions on
behalf of the Series or Segment, and the Sub-Adviser may pay to those
brokers in return for brokerage and research services a higher commission
than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that such commission is reasonable in terms
either of the particular transaction or of the overall responsibility of
the Sub-Adviser to the Series or its other clients and that the total
commissions paid by the Series or Segment 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
D-1
<PAGE>
sold to Mitchell Hutchins or the Sub-Adviser, or any affiliated person
thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder. The Sub-Adviser may aggregate sales and
purchase orders with respect to the assets of the Series or Segment with
similar orders being made simultaneously for other accounts advised by the
Sub-Adviser or its affiliates. Whenever the Sub-Adviser simultaneously
places orders to purchase or sell the same security on behalf of the Series
and one or more other accounts advised by the Sub-Adviser, the orders will
be allocated as to price and amount among all such accounts in a manner
believed to be equitable over time to each account. Mitchell Hutchins
recognizes that in some cases this procedure may adversely affect the
results obtained for the Series or Segment.
(c) The Sub-Adviser will maintain all books and records required to be
maintained pursuant to the 1940 Act and the rules and regulations
promulgated thereunder with respect to transactions by the Sub-Adviser on
behalf of the Series or Segment, and will furnish the Board and Mitchell
Hutchins with such periodic and special reports as the Board or Mitchell
Hutchins reasonably may request. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all
records that it maintains for the Series are the property of the Trust,
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940
Act any records that it maintains for the Trust and that are required to be
maintained by Rule 31a-1 under the 1940 Act, and further agrees to
surrender promptly to the Trust any records or copies thereof that it
maintains for the Series upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell
Hutchins with economic and investment analyses and reports as well as
quarterly reports setting forth the performance of the Series or Segment
and make available to the Board and Mitchell Hutchins any economic,
statistical and investment services that the Sub-Adviser normally makes
available to its institutional or other customers.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair
valuation of all portfolio securities in the Series or Segment, in
accordance with procedures adopted by the Board, as amended from time to
time. The Sub-Adviser will use its reasonable efforts to arrange for the
provision of a price from one or more parties independent of the Sub-
Adviser for each portfolio security for which the custodian does not obtain
prices in the ordinary course of business from an automated pricing
service.
3. Further Duties. In all matters relating to the performance of this
Contract, the Sub-Adviser and Mitchell Hutchins will act in conformity with
the Trust's Declaration of Trust, By-Laws and Registration Statement and with
the written instructions and written directions of the Board and will comply
with the requirements of the 1940 Act and the Investment Advisers Act of 1940,
as amended ("Advisers Act") and the rules under each, Subchapter M of the
Code, as applicable to regulated investment companies; and all other federal
and state laws and regulations applicable to the Trust and the Series.
Mitchell Hutchins agrees to provide to the Sub-Adviser copies of the Trust's
Declaration of Trust, By-Laws, Registration Statement, written instructions
and directions of the Board and Mitchell Hutchins, and any amendments or
supplements to any of these materials as soon as practicable after such
materials become available; and further agrees to identify to the Sub-Adviser
in writing any broker-dealers that are affiliated with Mitchell Hutchins
(other than PaineWebber Incorporated and Mitchell Hutchins itself).
4. Expenses. During the term of this Contract, the Sub-Adviser will bear
all expenses incurred by it in connection with its services under this
Contract. The Sub-Adviser shall not be responsible for any expenses incurred
by the Trust, the Series or Mitchell Hutchins.
5. Compensation.
(a) For the services provided and the expenses assumed by the Sub-
Adviser pursuant to this Contract, Mitchell Hutchins, not the Series, will
pay to the Sub-Adviser a sub-advisory fee, computed daily and paid
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<PAGE>
monthly, at an annual rate of 0.45% of the average daily net assets of the
Series or Segment (computed in the manner specified in the Management
Agreement) and will provide the Sub-Adviser with a schedule showing the
manner in which the fee was computed. If the Sub-Adviser is managing a
Segment, its fees will be based on the value of assets of the Series within
the Sub-Adviser's Segment.
(b) The fee shall be accrued daily and payable monthly to the Sub-
Adviser on or before the fifteenth day of the next succeeding calendar
month.
(c) 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 pro-rated according to the proportion that such
period bears to the full month in which such effectiveness or termination
occurs.
6. Limitation of Liability.
(a) The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Series, the Trust, its
shareholders or by Mitchell Hutchins in connection 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.
(b) Mitchell Hutchins shall indemnify, defend and hold harmless the Sub-
Adviser, its affiliates, and each of their respective directors, officers,
employees, shareholders, agents and representatives (collectively, the
"Indemnities") from and against any and all losses, claims, damages,
liabilities, costs and expenses (including reasonable attorney's fees)
arising from or related to the services contemplated under this Agreement,
except to the extent any such losses, claims, damages, liabilities, costs
and expenses result from willful misfeasance, bad faith or gross negligence
on the Sub-Adviser's part in the performance of its duties or from reckless
disregard by the Sub-Adviser of its obligations and duties under this
Agreement.
(c) In no event will the Sub-Adviser have any responsibilities for any
other series of the Trust, for any portion of the Series' investments not
managed by the Sub-Adviser or for the acts or omissions of any other sub-
adviser to the Trust or Series.
In particular, in the event the Sub-Adviser shall manage only a portion
of the Series' investments, the Sub-Adviser shall have no responsibility
for the Series' being in violation of any applicable law or regulation or
investment policy or restriction applicable to the Series as a whole or for
the Series' failing to qualify as a regulated investment company under the
Code, if the securities and other holdings of the Segment managed by the
Sub-Adviser are such that such Segment would not be in such violation or
fail to so qualify if such segment were deemed a separate series of the
Trust or a separate "regulated investment company" under the Code.
Nothing in this section shall be deemed a limitation or waiver of any
obligation or duty that may not by law be limited or waived.
7. Representations.
(a) The Sub-Adviser (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this
Contract remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this Contract;
(iii) has met and will seek to continue to meet for so long as this
Contract remains in effect, any other applicable federal or state
requirements, or the applicable requirements of any regulatory or industry
self-regulatory agency necessary to be met in order to perform the services
contemplated by this Contract; (iv) has the authority to enter into and
perform the services contemplated by this Contract; and (v) will promptly
notify Mitchell Hutchins of
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the occurrence of any event that would disqualify the Sub-Adviser from
serving as a sub-investment adviser of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise.
(b) Mitchell Hutchins (i) is registered as an investment adviser under
the Advisers Act and will continue to be so registered for so long as this
Contract remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services as investment adviser
contemplated by this Contract; (iii) has met and will seek to continue to
meet for so long as this Contract remains in effect, any other applicable
federal or state requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency necessary to be met in order
to perform the services as investment adviser contemplated by this
Contract; and (iv) will promptly notify the Sub-Adviser of the occurrence
of any event that would disqualify Mitchell Hutchins from serving as an
investment adviser of any investment company pursuant to Section 9(a) of
the 1940 Act or otherwise.
(c) The Sub-Adviser has adopted a written code of ethics and appropriate
procedures complying with the requirements of Rule 17j-1 under the 1940 Act
and has provided Mitchell Hutchins and the Board with a copy of such code
of ethics, together with evidence of its adoption. Within thirty days of
the end of the last calendar quarter of each year that this Contract is in
effect, the president or a vice president of the Sub-Adviser shall certify
to Mitchell Hutchins that the Sub-Adviser has complied with the
requirements of Rule 17j-1 during the previous year and that there has been
no material violation of the Sub-Adviser's code of ethics or, if such a
violation has occurred, that appropriate action was taken in response to
such violation. Upon the written request of Mitchell Hutchins, the Sub-
Adviser shall permit Mitchell Hutchins, its employees or its agents to
examine the reports required to be made by the Sub-Adviser pursuant to Rule
17j-1, which are relevant to the services provided under this Contract.
(d) The Sub-Adviser has provided Mitchell Hutchins with a copy of its
Form ADV, as most recently filed with the Securities and Exchange
Commission ("SEC") and promptly will furnish a copy of all amendments to
Mitchell Hutchins at least annually.
(e) The Sub-Adviser will notify Mitchell Hutchins of any change of
control of the Sub-Adviser, including any change of its general partners or
25% shareholders or 25% limited partners, as applicable, and any changes in
the key personnel who are either the portfolio manager(s) of the Series or
senior management of the Sub-Adviser, in each case prior to, or promptly
after, such change.
(f) The Sub-Adviser agrees that neither it, nor any of its affiliates,
will in any way refer directly or indirectly to its relationship with the
Series, the Trust, Mitchell Hutchins or any of their respective affiliates
in offering, marketing or other promotional materials without the prior
express written consent of Mitchell Hutchins.
8. Services Not Exclusive. The services furnished by the Sub-Adviser
hereunder are not to be deemed exclusive and the Sub-Adviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby or unless otherwise agreed to by the parties
hereunder in writing. Nothing in this Contract shall limit or restrict the
right of any trustee, director, officer or employee of the Sub-Adviser, 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.
9. Duration and Termination.
(a) This Contract shall become effective upon the day and year first
written above, provided that this Contract has been approved for the Series
by a vote of: (i) a majority of those Trustees of the Trust who are not
parties to this Contract or interested persons of any such party
("Independent Trustees") cast in person at a meeting called for the purpose
of voting on such approval and (ii) a majority of the Series' outstanding
voting securities unless in the case of (ii), the Trust complies with the
terms of any SEC exemptive order or rule permitting it to modify to the
Contract without such vote.
D-4
<PAGE>
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from its effective 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
Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board or by vote of a majority of
the outstanding voting securities of the Series.
(c) Notwithstanding the foregoing, with respect to the 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 the Series on sixty days' written notice to the Sub-Adviser
and may be terminated by the Sub-Adviser at any time, without the payment
of any penalty, on sixty days' written notice to Mitchell Hutchins. The
Contract may also be terminated, without payment of penalty, by Mitchell
Hutchins (i) upon material breach by the Sub-Adviser of any of the
representations and warranties set forth in Paragraph 7 of this Contract,
if such breach shall not have been cured within a 20 day period after
notice of such breach or (ii) if, in the reasonable judgment of Mitchell
Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Contract, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely
affect the Series. This Contract will terminate automatically in the event
of its assignment or upon termination of the Advisory Contract as it
relates to the Series.
10. 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 whom enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Contract as to the
Series shall be effective until approved by vote of (i) the Independent
Trustees and (ii) a majority of the Series' outstanding voting securities
unless in the case of (ii), the Trust complies with the terms of any SEC
exemptive order or rule permitting it to modify to the Contract without such
vote.
11. Governing Law. This Contract shall be construed in accordance with the
1940 Act and the laws of the State of New York, without giving effect to the
conflicts of laws principles thereof. To the extent that the applicable laws
of the State of New York conflict with the applicable provisions of the 1940
Act, the latter shall control.
12. 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,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "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 SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Contract is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Contract may be
signed in counterpart.
13. Notices. Any notice herein required is to be in writing and is deemed
to have been given to the Sub-Adviser or Mitchell Hutchins upon receipt of the
same at their respective addresses set forth below. All written notices
required or permitted to be given under this Contract will be delivered by
personal service, by postage mail--return receipt requested or by facsimile
machine or a similar means of same day delivery which provides evidence of
receipt (with a confirming copy by mail as set forth herein). All notices
provided to Mitchell Hutchins will be sent to the attention of Dianne E.
O'Donnell, Deputy General Counsel. All notices provided to the Sub-Adviser
will be sent to the attention of Robert T. Burns, Senior Vice President and
Associate General Counsel.
D-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Mitchell Hutchins Asset Management
Inc. 51 West 52nd Street New York,
New York 10019-6114
Attest:
By: _________________________________ By: _________________________________
Name: Keith A. Weller Name: Dianne E. O'Donnell
Title: First Vice President Title: Senior Vice President
Massachusetts Financial Services
Company 500 Boylston Street
Boston, Massachusetts 02116
Attest:
By: _________________________________ By: _________________________________
Name: Robert T. Burns Name: Joseph W. Dello Russo
Title: Assistant Secretary Title: Chief Administrative
Officer and Chief Financial
Officer
D-6
<PAGE>
APPENDIX E
MORE INFORMATION ABOUT MFS
MFS and its predecessor organizations have a history of money management
dating from 1924 and the founding of the first mutual fund, Massachusetts
Investors Trust. As of October 31, 2000, MFS had approximately $157.71 billion
of assets under management, including $3.05 billion in high income fund
assets. MFS is located at 500 Boylston Street, Boston, Massachusetts 02116.
MFS is the indirect majority owned subsidiary of Sun Life Financial Services
of Canada, Inc., which is located at 150 King Street West, Toronto, Ontario,
Canada M5H1J9.
The following is a list of the directors and principal executive officers
of MFS:
NAME POSITION(S) WITH MFS PRINCIPAL OCCUPATION
---- -------------------- --------------------
Jeffrey L. Shames....... Chairman and Chief
Executive Officer Same
John W. Ballen.......... Director, Chief Investment
Officer and President Same
Arnold D. Scott......... Director and Senior
Executive Vice President Same
Joseph W. Dello Russo... Director, Executive Vice
President, Chief Financial
Officer and Chief
Administrative Officer Same
Kevin R. Parke.......... Director, Executive Vice
President and Chief Equity
Officer Same
Thomas J. Cashman, Jr... Director and Executive
Vice President Same
William W. Scott, Jr.... Director and Executive
Vice President Same
C. James Prieur......... Director President, Sun Life
Financial Services of
Canada, Inc.
Donald A. Stewart....... Director Chairman and Chief
Executive Officer of Sun
Life Assurance Company
of Canada
William W. Stinson...... Director Chairman and Member of
Executive Committee of
United Dominion Industry
----------------
The business address of each person listed above is 500 Boylston Street,
Boston, Massachusetts 02116.
OTHER INVESTMENT COMPANY CLIENTS
MFS also serves as investment adviser or sub-adviser to the following
investment companies, which have investment objectives similar to the Fund's,
at the fee rates set forth below.
APPROXIMATE NET
ASSETS AS OF
OCTOBER 31, 2000
FUND (IN MILLIONS) ANNUAL INVESTMENT ADVISORY FEE
---- ---------------- --------------------------------------
MFS Bond Fund........... $1,113.4 0.255% of average daily net assets on
first $200 million; 0.191% of average
daily net assets over $200 million;
plus 2.75% of the first $20 million of
gross income; 2.34% of gross income in
excess of $20 million
MFS High Yield $ 50.7 0.65% of average daily net assets
Opportunities Fund......
MFS Income Fund......... $ 1.0 0.60% of average daily net assets
subject to a waiver of 0.60%
E-1
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE NET
ASSETS AS OF
OCTOBER 31, 2000
FUND (IN MILLIONS) ANNUAL INVESTMENT ADVISORY FEE
---- ---------------- --------------------------------------
<S> <C> <C>
MFS High Yield Fund..... $ 1.1 0.60% of average daily net assets
subject to a waiver of 0.60%
MFS High Quality Bond $ 1.3 0.50% of average daily net assets
Fund...................
MFS Intermediate
Investment Grade Bond $ 112.2 0.50% of average daily net assets
Fund................... subject to a waiver of 0.50%
MFS Limited Maturity $ 273.6 0.40% of average daily net assets
Fund................... subject to a waiver of 0.05%
MFS Municipal Bond $1,299.6 0.22% of average daily net assets of
Fund................... the first $200 million; 0.187% of
average daily net assets from over
$200 million to $2 billion; 0.168% of
average daily net assets in excess of
$2 billion; plus 4.12% of the first
$16 million in gross income; 3.51% of
gross income from over $16 million to
$160 million; 3.16% of gross income in
excess of $160 million
MFS Municipal High $1,342.7 0.30% of average daily net assets of
Income Fund............ the first $1.3 billion; 0.25% of
average daily net assets in excess of
$1.3 billion; plus 4.75% of gross
income subject to a waiver to the
extent the total advisory fee exceeds
0.55% of average daily net assets
MFS Municipal Limited $ 52.4 0.40% of average daily net assets
Maturity Fund.......... subject to a waiver of 0.10%
MFS Multimarket Income
Trust $ 567.5 0.34% of average daily net assets;
(closed-end fund)...... plus 5.40% of gross income
MFS Municipal Income
Trust (closed-end $ 305.9 0.40% of average daily net assets;
fund).................. plus 6.32% of gross income
MFS Municipal Income $ 328.1 0.30% of average daily net assets;
Fund................... plus 6.43% of gross income subject to
a waiver to the extent the total
advisory fee exceeds 0.40%
MFS Strategic Income $ 294.0 0.50% of average daily net assets;
Fund................... plus 7.14% of gross income subject to
a waiver to the extent the total
advisory fee exceeds 0.50%
MFS Massachusetts High
Income Tax Free Fund... $ 4.8 0.40% of average daily net assets
subject to a waiver of 0.40%
MFS New York High Income
Tax Free Fund.......... $ 0.5 0.40% of average daily net assets
subject to a waiver of 0.40%
MFS Government Markets $ 416.4 0.32% of average daily net assets;
Income Trust........... plus 5.33% of gross income
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE NET
ASSETS AS OF
OCTOBER 31, 2000
FUND (IN MILLIONS) ANNUAL INVESTMENT ADVISORY FEE
---- ---------------- --------------------------------------
<S> <C> <C>
MFS Intermediate Income
Trust $ 907.4 0.32% of average daily net assets;
(closed-end fund)...... plus 5.65% of gross income
MFS Variable Insurance
Trust--Bond Series..... $ 25.4 0.60% of average daily net assets
MFS Variable Insurance
Trust--High $ 58.7 0.75% of average daily net assets
Income Series..........
MFS Variable Insurance
Trust--Limited $ 0.3 0.55% of average daily net assets
Maturity Series........
MFS Institutional High $ 1.0 0.50% of average daily net assets
Yield Fund..............
Compass--High Yield $ 100.8 0.75% of average daily net assets of
Variable Account........ the first $300 million; 0.675% of
average daily net assets in excess of
$300 million
MFS/SunLife--Strategic $ 28.3 0.75% of average daily net assets
Income Series...........
MFS/SunLife--High Yield $ 324.3 0.75% of average daily net assets
Series.................. subject to a waiver of 0.05% of the
advisory fee on assets in excess of $1
billion
</TABLE>
E-3
<PAGE>
Please detach at perforation before mailing.
PROXY PROXY
PAINEWEBBER HIGH INCOME FUND
SPECIAL MEETING OF SHAREHOLDERS - FEBRUARY 8, 2001
THIS PROXY IS BEING SOLICITED FOR THE BOARD OF TRUSTEES OF PAINEWEBBER HIGH
INCOME FUND ("FUND"), A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST, AND
RELATES TO THE PROPOSALS INDICATED BELOW. The undersigned hereby appoints as
proxies SCOTT H. GRIFF and VICTORIA DRAKE, and each of them (with the power of
substitution) to vote for the undersigned all shares of common stock of the
undersigned in the Fund at the Special Meeting of Shareholders to be held at
10:00 a.m., Eastern time, on February 8, 2001 at 1285 Avenue of the Americas,
14th Floor, New York, New York 10019, and any adjournment thereof ("Meeting"),
with all the power the undersigned would have if personally present. The shares
represented by this card will be voted as instructed. UNLESS INDICATED TO THE
CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE "FOR" ALL
PROPOSALS RELATING TO THE FUND WITH DISCRETIONARY POWER TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
VOTE VIA THE INTERNET:
https://vote.proxy-direct.com
VOTE VIA THE TELEPHONE: 1-800-597-7836
--------------------------------------------------------------------------------
CONTROL NUMBER:
--------------------------------------------------------------------------------
Note: If shares are held by an individual, sign
your name exactly as it appears on this card. If
shares are held jointly, either party may sign,
but the name of the party signing should conform
exactly to the name shown on this card. If
shares are held by a corporation, partnership or
similar account, the name and the capacity of
the individual signing should be indicated,
unless it is reflected in the form of
registration. For example: "ABC Corp., John Doe,
Treasurer."
------------------------------------------------
Signature
------------------------------------------------
Signature (if held jointly)
,200
------------------------------------------------
Date HIN_11272
PLEASE MARK YOUR VOTE ON THE REVERSE SIDE OF THIS CARD.
<PAGE>
Please detach at perforation before mailing.
Please date and sign the reverse side of this proxy and return it promptly in
the enclosed envelope. This proxy will not be voted unless it is dated and
signed exactly as instructed.
When properly signed, the proxy will be voted as instructed below. If no
instruction is given for a proposal, voting will be made "FOR" that proposal.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE FOLLOWING PROPOSALS. PLEASE
INDICATE YOUR VOTE BY FILLING IN THE BOX COMPLETELY. EXAMPLE: [_]
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
1. Approve a new investment advisory and administration contract between
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") and the Fund. [_] [_] [_]
2. Approve a new sub-advisory contract between Mitchell Hutchins and
Massachusetts Financial Services Company. [_] [_] [_]
3. Approve a policy to permit Mitchell Hutchins and the Fund's Board of
Trustees to appoint and replace sub-advisers and to enter into and amend
sub-advisory contracts without further shareholder approval. [_] [_] [_]
</TABLE>
HIN_11272
PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.
<PAGE>
Your Proxy Vote is Important!
---------
And now you can Vote your Proxy
on the PHONE or on
the INTERNET.
[graphic] It saves Money! Telephone and Internet voting saves postage
costs. Savings which can help to minimize fund expenses.
It saves Time! Telephone and Internet voting is instantaneous -
24 hours a day.
It's Easy! Just follow these simple steps:
1. Read your proxy statement and have it at hand.
2. Call toll-free 1-800-597-7836 for automated instructions,
or go to website: https://vote.proxy-direct.com.
-----------------------------
3. Enter your 14 digit Control Number from your Proxy Card.
4. Follow the recorded or on-screen directions.
5. Do not mail your Proxy Card when you vote by phone or
---
internet.
6. If you have any questions regarding the meeting agenda or
the execution of your proxy, please call. 1-877-748-9131.
