Filed pursuant to Rule 497(b)
Registration No. 33-59951
PAINEWEBBER COMMUNICATIONS & TECHNOLOGY GROWTH FUND
(a series of PaineWebber Olympus Fund)
July 10, 1995
Dear Shareholder:
The attached proxy materials describe a proposal that PaineWebber
Communications & Technology Growth Fund ("ComTech Growth Fund") reorganize and
become part of PaineWebber Growth Fund ("Growth Fund") (each a "Fund"). If the
proposal is approved and implemented, each shareholder of ComTech Growth Fund
automatically would become a shareholder of Growth Fund. ComTech Growth Fund and
Growth Fund are each a series of PaineWebber Olympus Fund ("Trust"), an open-end
management investment company organized as a Massachusetts business trust.
YOUR BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE REORGANIZATION PROPOSAL.
The Board believes that combining the two Funds will benefit ComTech Growth
Fund's shareholders by providing them with a portfolio that has an investment
objective similar to the investment objective of ComTech Growth Fund, is managed
in a similar manner (although its investment strategies may differ in some
material respects) and will have lower operating expenses as a percentage of net
assets. The attached materials provide more information about the proposed
reorganization and the two Funds.
____YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. Voting your shares
early will permit the Trust to avoid costly follow-up mail and telephone
solicitation. After reviewing the attached materials, please complete, date and
sign your proxy card and mail it in the enclosed return envelope today.
Very truly yours,
/s/ Margo N. Alexander
MARGO N. ALEXANDER
President, PaineWebber Olympus Fund
<PAGE>
PAINEWEBBER BLUE CHIP GROWTH FUND
(a series of PaineWebber Master Series, Inc.)
July 10, 1995
Dear Shareholder:
The attached proxy materials describe a proposal that PaineWebber Blue Chip
Growth Fund ("Blue Chip Growth Fund") reorganize and become part of PaineWebber
Growth Fund ("Growth Fund") (each a "Fund"). If the proposal is approved and
implemented, each shareholder of Blue Chip Growth Fund automatically would
become a shareholder of Growth Fund. Blue Chip Growth Fund is a series of
PaineWebber Master Series, Inc. ("Corporation"), a professionally managed,
open-end investment company organized as a Maryland corporation. Growth Fund is
a series of PaineWebber Olympus Fund, an open-end management investment company
organized as a Massachusetts business trust.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE REORGANIZATION PROPOSAL.
The Board believes that combining the two Funds will benefit Blue Chip Growth
Fund's shareholders by providing them with a portfolio that has an investment
objective similar to the investment objective of Blue Chip Growth Fund, is
managed in a similar manner and will have lower operating expenses as a
percentage of net assets. The attached materials provide more information about
the proposed reorganization and the two Funds.
____YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. Voting your shares
early will permit the Corporation to avoid costly follow-up mail and telephone
solicitation. After reviewing the attached materials, please complete, date and
sign your proxy card and mail it in the enclosed return envelope today.
Very truly yours,
/s/ Margo N. Alexander
MARGO N. ALEXANDER
President, PaineWebber Master Series,
Inc.
<PAGE>
PAINEWEBBER COMMUNICATIONS & TECHNOLOGY GROWTH FUND
(a series of PaineWebber Olympus Fund)
-------------------
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
August 11, 1995
-------------------
To The Shareholders:
A special meeting of shareholders ("Meeting") of PaineWebber Communications
& Technology Growth Fund ("ComTech Growth Fund"), a series of PaineWebber
Olympus Fund ("Trust"), will be held on August 11, 1995, at 10:00 a.m. eastern
time, at 1285 Avenue of the Americas, 38th Floor, New York, New York 10019, for
the following purposes:
(1) To consider an Agreement and Plan of Reorganization and Termination
under which PaineWebber Growth Fund ("Growth Fund"), a series of the Trust,
would acquire the assets of ComTech Growth Fund in exchange solely for
shares of beneficial interest in Growth Fund and the assumption by Growth
Fund of ComTech Growth Fund's liabilities, followed by the distribution of
those shares to the shareholders of ComTech Growth Fund, all as described in
the accompanying prospectus/proxy statement; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
You are entitled to vote at the Meeting and any adjournment thereof if you
owned shares of ComTech Growth Fund at the close of business on June 26, 1995.
IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON. IF YOU DO NOT
EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the board of trustees,
DIANNE E. O'DONNELL
Secretary
July 10, 1995
1285 Avenue of the Americas
New York, New York 10019
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the
enclosed proxy card, date and sign the card, and return
it in the envelope provided. IF YOU SIGN, DATE AND
RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS,
YOUR SHARES WILL BE VOTED "FOR" THE PROPOSALS NOTICED
ABOVE. In order to avoid the additional expense to
ComTech Growth Fund of further solicitation, we ask your
cooperation in mailing in your proxy card promptly.
Unless proxy cards submitted by corporations and
partnerships are signed by the appropriate persons as
indicated in the voting instructions on the proxy card,
they will not be voted.
<PAGE>
PAINEWEBBER GROWTH FUND
PAINEWEBBER COMMUNICATIONS & TECHNOLOGY
GROWTH FUND
(EACH A SERIES OF PAINEWEBBER OLYMPUS FUND)
PAINEWEBBER BLUE CHIP GROWTH FUND
(A SERIES OF PAINEWEBBER MASTER SERIES, INC.)
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(TOLL FREE) 1-800-647-1568
-------------------
PROSPECTUS/PROXY STATEMENT
JULY 10, 1995
-------------------
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of PaineWebber Communications & Technology Growth Fund ("ComTech
Growth Fund"), a series of PaineWebber Olympus Fund ("Trust"), and PaineWebber
Blue Chip Growth Fund ("Blue Chip Growth Fund"), a series of PaineWebber Master
Series, Inc. ("Corporation") (each an "Acquired Fund" and collectively, the
"Acquired Funds"), in connection with the solicitation of proxies by the Trust's
board of trustees and the Corporation's board of directors for use at a combined
special meeting of shareholders of the Acquired Funds, to be held on August 11,
1995, at 10:00 a.m. eastern time, and at any adjournment thereof ("Meeting").
As more fully described in the Proxy Statement, the primary purpose of the
Meeting is to vote on two proposed reorganizations (each a "Reorganization" and
collectively, the "Reorganizations"). In each Reorganization, PaineWebber Growth
Fund ("Growth Fund"), a series of the Trust, would acquire the assets of an
Acquired Fund in exchange solely for shares of beneficial interest in Growth
Fund and the assumption by Growth Fund of that Acquired Fund's liabilities.
Those Growth Fund shares then would be distributed to that Acquired Fund's
shareholders, by class, so that each such shareholder would receive a number of
full and fractional shares of the applicable class of Growth Fund having an
aggregate value that, on the effective date of the Reorganization, is equal to
the aggregate net asset value of the shareholder's shares of the corresponding
class in the Acquired Fund. As soon as practicable following these
distributions, each Acquired Fund will be terminated.
Growth Fund is a diversified series of the Trust, which is an open-end
management investment company comprised of two outstanding series (Growth Fund
and ComTech Growth Fund). Growth Fund's investment objective is long-term
capital appreciation. Growth Fund seeks to achieve its investment objective by
investing primarily in common stocks issued by companies that, in the judgment
of Growth Fund's investment adviser, have substantial potential for capital
growth.
This Proxy Statement, which should be retained for future reference, sets
forth concisely the information about each Reorganization and Growth Fund that a
shareholder should know before voting. This Proxy Statement is accompanied by
the Prospectus of Growth Fund dated January 1, 1995, and by its Annual Report to
Shareholders for the fiscal year ended August 31, 1994, which are incorporated
by this reference into this Proxy Statement. A Statement of Additional
Information dated January 1, 1995, including historical financial statements,
has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated herein by this reference. A Prospectus of ComTech Growth Fund dated
January 1, 1995, and Statements of Additional Information of Growth Fund and
ComTech Growth Fund, each dated January 1, 1995, have been filed with the SEC
and are incorporated herein by this reference. A Prospectus and Statement of
Additional Information of Blue Chip Growth Fund, each dated July 3, 1995, are
included in the registration statement of which this Proxy
<PAGE>
Statement is a part and are incorporated herein by this reference. Copies of
these documents, as well as each Acquired Fund's annual report, or semi-annual
report, if applicable, may be obtained without charge and further inquiries may
be made by contacting your investment executive at PaineWebber Incorporated
("PaineWebber") or PaineWebber's correspondent firms or by calling toll-free
1-800-647-1568.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
VOTING INFORMATION.................................................................... 1
APPROVAL OF THE REORGANIZATIONS....................................................... 3
SYNOPSIS.............................................................................. 3
COMPARATIVE FEE TABLES................................................................ 4
COMPARISON OF PRINCIPAL RISK FACTORS.................................................. 13
ADDITIONAL INFORMATION ABOUT GROWTH FUND.............................................. 20
MISCELLANEOUS......................................................................... 24
APPENDIX A--AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION WITH RESPECT TO BLUE
CHIP GROWTH FUND.................................................................... A-1
APPENDIX B--AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION WITH RESPECT TO
COMMUNICATIONS & TECHNOLOGY GROWTH FUND............................................. B-1
</TABLE>
<PAGE>
PAINEWEBBER COMMUNICATIONS & TECHNOLOGY GROWTH FUND
(A SERIES OF PAINEWEBBER OLYMPUS FUND)
PAINEWEBBER BLUE CHIP GROWTH FUND
(A SERIES OF PAINEWEBBER MASTER SERIES, INC.)
-------------------
PROSPECTUS/PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
AUGUST 11, 1995
-------------------
VOTING INFORMATION
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of PaineWebber Communications & Technology Growth Fund ("ComTech
Growth Fund"), a series of PaineWebber Olympus Fund ("Trust"), and PaineWebber
Blue Chip Growth Fund ("Blue Chip Growth Fund"), a series of PaineWebber Master
Series, Inc. ("Corporation") (each an "Acquired Fund" and collectively, the
"Acquired Funds"), in connection with the solicitation of proxies by the board
of trustees of the Trust and the board of directors of the Corporation (each a
"Board"), for use at a combined special meeting of shareholders of the Acquired
Funds to be held on August 11, 1995, and at any adjournment thereof ("Meeting").
This Proxy Statement will first be mailed to shareholders on or about July 10,
1995.
At least one-third of Blue Chip Growth Fund's shares, and a majority of
ComTech Growth Fund's shares, outstanding on June 26, 1995, represented in
person or by proxy, must be present for the transaction of business by that
Acquired Fund at the Meeting. If, with respect to either Acquired Fund, a quorum
is not present at the Meeting or a quorum is present but sufficient votes to
approve the proposal are not received, the persons named as proxies may propose
one or more adjournments of the Meeting with respect to that Acquired Fund to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares of the Acquired Fund represented
at the Meeting in person or by proxy. The persons named as proxies will vote
those proxies that they are entitled to vote FOR any such proposal in favor of
such an adjournment and will vote those proxies required to be voted AGAINST any
such proposal against such adjournment. A shareholder vote may be taken on one
or more of the proposals in this Proxy Statement prior to any such adjournment
if sufficient votes have been received and it is otherwise appropriate.
Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and the broker does not have discretionary voting
authority. Abstentions and broker non-votes will be counted as shares present
for purposes of determining whether a quorum is present but will not be voted
for or against any adjournment or proposal. Accordingly, abstentions and broker
non-votes effectively will be a vote against adjournment or against any proposal
where the required vote is a percentage of the shares present. Abstentions and
broker non-votes will not be counted, however, as votes cast for purposes of
determining whether sufficient votes have been received to approve a proposal.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your direction as indicated thereon if your proxy card is
received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you sign, date and return the proxy card, but give no
voting instructions, your shares will be voted in favor of approval of the
Agreement and Plan of Reorganization and Termination dated as of June 1, 1995
(each a "Reorganization Plan") that involves your Acquired Fund. The
Reorganization Plans are attached to this Proxy Statement as Appendices A and B.
Under each Reorganization Plan, PaineWebber Growth Fund ("Growth Fund"), a
series of the Trust, would
<PAGE>
acquire the assets of an Acquired Fund in exchange solely for shares of
beneficial interest in Growth Fund and the assumption by Growth Fund of that
Acquired Fund's liabilities; those shares then would be distributed to that
Acquired Fund's shareholders. (Each of these transactions is referred to herein
as a "Reorganization.") After completion of a Reorganization, the participating
Acquired Fund will be terminated.
In addition, if you sign, date and return the proxy card, but give no voting
instructions, the duly appointed proxies may, in their discretion, vote upon
such other matters as may come before the Meeting. The proxy card may be revoked
by giving another proxy or by letter or telegram revoking the initial proxy. To
be effective, such revocation must be received by the Trust or the Corporation,
as applicable, prior to the Meeting and must indicate your name and account
number. In addition, if you attend the Meeting in person you may, if you wish,
vote by ballot at the Meeting, thereby canceling any proxy previously given.
As of the record date, June 26, 1995 ("Record Date"), ComTech Growth Fund
had 6,170,626.32 shares of beneficial interest outstanding and Blue Chip Growth
Fund had 5,296,930.38 shares of common stock outstanding. The solicitation of
proxies, the cost of which will be borne by Growth Fund, ComTech Growth Fund and
Blue Chip Growth Fund (each a "Fund" and collectively, the "Funds") in
proportion to their respective net assets, will be made primarily by mail but
also may include telephone or oral communications by representatives of Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), who will not receive any
compensation therefor from the Funds, or by Shareholder Communications
Corporation, professional proxy solicitors retained by the Acquired Funds, who
will be paid fees and expenses of up to approximately $24,000 for soliciting
services. Management does not know of any person who owns beneficially 5% or
more of the shares of either Acquired Fund. Trustees and officers of the Trust
and directors and officers of the Corporation own in the aggregate less than 1%
of the shares of their respective Acquired Funds.
Summarized below are the proposals the shareholders of each Acquired Fund
are being asked to consider:
FUND PROPOSAL
- ---------------------- ----------------------------------
[S] [C]
ComTech Growth Fund To approve a Reorganization Plan.
Blue Chip Growth Fund To approve a Reorganization Plan.
For voting purposes, the shareholders of each Acquired Fund will vote only
on the Reorganization Plan applicable to it. Approval of a Reorganization Plan
and consummation of the transactions contemplated thereby for one Acquired Fund
does not depend on the approval of the other Reorganization Plan by the other
Acquired Fund's shareholders and consummation of the transactions contemplated
thereby.
Approval of the Reorganization Plan with respect to ComTech Growth Fund
requires the affirmative vote of a majority of the outstanding voting securities
of that Fund. As defined in the Investment Company Act of 1940 ("1940 Act"),
"majority of the outstanding voting securities" means the lesser of (1) 67% of
ComTech Growth Fund's shares present at a meeting of shareholders if the owners
of more than 50% of its shares then outstanding are present in person or by
proxy, or (2) more than 50% of its outstanding shares. Under Maryland law and
the Corporation's Amended and Restated Articles of Incorporation, the
affirmative vote of a majority of the outstanding shares of Blue Chip Growth
Fund entitled to vote at the Meeting is required to approve the Reorganization
Plan. Each outstanding full share of each Acquired Fund is entitled to one vote,
and each outstanding fractional share of each Acquired Fund is entitled to a
proportionate fractional share of one vote. If a Reorganization Plan is not
approved by the requisite vote of the shareholders of the involved Acquired
Fund, the persons named as proxies may propose one or more adjournments of the
Meeting to permit further solicitation of proxies. Although the shareholders of
the Acquired Funds may exchange or redeem out of a Fund, they do not have the
appraisal rights which may be accorded to shareholders of corporations that
propose similar types of reorganizations under the laws of some states.
2
<PAGE>
APPROVAL OF THE REORGANIZATIONS
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement, the prospectuses of the Funds (which are incorporated
herein by reference), and the Reorganization Plans. Shareholders should read
this Proxy Statement and the prospectus of Growth Fund carefully. As discussed
more fully below, the Boards believe that the proposed Reorganizations will
benefit their respective Acquired Fund's shareholders. Growth Fund has an
investment objective generally similar to that of ComTech Growth Fund, and Blue
Chip Growth Fund, although its investment strategy may differ from the Acquired
Funds' investment strategies in some material respects. It is anticipated that,
following the Reorganizations, each Acquired Fund's shareholders, as
shareholders of Growth Fund, will be subject to lower operating expenses as a
percentage of net assets.
THE REORGANIZATIONS
Each Board approved a Reorganization Plan with respect to its Acquired Fund
at a combined meeting of the Boards held on April 28, 1995. Each Reorganization
Plan provides for the acquisition by Growth Fund of the assets of an Acquired
Fund in exchange solely for shares of Growth Fund and the assumption by Growth
Fund of the liabilities of the Acquired Fund. Each Acquired Fund then will
distribute the Growth Fund shares to its shareholders, by class, so that each
shareholder will receive the number of full and fractional shares of the class
of Growth Fund that corresponds in terms of fees and other characteristics
("Corresponding Class") and that is equal in value to the value of such
shareholder's holdings in the Acquired Fund as of the Closing Date (defined
below). Each Acquired Fund then will be terminated as soon as practicable
thereafter.
The exchange of each Acquired Fund's assets for Growth Fund shares and
Growth Fund's assumption of its liabilities will occur at or as of 4:00 p.m.,
eastern time, on August 18, 1995, or on such later date as the conditions to the
closing are satisfied ("Closing Date").
Growth Fund currently offers for sale four classes of shares (each a "Class"
and collectively, "Classes"), designated as Class A, Class B, Class C and Class
D shares. Growth Fund will only issue Class A, Class B and Class D shares in
exchange for an Acquired Fund's assets; Class C shares will not be issued in the
Reorganizations. Each Acquired Fund has three Classes of shares, designated as
Class A, Class B and Class D shares, which are identical to the correspondingly
lettered Classes of Growth Fund's shares.
The rights and privileges of the former shareholders of each Class of an
Acquired Fund will be effectively unchanged by the Reorganizations. Accordingly,
the Reorganizations will have no effect on the holding period of Class B shares
of the Acquired Funds for purposes of calculating any applicable contingent
deferred sales charge ("CDSC") or the holding period for the conversion of Class
B shares into Class A shares. Similarly, the Reorganizations will have no effect
on the policies regarding the ability of investors to qualify for reduced or
waived sales charges, as currently in effect for the Acquired Funds.
For the reasons set forth below under "The Proposed Transactions--Reasons
for the Reorganizations," the Trust's Board (with respect to ComTech Growth
Fund) and the Corporation's Board (with respect to Blue Chip Growth Fund),
including the trustees and directors who are not "interested persons," as that
term is defined in the 1940 Act, of the Trust or the Corporation ("Independent
Persons"), have determined, in each instance, that the Reorganization is in the
best interests of the participating Acquired Fund, that the terms of the
Reorganization are fair and reasonable and that the interests of such Acquired
Fund's shareholders will not be diluted as a result of the Reorganization.
Accordingly, each Board recommends approval of the Reorganizations. In addition,
the Trust's board of
3
<PAGE>
trustees, including its Independent Persons, has determined that the
Reorganizations are in the best interests of Growth Fund, that the terms of the
Reorganizations are fair and reasonable and that the interests of Growth Fund's
shareholders will not be diluted as a result of the Reorganizations.
COMPARATIVE FEE TABLES
SHAREHOLDER TRANSACTION EXPENSES
The table below shows certain transaction fees and expenses for each Class
of shares that will be issued in the Reorganizations. These fees and expenses
are identical for each Fund and will remain the same if either one or both
Reorganizations are completed.
<TABLE>
<CAPTION>
ALL FUNDS
-----------------------------
<S> <C> <C> <C>
CLASS A CLASS B CLASS D
------- ------- -------
<CAPTION>
<S> <C> <C> <C>
Maximum sales charge (as a percentage of public offering price)..... 4.5% None None
Exchange fee........................................................ $5.00 $5.00 $5.00
Maximum contingent deferred sales charge (as a percentage of
redemption proceeds).............................................. None 5% None
</TABLE>
REORGANIZATION OF COMTECH GROWTH FUND INTO GROWTH FUND
The following table shows the current operating fees and expenses incurred
by the Class A, Class B and Class D shares of ComTech Growth Fund for the fiscal
period from November 2, 1993 (commencement of operations) to August 31, 1994,
and Growth Fund for the fiscal year ended August 31, 1994, and pro forma fees
for Growth Fund's Class A, Class B and Class D shares after giving effect to the
Reorganization.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
COMTECH GROWTH FUND GROWTH FUND
(FISCAL PERIOD 11/2/93 (FISCAL YEAR COMBINED FUND (ESTIMATED)
TO 8/31/94) ENDED 8/31/94)
------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A CLASS B CLASS D CLASS A CLASS B CLASS D CLASS A CLASS B CLASS D
------- ------- ------- ------- ------- ------- ------- ------- -------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees(1).................. 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
12b-1 Fees(2)....................... 0.25% 1.00% 1.00% 0.21% 1.00% 1.00% 0.23% 1.00% 1.00%
Other Expenses...................... 0.54% 0.53% 0.54% 0.25% 0.25% 0.23% 0.24% 0.26% 0.25%
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Fund Operating Expenses(3).... 1.54%* 2.28%* 2.29%* 1.21% 2.00% 1.98% 1.22% 2.01% 2.00%
------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
- ------------
* Annualized
(1) The management fees paid by each Fund to Mitchell Hutchins are higher than
the management fees paid by most funds.
(2) 12b-1 fees have two components, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
12b-1 service fee.................................... 0.25% 0.25% 0.25%
12b-1 distribution fee............................... 0.00% 0.75% 0.75%
</TABLE>
For the fiscal year ended August 31, 1994, Growth Fund Class A shareholders
paid a 12b-1 service fee of 0.21% of that Fund's average daily net assets,
which reflected a blended annual rate of 0.25% with respect to shares sold
on or after December 2, 1988, and 0.15% with respect to shares sold prior
to that date.
12b-1 distribution fees are asset-based sales charges. Long-term Class B
and Class D shareholders may pay more in direct and indirect sales charges
(including distribution fees) than the economic equivalent of the maximum
front-end sales charge permitted by The National Association of Securities
Dealers, Inc.
(3) For the twelve months ended February 28, 1995 (the period used for the
Combined Fund (Estimated) expenses), the ratios of total operating expenses
as a percentage of average net assets for ComTech Growth Fund were 1.64%,
2.39% and 2.41% for Class A, Class B and Class D shares, respectively, and
for Growth Fund were 1.25%, 2.02% and 2.02% for Class A, Class B and Class D
shares, respectively.
4
<PAGE>
EXAMPLE OF EFFECT OF FUND EXPENSES
The following illustrates the expenses on a $1,000 investment under the
existing and estimated fees and expenses stated above, assuming a 5% annual
return. The fees shown below reflect a maximum initial sales charge of 4.5% of
the public offering price that is charged in connection with the sale of each
Fund's Class A shares. No initial sales charge will be charged in connection
with Class A shares of Growth Fund distributed to Class A shareholders of the
Acquired Funds as part of the Reorganization.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
COMTECH GROWTH FUND
Class A shares......................... $ 60 $ 91 $125 $ 220
Class B shares:
Assuming complete redemption at end
of period(1)(2).................... $ 73 $ 101 $142 $ 226
Assuming no redemption(2)............ $ 23 $ 71 $122 $ 226
Class D shares......................... $ 23 $ 72 $123 $ 263
GROWTH FUND
Class A shares......................... $ 57 $ 82 $108 $ 185
Class B shares:
Assuming complete redemption at end
of period(1)(2).................... $ 70 $ 93 $128 $ 194
Assuming no redemption(2)............ $ 20 $ 63 $108 $ 194
Class D shares......................... $ 20 $ 62 $107 $ 231
COMBINED FUND
Class A shares......................... $ 57 $ 82 $109 $ 186
Class B shares:
Assuming complete redemption at end
of period(1)(2).................... $ 72 $ 96 $131 $ 195
Assuming no redemption(2)............ $ 20 $ 63 $108 $ 195
Class D shares......................... $ 20 $ 63 $108 $ 233
</TABLE>
- ------------
(1) Assumes deduction at the time of the redemption of the maximum applicable
CDSC.
(2) Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year.
This Example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund Operating
Expenses remain the same in the years shown. The above tables and the assumption
in the Example of a 5% annual return are required by regulations of the
Securities and Exchange Commission ("SEC"); the assumed 5% annual return is not
a prediction of, and does not represent, the projected or actual performance of
any Class of the Funds' shares.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND A FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The
actual expenses attributable to each Class of a Fund's shares will depend upon,
among other things, the level of average net assets and the extent to which a
Fund incurs variable expenses, such as transfer agency costs.
5
<PAGE>
REORGANIZATION OF BLUE CHIP GROWTH FUND INTO GROWTH FUND
The following table shows the current operating fees and expenses incurred
by the Class A, Class B and Class D shares of Blue Chip Growth Fund and Growth
Fund for the fiscal years ended February 28, 1995 and August 31, 1994,
respectively, and pro forma fees for Growth Fund's Class A, Class B and Class D
shares after giving effect to the Reorganization.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
BLUE CHIP GROWTH FUND GROWTH FUND
(FISCAL YEAR (FISCAL YEAR COMBINED FUND (ESTIMATED)
ENDED 2/28/95) ENDED 8/31/94)
------------------------- ------------------------- -------------------------
CLASS A CLASS B CLASS D CLASS A CLASS B CLASS D CLASS A CLASS B CLASS D
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees(1).................. 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
12b-1 Fees(2)....................... 0.25% 1.00% 1.00% 0.21% 1.00% 1.00% 0.23% 1.00% 1.00%
Other Expenses...................... 0.36% 0.37% 0.39% 0.25% 0.25% 0.23% 0.21% 0.24% 0.25%
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Fund Operating Expenses(3).... 1.36% 2.12% 2.14% 1.21% 2.00% 1.98% 1.19% 1.99% 2.00%
------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
- ------------
(1) The management fees paid by each Fund to Mitchell Hutchins are higher than
the management fees paid by most funds.
(2) 12b-1 fees have two components, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------- -------- --------
<S> <C> <C> <C>
12b-1 service fee................................. 0.25% 0.25% 0.25%
12b-1 distribution fee............................ 0.00% 0.75% 0.75%
</TABLE>
For the fiscal year ended August 31, 1994, Growth Fund Class A shareholders
paid a 12b-1 service fee of 0.21% of that Fund's average daily net assets,
which reflected a blended annual rate of 0.25% with respect to shares sold
on or after December 2, 1988, and 0.15% with respect to shares sold prior to
that date.
12b-1 distribution fees are asset-based sales charges. Long-term Class B and
Class D shareholders may pay more in direct and indirect sales charges
(including distribution fees) than the economic equivalent of the maximum
front-end sales charge permitted by The National Association of Securities
Dealers, Inc.
(3) For the twelve months ended February 28, 1995 (the period used for the
Combined Fund (Estimated) expenses), the ratios of total operating expenses
as a percentage of average net assets for Blue Chip Growth Fund were 1.36%,
2.12% and 2.14% for Class A, Class B and Class D shares, respectively, and
for Growth Fund were 1.25%, 2.02% and 2.02% for Class A, Class B and Class D
shares, respectively.
6
<PAGE>
EXAMPLE OF EFFECT OF FUND EXPENSES
The following illustrates the expenses on a $1,000 investment under the
existing and estimated fees and expenses stated above, assuming a 5% annual
return. The fees shown below reflect a maximum initial sales charge of 4.5% of
the public offering price that is charged in connection with the sale of each
Fund's Class A shares. No initial sales charge will be charged in connection
with Class A shares of Growth Fund distributed to Class A shareholders of the
Acquired Funds as part of the Reorganization.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
BLUE CHIP GROWTH FUND
Class A shares......................... $ 58 $86 $116 $ 201
Class B shares:
Assuming complete redemption at end
of period(1)(2).................... $ 72 $96 $134 $ 208
Assuming no redemption(2)............ $ 22 $66 $114 $ 208
Class D shares......................... $ 22 $67 $115 $ 247
GROWTH FUND
Class A shares......................... $ 57 $82 $108 $ 185
Class B shares:
Assuming complete redemption at end
of period(1)(2).................... $ 70 $93 $128 $ 194
Assuming no redemption(2)............ $ 20 $63 $108 $ 194
Class D shares......................... $ 20 $62 $107 $ 231
COMBINED FUND
Class A shares......................... $ 57 $81 $107 $ 183
Class B shares:
Assuming complete redemption at end
of period(1)(2).................... $ 72 $95 $130 $ 192
Assuming no redemption(2)............ $ 20 $62 $107 $ 192
Class D shares......................... $ 20 $63 $108 $ 233
</TABLE>
- ------------
(1) Assumes deduction at the time of the redemption of the maximum applicable
CDSC.
(2) Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year.
This Example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund Operating
Expenses remain the same in the years shown. The above tables and the assumption
in the Example of a 5% annual return are required by regulations of the SEC; the
assumed 5% annual return is not a prediction of, and does not represent, the
projected or actual performance of any Class of the Funds' shares.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND A FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The
actual expenses attributable to each Class of a Fund's shares will depend upon,
among other things, the level of average net assets and the extent to which a
Fund incurs variable expenses, such as transfer agency costs.
7
<PAGE>
REORGANIZATIONS OF COMTECH GROWTH FUND AND BLUE CHIP GROWTH FUND INTO GROWTH
FUND
The following table shows the current operating fees and expenses incurred
by the Class A, Class B and Class D shares of ComTech Growth Fund for the fiscal
period from November 2, 1993 (commencement of operations) to August 31, 1994,
Growth Fund for the fiscal year ended August 31, 1994, and Blue Chip Growth Fund
for the fiscal year ended February 28, 1995, and pro forma fees for Growth
Fund's Class A, Class B and Class D shares after giving effect to the
Reorganizations.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
COMTECH GROWTH FUND BLUE CHIP GROWTH FUND GROWTH FUND
(FISCAL PERIOD (FISCAL YEAR (FISCAL YEAR
11/2/93 TO 8/31/94) ENDED 2/28/95) ENDED 8/31/94)
--------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS D CLASS A CLASS B CLASS D CLASS A CLASS B CLASS D
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees(1)....................... 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
12b-1 Fees(2)............................ 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.21% 1.00% 1.00%
Other Expenses........................... 0.54% 0.53% 0.54% 0.36% 0.37% 0.39% 0.25% 0.25% 0.23%
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Fund Operating Expenses(3)...... 1.54%* 2.28%* 2.29%* 1.36% 2.12% 2.14% 1.21% 2.00% 1.98%
------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- -------
<CAPTION>
COMBINED FUND (ESTIMATED)
---------------------------
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
Management Fees(1)....................... 0.75% 0.75% 0.75%
12b-1 Fees(2)............................ 0.23% 1.00% 1.00%
Other Expenses........................... 0.22% 0.24% 0.24%
------- ------- -------
Total Fund Operating Expenses(3)...... 1.20% 1.99% 1.99%
------- ------- -------
------- ------- -------
</TABLE>
- ------------
* Annualized
(1) The management fees paid by each Fund to Mitchell Hutchins are higher than
the management fee paid by most funds.
(2) 12b-1 fees have two components, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
----------- ------- -------
<S> <C> <C> <C>
12b-1 service fee............................................................... up to 0.25% 0.25% 0.25%
12b-1 distribution fee.......................................................... 0.00% 0.75% 0.75%
</TABLE>
For the fiscal year ended August 31, 1994, Growth Fund Class A shareholders
paid a 12b-1 service fee of 0.21% of that Fund's average daily net assets,
which reflected a blended annual rate of 0.25% with respect to shares sold
on or after December 2, 1988, and 0.15% with respect to shares sold prior to
that date.
12b-1 distribution fees are asset-based sales charges. Long-term Class B and
Class D shareholders may pay more in direct and indirect sales charges
(including distribution fees) than the economic equivalent of the maximum
front-end sales charge permitted by The National Association of Securities
Dealers, Inc.
(3) For the twelve months ended February 28, 1995 (the period used for the
Combined Fund (Estimated) expenses), the ratios of total operating expenses
as a percentage of average net assets for Blue Chip Growth Fund were 1.36%,
2.12% and 2.14% for Class A, Class B and Class D shares, respectively, for
ComTech Growth Fund were 1.64%, 2.39% and 2.41% for Class A, Class B and D
shares, respectively, and for Growth Fund were 1.25%, 2.02% and 2.02% for
Class A, Class B and Class D shares, respectively.
8
<PAGE>
EXAMPLE OF EFFECT OF FUND EXPENSES
The following illustrates the expenses on a $1,000 investment under the
existing and estimated fees and expenses stated above, assuming a 5% annual
return. The fees shown below reflect a maximum initial sales charge of 4.5% of
the public offering price that is charged in connection with the sale of each
Fund's Class A shares. No initial sales charge will be charged in connection
with Class A shares of Growth Fund distributed to Class A shareholders of the
Acquired Funds as part of the Reorganizations.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
COMTECH GROWTH FUND
Class A shares......................... $ 60 $ 91 $125 $ 220
Class B shares:
Assuming complete redemption at end
of period(1)(2).......................... $ 73 $ 101 $142 $ 226
Assuming no redemption(2)............ $ 23 $ 71 $122 $ 226
Class D shares......................... $ 23 $ 72 $123 $ 263
BLUE CHIP GROWTH FUND
Class A shares......................... $ 58 $ 86 $116 $ 201
Class B shares:
Assuming complete redemption at end
of period(1)(2).......................... $ 72 $ 96 $134 $ 208
Assuming no redemption(2)............ $ 22 $ 66 $114 $ 208
Class D shares......................... $ 22 $ 67 $115 $ 247
GROWTH FUND
Class A shares......................... $ 57 $ 82 $108 $ 185
Class B shares:
Assuming complete redemption at end
of period(1)(2).......................... $ 70 $ 93 $128 $ 194
Assuming no redemption(2)............ $ 20 $ 63 $108 $ 194
Class D shares......................... $ 20 $ 62 $107 $ 231
COMBINED FUND
Class A shares......................... $ 57 $ 81 $108 $ 184
Class B shares:
Assuming complete redemption at end
of period(1)(2).......................... $ 72 $ 95 $130 $ 193
Assuming no redemption(2)............ $ 20 $ 62 $107 $ 193
Class D shares......................... $ 20 $ 62 $107 $ 232
</TABLE>
- ------------
(1) Assumes deduction at the time of the redemption of the maximum applicable
CDSC.
(2) Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year.
This Example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund Operating
Expenses remain the same in the years shown. The above tables and the assumption
in the Example of a 5% annual return are required by regulations of the SEC; the
assumed 5% annual return is not a prediction of, and does not represent, the
projected or actual performance of any Class of the Funds' shares.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND A FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The
actual expenses attributable to each Class of a Fund's shares will depend upon,
among other things, the level of average net assets and the extent to which a
Fund incurs variable expenses, such as transfer agency costs.
9
<PAGE>
FORMS OF ORGANIZATION
The Trust is an open-end management investment company organized as a
Massachusetts business trust, and Growth Fund, its initial series, commenced
operations on March 18, 1985. ComTech Growth Fund, the other series of the
Trust, commenced operations on November 2, 1993. The Corporation is an open-end
management investment company organized as a Maryland corporation, and Blue Chip
Growth Fund, one of its series, commenced operations on July 18, 1986.
ComTech Growth Fund and Blue Chip Growth Fund each offers three Classes of
shares, designated as Class A, Class B and Class D shares, and Growth Fund
offers four Classes of shares, designated as Class A, Class B, Class C and Class
D shares. The Trust's Declaration of Trust authorizes the trustees to issue an
unlimited number of each Class of Growth Fund's and ComTech Growth Fund's shares
of beneficial interest, par value $.001 per share. The Corporation is authorized
to issue ten billion shares, three billion of which have been designated as Blue
Chip Growth Fund shares and are classified as Class A, Class B and Class D
shares (one billion shares each). As a Massachusetts business trust, the Trust
is not required to (and does not) hold annual shareholder meetings. As a
Maryland corporation operating as an open-end investment company, the
Corporation is also not required to (and does not) hold annual shareholder
meetings. None of the Funds currently issue share certificates.
Although shareholders of a Massachusetts business trust may, under certain
circumstances, be held personally liable for its obligations, the Trust's
Declaration of Trust expressly disclaims, and provides indemnification against,
such liability. Accordingly, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which
Growth Fund or ComTech Growth Fund itself would be unable to meet its
obligations, a possibility that Mitchell Hutchins believes is remote and, thus,
does not pose a material risk.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each Fund are set forth below.
Growth Fund has an investment objective generally similar to that of ComTech
Growth Fund and Blue Chip Growth Fund, although its investment strategy may
differ from the Acquired Funds' investment strategies in some material respects.
There can be no assurance that any Fund will achieve its investment objective,
and each Fund's net asset value ("NAV") fluctuates based upon changes in the
value of its portfolio securities.
GROWTH FUND. The investment objective of Growth Fund is to provide long-term
capital appreciation. The Fund seeks to achieve its objective by investing
primarily in common stocks issued by companies that, in the judgment of Mitchell
Hutchins, have substantial potential for capital growth. Under normal
circumstances, at least 65% of its assets are invested in common stocks. The
Fund may invest up to 35%, and for temporary purposes more than 35%, of its
assets in U.S. government securities and convertible and non-convertible debt
securities. The Fund may invest in debt securities rated as low as B+ by
Standard & Poor's Ratings Group ("S&P"), B1 by Moody's Investors Service, Inc.
("Moody's"), comparably rated by another nationally recognized statistical
rating organization ("NRSRO") or, if unrated, determined by Mitchell Hutchins to
be of comparable quality.
COMTECH GROWTH FUND. The investment objective of ComTech Growth Fund is
long-term capital appreciation. The Fund seeks to achieve this objective by
investing in equity securities of companies primarily engaged in communications
or technology, including companies primarily engaged in new information
technology development or information production, distribution or use. Under
normal circumstances, the Fund invests at least 65% of its total assets in the
equity securities of such companies. The Fund may invest up to 35% of its total
assets in equity securities of other companies (including companies that will
benefit from these new technologies, such as companies in the financial
services, retailing and health care industries) as well as convertible debt
securities, convertible preferred stocks, U.S. government securities, corporate
debt securities and money market instruments. The Fund may invest in debt
securities rated as low as B+ by S&P, B1 by Moody's, comparably rated by another
NRSRO or, if unrated, determined by Mitchell Hutchins to be of comparable
quality.
10
<PAGE>
BLUE CHIP GROWTH FUND. The investment objective of Blue Chip Growth Fund is
capital appreciation. The Fund seeks to achieve this objective by investing
principally in equity securities of large, established U.S. companies with
market capitalization of at least $300 million. At least 65% of the Fund's
assets normally are invested in such securities. The Fund may invest up to 35%
of its assets in other equity securities, including stocks of companies with
lower market capitalization levels, convertible securities, debt securities of
U.S. companies and debt obligations and mortgage-backed securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities. The Fund
may invest in debt securities that at the time of purchase are rated at least
BBB by S&P, Baa by Moody's, comparably rated by another NRSRO or, if unrated,
determined by Mitchell Hutchins to be of comparable quality.
OTHER POLICIES OF THE FUNDS. Each Fund may invest up to 25% of its total
assets in U.S. dollar-denominated securities of foreign issuers that are traded
on recognized U.S. exchanges or in the U.S. over-the-counter market. The Funds
may also use options and futures contracts. In addition, Growth Fund and Blue
Chip Growth Fund each may invest up to 10% of its net assets in illiquid
securities; ComTech Growth Fund may invest up to 15% of its net assets in
illiquid securities.
OPERATIONS OF GROWTH FUND FOLLOWING THE REORGANIZATIONS
There are differences in the investment objective (with respect to Blue Chip
Growth Fund) and some of the investment policies of the Funds. It is not
expected, however, that Growth Fund will revise its investment objective or
policies following the Reorganizations to reflect those of either Acquired Fund.
Mitchell Hutchins believes that most, if not all, of the assets held by the
Acquired Funds will be consistent with the investment policies of Growth Fund
and thus could be transferred to and held by Growth Fund if the Reorganizations
are approved. If the Reorganizations are approved, the Acquired Funds will sell
any assets that are inconsistent with the investment policies of Growth Fund
prior to the effective time of the Reorganizations, and the proceeds thereof
will be held in temporary investments or reinvested in assets that qualify to be
held by Growth Fund. The need for the Acquired Funds to dispose of assets prior
to the effective time of the Reorganizations may result in selling securities at
a disadvantageous time and could result in an Acquired Fund's realizing losses
that would not otherwise have been realized.
After the Reorganizations, the trustees and officers of the Trust and Growth
Fund's investment adviser, distributor, exclusive dealer and other outside
agents will continue to serve Growth Fund in their current capacities. In
addition, Ellen R. Harris, who currently is primarily responsible for the day-
to-day portfolio management of Growth Fund, will continue to be primarily
responsible for such portfolio management following the Reorganizations.
PURCHASES AND REDEMPTIONS
Shares of each Fund are available through PaineWebber Incorporated
("PaineWebber") and its correspondent firms or, for investors who are not
clients of PaineWebber, through each Fund's transfer agent, PFPC Inc. ("Transfer
Agent"). The minimum initial investment in each Fund is $1,000; each additional
investment must be $100 or more. These minimums may be waived or reduced for
investments by employees of PaineWebber or its affiliates, certain pension plans
and retirement accounts and participants in a Fund's automatic investment plan.
The Class A shares of each Fund are sold subject to a maximum initial sales
charge of 4.5%. The Class A shares of Growth Fund that will be distributed to
Class A shareholders of the Acquired Funds will not be subject to an initial
sales charge. Class B shares are sold subject to a maximum CDSC of 5% of
redemption proceeds, which declines to zero after six years, when Class B shares
automatically convert into Class A shares. The Class D shares of each Fund are
sold without initial sales charges or CDSCs.
Clients of PaineWebber or its correspondent firms may redeem shares held in
non-certificate form through PaineWebber or those firms; all other shareholders
must redeem through the Transfer Agent.
11
<PAGE>
Shares of each Class of each Fund may be redeemed at their particular NAV
(subject to any applicable CDSC), and redemption proceeds for shares redeemed
through PaineWebber and its correspondent firms will be paid within three
Business Days of the receipt of a redemption request. A "Business Day" is any
day, Monday through Friday, on which the New York Stock Exchange, Inc. ("NYSE")
is open for business. Redemption proceeds for shares redeemed through the
Transfer Agent will be paid within seven days.
Following the Reorganizations, the Class B shares of Growth Fund received
pursuant to the Reorganizations by former shareholders of Class B shares of an
Acquired Fund would remain subject to the maximum 5% CDSC and six-year schedule
of reducing CDSCs in effect prior to the Reorganizations. New purchases of Class
A, Class B and Class D shares of Growth Fund by any shareholders would be
subject to their terms, including, for example, for Class A shares, the 4.5%
initial sales charge. As is currently the case for each Fund, no CDSC will be
applied to redemptions of Class B shares that represent reinvested dividends or
other distributions, nor will Class A shares so acquired be subject to any
initial sales charge.
If a Reorganization is approved with respect to an Acquired Fund, purchases
of all Classes of its shares will cease on August 11, 1995, so that its shares
will no longer be available for purchase or exchange starting on August 14, 1995
(the next Business Day). If the Meeting with respect to an Acquired Fund is
adjourned and the Reorganization involving it is approved on a later date, its
shares will no longer be available for purchase or exchange on the Business Day
following the date on which the Reorganization is approved and all contingencies
have been met. Redemptions of the Acquired Fund's shares and exchanges of such
shares for shares of other PaineWebber or Mitchell Hutchins/Kidder, Peabody
("MH/KP") funds may be effected through the Closing Date.
EXCHANGES
Shares of each Fund may be exchanged for shares of the Corresponding Class
of other PaineWebber and MH/KP funds, and shares of each Fund may be acquired
through an exchange of shares of the Corresponding Class of other PaineWebber or
MH/KP funds, as provided in the prospectus of each Fund. No initial sales charge
will be imposed on the shares being acquired, and no CDSC will be imposed on the
shares being disposed of, through an exchange. However, a CDSC may apply to
redemptions of a PaineWebber fund's Class B shares acquired through an exchange.
Exchanges may be subject to minimum investment and other requirements of the
fund into which exchanges are made. The $5.00 service fee currently imposed on
each exchange of shares of an Acquired Fund for shares of any other PaineWebber
or MH/KP fund will be waived on such exchanges until the Closing Date.
DIVIDENDS AND OTHER DISTRIBUTIONS
Dividends from each Fund's net investment income, if any, are distributed
annually. Any net capital gain (the excess of net long-term capital gain over
net short-term capital loss) and net short-term capital gain realized from the
sale of portfolio securities are also distributed annually. Shareholders of each
Fund may reinvest dividends and other distributions in additional shares on the
payment date at those shares' NAV that day or receive them in cash. Each Fund
may make additional distributions if necessary to avoid a 4% excise tax on
certain undistributed ordinary income and capital gain.
On or before the Closing Date, each Acquired Fund will declare as a
distribution substantially all of its net investment income, net capital gain
and net short-term capital gain in order to maintain its tax status as a
regulated investment company. Each Acquired Fund will pay these distributions
only in cash. Growth Fund also may declare and distribute as a dividend to its
shareholders, on or before the Closing Date, substantially all of any previously
undistributed net investment income.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATIONS
Each of the Corporation and the Trust has received an opinion of Kirkpatrick
& Lockhart LLP, its counsel, to the effect that the Reorganization involving its
Fund will constitute a tax-free reorganization within the meaning of section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended
12
<PAGE>
("Code"). Accordingly, no gain or loss will be recognized to any of the Funds or
their shareholders as a result of the Reorganizations. See "The Proposed
Transactions--Federal Income Tax Considerations," page 18.
COMPARISON OF PRINCIPAL RISK FACTORS
Because Growth Fund's investment objective and policies are generally
similar to those of the Acquired Funds, the investment risks of all three Funds
are those typically associated with investing in a growth fund. As described
below, however, an investment in Growth Fund presents somewhat greater risks
than an investment in Blue Chip Growth Fund because Growth Fund does not limit
its investments in equity securities to those of issuers with a minimum market
capitalization of at least $300 million and may invest up to 35% of its assets
in debt securities rated below investment grade. Also, because Growth Fund does
not invest primarily in the equity securities of companies primarily engaged in
communications or technology, its shares will not be affected by economic and
regulatory developments in those industries to as great an extent as is the case
for the shares of ComTech Growth Fund. See the prospectus of Growth Fund, which
accompanies this Proxy Statement, for a more detailed discussion of such risks.
EQUITY SECURITIES. Each Fund invests, under normal conditions, at least 65%
of its total assets in equity securities. In the case of Growth Fund, these
equity securities consist of common stocks issued by companies that, in the
judgement of Mitchell Hutchins, have substantial potential for capital growth
and no minimum market capitalization or other requirement relating to size is
imposed on these investments. Blue Chip Growth Fund, however, with respect to
65% of its assets, normally invests in equity securities of large established
U.S. companies with market capitalizations of at least $300 million and that
Mitchell Hutchins considers to be "blue chip." Because Growth Fund may invest to
a greater extent in equity securities of smaller, less established issuers, its
shares are subject to greater risk than those of Blue Chip Growth Fund.
Under normal circumstances, ComTech Growth Fund invests at least 65% of its
total assets in the equity securities of companies primarily engaged in
communications and technology, including companies primarily engaged in
information production, distribution or use (including content owners, content
providers, content distributors and content subscribers), as well as new
information technology development companies. This emphasis subjects the shares
of ComTech Growth Fund to greater risk than the shares of a fund that is not so
limited, and in particular the NAV of its shares is affected by economic and
regulatory developments in those industries. Growth Fund does not similarly
limit its investments and so is not subject to as great a degree to the risks of
concentrating investments in a single group of related industries.
DEBT SECURITIES. Each Fund may invest up to 35% of its assets in debt
securities that will be subject to credit risk and the inverse relationship
between market prices and interest rates; that is, when interest rates rise, the
prices of such securities tend to decline, and conversely, when interest rates
fall, prices tend to rise. Blue Chip Growth Fund is permitted to purchase only
investment grade debt securities. Debt securities rated Baa by Moody's or BBB by
S&P are investment grade, although Moody's considers securities rated Baa to
have speculative characteristics. Growth Fund and ComTech Growth Fund each is
permitted to invest up to 35% of its total assets in debt securities rated as
low as B+ by S&P, B1 by Moody's or comparably rated by another NRSRO. These
securities are deemed by those NRSROs to be predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal and may
involve major risk exposure to adverse conditions. Such securities are commonly
referred to as "junk bonds." Accordingly, an investment in Growth Fund involves
greater risks than one in Blue Chip Growth Fund because Growth Fund may invest
up to 35% of its assets in debt securities rated below investment grade.
13
<PAGE>
These lower-rated debt securities generally offer a higher current yield
than that available for higher-grade issues, but they involve higher risks,
since they are especially subject to adverse changes in general economic
conditions and in the industries in which the issuers are engaged, to changes in
the financial condition of the issuers and to price fluctuations in response to
changes in interest rates. During periods of economic downturn or rising
interest rates, highly leveraged issuers may experience financial stress that
could adversely affect their ability to make payments of interest and principal
and increase the possibility of default. In addition, such issuers may not have
more traditional methods of financing available to them and may be unable to
repay debt at maturity by refinancing. The risk of loss due to default by such
issuers is significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior indebtedness.
The market for lower-rated debt securities has expanded rapidly in recent
years, and its growth paralleled a long economic expansion. In the past, the
prices of many lower-rated debt securities declined substantially, reflecting an
expectation that many issuers of such securities might experience financial
difficulties. As a result, the yields on lower-rated debt securities rose
dramatically. However, such higher yields did not reflect the value of the
income stream that holders of such securities expected, but rather the risk that
holders of such securities could lose a substantial portion of their investment
as a result of the issuers' financial restructuring or default. There can be no
assurance that such declines will not recur. The market for lower-rated debt
issues generally is thinner and less active than that for higher-quality
securities, which may limit a Fund's ability to sell such securities at fair
value in response to changes in the economy or financial markets. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of lower-rated securities,
especially in a thinly traded market.
U.S. DOLLAR-DENOMINATED FOREIGN SECURITIES. Each Fund may invest in U.S.
dollar-denominated securities of foreign issuers. Such securities in which the
Funds may invest may involve special risks, arising both from political and
economic developments abroad and differences between foreign and U.S. regulatory
systems. Foreign securities may be less liquid and their prices more volatile
than comparable U.S. securities. The prices of these securities may also be
affected by fluctuations in the values of foreign currencies.
HEDGING STRATEGIES. Each Fund may use options and futures contracts for
hedging purposes. There can be no assurance, however, that any hedging strategy
utilizing these instruments will succeed. If Mitchell Hutchins incorrectly
forecasts interest rates, market values or other economic factors in utilizing a
hedging strategy for a Fund, the Fund would be in a better position had it not
hedged at all. The use of these strategies involves certain special risks,
including (1) the fact that skills needed to use hedging instruments are
different from those needed to select the Funds' securities, (2) possible
imperfect correlation, or even no correlation, between price movements of
hedging instructions and price movements of the investments being hedged, (3)
the fact that, while hedging strategies can reduce the risk of loss, they can
also reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in hedged investments, and (4) the possible inability
of a Fund to purchase or sell a portfolio security at a time that otherwise
would be favorable for it to do so, or the possible need for a Fund to sell a
portfolio security at a disadvantageous time, due to the need for the Fund to
maintain "cover" or to segregate securities in connection with hedging
transactions and the possible inability of a Fund to close out or to liquidate
its hedged position.
14
<PAGE>
THE PROPOSED TRANSACTIONS
REORGANIZATION PLANS
The terms and conditions under which the proposed transactions may be
consummated are set forth in the Reorganization Plans. Significant provisions of
the Reorganization Plans are summarized below; however, this summary is
qualified in its entirety by reference to the Reorganization Plans, which are
attached as Appendices A and B to this Proxy Statement.
Each Reorganization Plan contemplates (a) Growth Fund's acquiring on the
Closing Date the assets of an Acquired Fund in exchange solely for its shares
and its assumption of the Acquired Fund's liabilities and (b) the constructive
distribution of such shares to the shareholders of the Acquired Fund.
The assets of each Acquired Fund to be acquired by Growth Fund include all
cash, cash equivalents, securities, receivables and other property owned by the
Acquired Fund. Growth Fund will assume from each Acquired Fund all debts,
liabilities, obligations and duties of the Fund of whatever kind or nature;
provided, however, that each Acquired Fund will use its best efforts, to the
extent practicable, to discharge all of its known debts, liabilities,
obligations and duties prior to the Closing Date. Growth Fund also will deliver
its shares to each Acquired Fund, which then will be constructively distributed
to the Acquired Fund's shareholders.
The value of an Acquired Fund's assets to be acquired, and the amount of its
liabilities to be assumed, by Growth Fund and the NAV of a Class A, a Class B
and a Class D share of Growth Fund will be determined as of the close of regular
trading on the NYSE on the Closing Date. Where market quotations are readily
available, portfolio securities will be valued based upon such market
quotations, provided such quotations adequately reflect, in Mitchell Hutchins'
judgment, the fair value of the security. Where such market quotations are not
readily available, such securities will be valued based upon appraisals received
from a pricing service using a computerized matrix system or based upon
appraisals derived from information concerning the security or similar
securities received from recognized dealers in those securities. The amortized
cost method of valuation generally will be used to value debt instruments with
60 days or less remaining to maturity, unless the Corporation's board of
directors (with respect to Blue Chip Growth Fund) or the Trust's board of
trustees (with respect to Growth Fund and ComTech Growth Fund) determines that
this does not represent fair value. All other securities and assets will be
valued at fair value as determined in good faith by or under the direction of
the respective Boards.
On, or as soon as practicable after, the Closing Date, each Acquired Fund
will distribute to its shareholders of record the shares of Growth Fund it
received, by Class, so that each Acquired Fund shareholder will receive a number
of full and fractional shares of the Corresponding Class or Classes of Growth
Fund shares equal in value to the shareholder's holdings in the Acquired Fund;
each Acquired Fund will be terminated as soon as is practicable thereafter. Such
distribution will be accomplished by opening accounts on the books of Growth
Fund in the names of the Acquired Fund shareholders and by transferring thereto
the shares of each Class previously credited to the account of each Acquired
Fund on those books. Fractional shares in each Class of Growth Fund will be
rounded to the third decimal place.
Accordingly, immediately after each Reorganization, each former shareholder
of the participating Acquired Fund will own shares of the Class of Growth Fund
that will equal the value of that shareholder's shares of the Corresponding
Class of the Acquired Fund immediately prior to the Reorganization. Moreover,
because shares of each Class of Growth Fund will be issued at NAV in exchange
for the net assets applicable to the Corresponding Class of each Acquired Fund,
the aggregate value of shares of each Class of Growth Fund so issued will equal
the aggregate value of shares of the Corresponding Class of the Acquired Funds.
The NAV per share of Growth Fund will be unchanged by the transactions. Thus,
the Reorganizations will not result in a dilution of any shareholder interest.
15
<PAGE>
Any transfer taxes payable upon issuance of shares of Growth Fund in a name
other than that of the registered holder of the shares on the books of an
Acquired Fund shall be paid by the person to whom such shares are to be issued
as a condition of such transfer. Any reporting responsibility of an Acquired
Fund will continue to be its responsibility up to and including the Closing Date
and such later date on which such Fund is terminated.
The cost of the Reorganizations, including professional fees and the cost of
soliciting proxies for the Meeting, consisting principally of printing and
mailing expenses, together with the cost of any supplementary solicitation, will
be borne by the Funds in proportion to their respective net assets. This method
of allocation will result in Growth Fund's bearing the greatest part of the
Reorganization costs. Mitchell Hutchins recommended this method of expense
allocation to the Boards. Mitchell Hutchins based its recommendations on its
belief that the method is fair because, for the reasons discussed under "Reasons
for the Reorganizations," the Reorganizations have the potential to benefit all
Funds. The Boards considered the expense allocation method in approving the
Reorganizations and in finding that the Reorganizations are in the best
interests of their respective Funds.
The consummation of each Reorganization is subject to a number of conditions
set forth in its Reorganization Plan, some of which may be waived by an Acquired
Fund. In addition, the Reorganization Plans may be amended in any mutually
agreeable manner, except that no amendment may be made subsequent to the Meeting
that would have a material adverse effect on the shareholders' interests.
REASONS FOR THE REORGANIZATIONS
The Trust's Board, including a majority of its Independent Persons, has
determined that the Reorganization involving ComTech Growth Fund is in the best
interests of ComTech Growth Fund, that the terms of the Reorganization are fair
and reasonable and that the interests of ComTech Growth Fund's shareholders will
not be diluted as a result of the Reorganization. The Corporation's Board,
including a majority of its Independent Persons, has determined that the
Reorganization is in the best interests of Blue Chip Growth Fund, that the terms
of the Reorganization are fair and reasonable and that the interests of Blue
Chip Growth Fund's shareholders will not be diluted as a result of the
Reorganization. In addition, the Trust's Board, including a majority of its
Independent Persons, has concluded that the Reorganizations are in the best
interests of Growth Fund, that the terms of the Reorganizations are fair and
reasonable and that the interests of Growth Fund's shareholders will not be
diluted as a result of the Reorganizations.
In considering the Reorganizations, the Boards made an extensive inquiry
into a number of factors, including the following:
(1) the compatibility of the investment objectives, policies and
restrictions of the Funds;
(2) the investment performance of the Funds;
(3) the effect of the Reorganizations on the expense ratio of Growth
Fund relative to each Fund's current expense ratio;
(4) the costs to be incurred by each Fund as a result of the
Reorganizations;
(5) the tax consequences of the Reorganizations;
(6) possible alternatives to the Reorganizations, including continuing
to operate on a stand-alone basis or liquidation; and
(7) the potential benefits of the Reorganizations to other persons,
especially Mitchell Hutchins and PaineWebber.
16
<PAGE>
The Reorganizations were recommended to the Boards by Mitchell Hutchins at a
combined meeting of the Boards held on April 28, 1995. In considering the
proposed transactions, the Boards were advised by Mitchell Hutchins that,
because Growth Fund has greater net assets than each Acquired Fund, combining
the Funds would reduce the expenses borne by the shareholders of each Acquired
Fund as a percentage of net assets. The Boards were further advised that the
expenses of Growth Fund would also be likely to decrease if, as a result of the
Reorganizations, the combined Fund experienced increased sales of its shares.
In recommending the Reorganizations, Mitchell Hutchins advised the Boards
that the Funds have generally similar investment objectives and policies, with
the material differences noted. Mitchell Hutchins also noted its belief that
there was no reason to maintain three Funds with substantially similar
investment objectives, two of which also have substantially similar investment
portfolios. In approving the proposed transactions, the Boards took account of
the opinion that Growth Fund's overall objective of seeking long-term capital
appreciation by investing primarily in common stocks remains an appropriate one
to offer to investors as part of an overall investment strategy. The Boards also
considered the fact that the investment objectives and policies of the Funds are
sufficiently compatible, that the Reorganizations would not require any basic
changes in Growth Fund's policies and that the risk profile of Growth Fund is
substantially the same as that of Blue Chip Growth Fund and may be an
improvement compared to the risk profile of ComTech Growth Fund.
Mitchell Hutchins further advised the Boards that, while past performance is
no guarantee of future results, Growth Fund had experienced better investment
performance than either Acquired Fund during the recent time period. Mitchell
Hutchins also advised the Boards that it did not expect to receive any immediate
direct benefits from the Reorganizations, because the compensation that would be
received by it as investment adviser to the combined Fund would be the same as
the aggregate compensation it receives from the three Funds currently, assuming
no change in aggregate net assets. However, Mitchell Hutchins noted that it
could benefit in the future if the combined Fund's assets grow faster than would
be the case for the three separate Funds in the absence of the Reorganizations.
THE BOARDS OF TRUSTEES/DIRECTORS
RECOMMEND THAT THE SHAREHOLDERS OF THE
ACQUIRED FUNDS VOTE "FOR" THE REORGANIZATIONS
DESCRIPTION OF SECURITIES TO BE ISSUED
The Trust is registered with the SEC as an open-end management investment
company. Its trustees are authorized to issue an unlimited number of shares of
beneficial interest of separate series (par value $.001 per share). The trustees
have established Growth Fund as one of its two series and have authorized the
public offering of four Classes of shares of Growth Fund. Each share in a Class
represents an equal proportionate interest in Growth Fund with each other share
in that Class. Shares of Growth Fund entitle their holders to one vote per full
share and fractional votes for fractional shares held, except that each Class of
shares has exclusive voting rights on matters pertaining to its plan of
distribution.
On the Closing Date, Growth Fund will have outstanding four Classes of
shares, designated Class A, Class B, Class C and Class D shares. Only Class A,
Class B and Class D shares will be issued as part of the Reorganizations. Each
Class represents interests in the same assets of the Fund. The Classes differ as
follows: (1) each Class has exclusive voting rights on matters pertaining to its
plan of distribution; (2) Class A shares are subject to an initial sales charge;
(3) Class B shares bear ongoing distribution fees, are subject to a CDSC upon
certain redemptions and automatically convert to Class A shares approximately
six years after issuance; (4) Class C shares have no initial sales charge or
CDSC, bear no service or distribution fees and may be purchased only by certain
categories of purchasers; (5)
17
<PAGE>
Class D shares are subject to neither an initial sales charge nor a CDSC, bear
ongoing distribution fees and do not convert to another Class; and (6) each
Class may bear differing amounts of certain Class-specific expenses. Each share
of each Class of Growth Fund is entitled to participate equally in dividends and
other distributions and the proceeds of any liquidation, except that because of
the higher expenses resulting from the distribution fees borne by the Class B
and Class D shares, dividends on those shares are expected to be lower than
those for Class A shares of the Fund. Dividends on each Class also might be
affected differently by the allocation of other Class-specific expenses.
The Trust does not hold annual meetings of shareholders. There will normally
be no meetings of shareholders for the purpose of electing trustees unless fewer
than a majority of the trustees holding office has been elected by shareholders,
at which time the trustees then in office will call a shareholders meeting for
the election of trustees. Under the 1940 Act, shareholders of record of at least
two-thirds of the outstanding shares of an investment company may remove a
trustee by votes cast in person or by proxy at a meeting called for that
purpose. The trustees are required to call a meeting of shareholders for the
purpose of voting upon the question of removal of any trustee when requested in
writing to do so by the shareholders of record holding at least 10% of the
Trust's outstanding shares.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of an Acquired Fund's assets for Growth Fund shares and Growth
Fund's assumption of liabilities of that Acquired Fund is intended to qualify
for federal income tax purposes as a tax-free reorganization under section
368(a)(1)(C) of the Code. The Corporation has received an opinion of Kirkpatrick
& Lockhart LLP, its counsel, with respect to the Reorganization involving Blue
Chip Growth Fund, and the Trust has received an opinion of Kirkpatrick &
Lockhart LLP, its counsel, with respect to each Reorganization, each
substantially to the effect that--
(i) Growth Fund's acquisition of the Acquired Fund's assets in exchange
solely for Growth Fund shares and Growth Fund's assumption of the Acquired
Fund's liabilities, followed by the Acquired Fund's distribution of those
shares to its shareholders constructively in exchange for their Acquired
Fund shares, will constitute a "reorganization" within the meaning of
section 368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
(ii) No gain or loss will be recognized to the Acquired Fund on the
transfer to Growth Fund of its assets in exchange solely for Growth Fund
shares and Growth Fund's assumption of the Acquired Fund's liabilities or on
the subsequent distribution of those shares to the Acquired Fund's
shareholders in constructive exchange for their Acquired Fund shares;
(iii) No gain or loss will be recognized to Growth Fund on its receipt
of the transferred assets in exchange solely for Growth Fund shares and its
assumption of the Acquired Fund's liabilities;
(iv) Growth Fund's basis for the transferred assets will be the same as
the basis thereof in the Acquired Fund's hands immediately prior to the
Reorganization, and Growth Fund's holding period for those assets will
include the Acquired Fund's holding period therefor;
(v) An Acquired Fund shareholder will recognize no gain or loss on the
constructive exchange of all its Acquired Fund shares solely for Growth Fund
shares pursuant to the Reorganization; and
(vi) An Acquired Fund shareholder's basis for the Growth Fund shares to
be received by it in the Reorganization will be the same as the basis for
its Acquired Fund shares to be constructively surrendered in exchange for
those Growth Fund shares, and its holding period for those Growth Fund
shares will include its holding period for those Acquired Fund shares,
provided they are held as capital assets by the shareholder on the Closing
Date.
18
<PAGE>
Each such opinion may state that no opinion is expressed as to the effect of
the Reorganization on the Funds or any shareholder (regarding the recognition of
gain or loss and/or the determination of the basis or holding period) with
respect to any asset (including certain options, futures and forward contracts)
as to which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Utilization by Growth Fund after the Reorganizations of pre-Reorganization
capital losses realized by ComTech Growth Fund could be subject to limitation in
future years under the Code.
Shareholders of an Acquired Fund should consult their tax advisers regarding
the effect, if any, of the Reorganizations in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Reorganizations, those shareholders also should
consult their tax advisers as to state and local tax consequences, if any, of
the Reorganizations.
CAPITALIZATION
The following tables show the capitalization of each Fund as of February 28,
1995 (unaudited for Growth Fund and ComTech Growth Fund) and on a pro forma
combined basis (unaudited) as of that date, giving effect to the Reorganizations
and assuming that the Acquired Funds indicated participate in the
Reorganizations.
If only ComTech Growth Fund participates in a Reorganization:
<TABLE>
<CAPTION>
COMTECH PRO FORMA
GROWTH FUND GROWTH FUND COMBINED
------------ ----------- ------------
<S> <C> <C> <C>
Net Assets
Class A......................................... $120,933,807 $16,557,013 $137,490,820
Class B......................................... 83,636,897 42,955,786 126,592,683
Class C......................................... 29,937,919 -- 29,937,919
Class D......................................... 22,936,179 9,001,324 31,937,503
NAV Per Share
Class A......................................... $19.21 $9.30 $19.21
Class B......................................... 18.65 9.21 18.65
Class C......................................... 19.41 -- 19.41
Class D......................................... 18.78 9.21 18.78
Shares Outstanding
Class A......................................... 6,294,685 1,780,835 7,156,828
Class B......................................... 4,485,279 4,666,041 6,789,528
Class C......................................... 1,542,616 -- 1,542,616
Class D......................................... 1,221,271 977,690 1,700,745
</TABLE>
19
<PAGE>
If only Blue Chip Growth Fund participates in a Reorganization:
<TABLE>
<CAPTION>
BLUE CHIP PRO FORMA
GROWTH FUND GROWTH FUND COMBINED
------------ ----------- ------------
<S> <C> <C> <C>
Net Assets
Class A......................................... $120,933,807 $50,445,093 $171,378,900
Class B......................................... 83,636,897 32,772,270 116,409,167
Class C......................................... 29,937,919 -- 29,937,919
Class D......................................... 22,936,179 3,445,624 26,381,803
NAV Per Share
Class A......................................... $19.21 $14.54 $19.21
Class B......................................... 18.65 14.04 18.65
Class C......................................... 19.41 -- 19.41
Class D......................................... 18.78 14.20 18.78
Shares Outstanding
Class A......................................... 6,294,685 3,469,743 8,920,925
Class B......................................... 4,485,279 2,333,945 6,242,308
Class C......................................... 1,542,616 -- 1,542,616
Class D......................................... 1,221,271 242,573 1,404,686
</TABLE>
If both Acquired Funds participate in the Reorganizations:
<TABLE>
<CAPTION>
COMTECH BLUE CHIP PRO FORMA
GROWTH FUND GROWTH FUND GROWTH FUND COMBINED
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net Assets
Class A........................... $120,933,807 $16,557,013 $50,445,093 $187,935,913
Class B........................... 83,636,897 42,955,786 32,772,270 159,364,953
Class C........................... 29,937,919 -- -- 29,937,919
Class D........................... 22,936,179 9,001,324 3,445,624 35,383,127
NAV Per Share
Class A........................... $19.21 $9.30 $14.54 $19.21
Class B........................... 18.65 9.21 14.04 18.65
Class C........................... 19.41 -- -- 19.41
Class D........................... 18.78 9.21 14.20 18.78
Shares Outstanding
Class A........................... 6,294,685 1,780,835 3,469,743 9,783,068
Class B........................... 4,485,279 4,666,041 2,333,945 8,546,557
Class C........................... 1,542,616 -- -- 1,542,616
Class D........................... 1,221,271 977,690 242,573 1,884,160
</TABLE>
ADDITIONAL INFORMATION ABOUT GROWTH FUND
FINANCIAL HIGHLIGHTS
The table below provides condensed information concerning income and capital
changes for one Class A, one Class B and one Class D share of Growth Fund for
the periods shown. (No Class C shares of Growth Fund will be issued in
connection with the Reorganizations.) This information is supplemented by the
financial statements and accompanying notes appearing in Growth Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 1994, and the
unaudited financial statements and accompanying notes in Growth Fund's
Semi-Annual Report to Shareholders for the six
20
<PAGE>
months ended February 28, 1995, which are incorporated herein by this reference.
The financial statements and notes for the fiscal year ended August 31, 1994 and
the financial information in the tables below, insofar as they relate to the
five years in the period ended August 31, 1994, have been audited by Ernst &
Young LLP, independent auditors, whose report thereon is included in the Annual
Report to Shareholders that accompanies this Proxy Statement.
Selected data for a Class A, Class B, and Class D share of beneficial
interest of Growth Fund outstanding throughout each period is presented below:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE SIX
MONTHS ENDED
FEBRUARY 28, FOR THE YEARS ENDED AUGUST 31,
1995 --------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------ -------- -------- -------- ------- -------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................. $ 20.04 $ 20.60 $ 16.78 $ 17.50 $ 13.43 $ 15.57
Income (loss) from
investment operations:
Net investment income..... 0.06 -- 0.07 -- 0.02 0.17
Net realized and
unrealized gains
(losses) from investment
transactions............ (0.86) 0.51 4.37 (0.11) 4.68 (1.16)
------------ -------- -------- -------- ------- -------
Total income (loss) from
investment operations..... (0.80) 0.51 4.44 (0.11) 4.70 (0.99)
------------ -------- -------- -------- ------- -------
Less dividends and other
distributions from:
Net investment income..... -- -- -- (0.01) (0.17) --
Net realized gains on
investments............. (0.03) (1.07) (0.62) (0.60) (0.46) (1.15)
------------ -------- -------- -------- ------- -------
Total dividends and other
distributions........... (0.03) (1.07) (0.62) (0.61) (0.63) (1.15)
------------ -------- -------- -------- ------- -------
Net asset value, end of
period.................. $ 19.21 $ 20.04 $ 20.60 $ 16.78 $ 17.50 $ 13.43
------------ -------- -------- -------- ------- -------
------------ -------- -------- -------- ------- -------
Total return (1)............ (4.01)% 2.33% 26.97% (0.85)% 37.02% (7.05)%
------------ -------- -------- -------- ------- -------
------------ -------- -------- -------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period
(000's)................... $120,934 $141,342 $130,353 $102,640 $96,796 $72,805
Ratio of expenses to
average net assets...... 1.23%* 1.21% 1.22% 1.43% 1.56% 1.59%
Ratio of net investment
income to average net
assets.................. 0.43%* 0.06% 0.38% 0.00% 0.10% 2.96%
Portfolio turnover........ 12.44% 24.41% 35.81% 32.49% 28.59% 39.16%
</TABLE>
- ------------
* Annualized
(1) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends and capital gain
distributions at NAV on the payable date, and a sale at NAV on the last day
of each period reported. The figures do not include sales charges; results
of Class A and Class B shares would be lower if sales charges were included.
Total return information for periods less than one year is not annualized.
21
<PAGE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED AUGUST FOR THE PERIOD
FEBRUARY 28, 31, JULY 1, 1991+
1995 ----------------------------- TO AUGUST 31,
(UNAUDITED) 1994 1993 1992 1991
------------ ------- ------- ------- --------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 19.53 $ 20.25 $ 16.64 $ 17.48 $15.63
Income (loss) from investment
operations:
Net investment (loss)......... (0.05) (0.06) (0.05) (0.06) (0.02)
Net realized and unrealized
gains (losses) from
investment transactions..... (0.80) 0.41 4.28 (0.18) 1.87
------------ ------- ------- ------- -------
Total income (loss) from
investment operations......... (0.85) 0.35 4.23 (0.24) 1.85
Less dividends and other
distributions from:
Net investment income......... -- -- -- -- --
Net realized gains on
investments................... (0.03) (1.07) (0.62) (0.60) --
------------ ------- ------- ------- -------
Total dividends and other
distributions............... (0.03) (1.07) (0.62) (0.60) --
------------ ------- ------- ------- -------
Net asset value, end of
period...................... $ 18.65 $ 19.53 $ 20.25 $ 16.64 $17.48
------------ ------- ------- ------- -------
------------ ------- ------- ------- -------
Total return (1)................ (4.37)% 1.55% 25.91% (1.58)% 11.84%
------------ ------- ------- ------- -------
------------ ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period
(000's)..................... $ 83,637 $97,272 $60,280 $35,867 $3,804
Ratio of expenses to average
net assets.................. 2.01%* 2.00% 2.02% 2.20% 2.24%*
Ratio of net investment loss
to average net assets....... (0.35)%* (0.66)% (0.46)% (0.70)% (0.81)%*
Portfolio turnover............ 12.44% 24.41% 35.81% 32.49% 28.59%
</TABLE>
- ------------
<TABLE>
<C> <S>
* Annualized
+ Commencement of offering of shares.
(1) Total return is calculated assuming a $1,000 investment on the first day of each period
reported, reinvestment of all dividends and capital gain distributions at NAV on the
payable date, and a sale at NAV on the last day of each period reported. The figures do
not include sales charges; results of Class A and Class B shares would be lower if
sales charges were included. Total return information for periods less than one year is
not annualized.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
CLASS D
--------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE SIX FOR THE YEARS FOR THE PERIOD
MONTHS ENDED ENDED AUGUST 31, JULY 2, 1992+ TO
FEBRUARY 28, 1995 ------------------ AUGUST 31,
(UNAUDITED) 1994 1993 1992
-------------------- ------- ------- ----------------
<CAPTION>
<S> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 19.67 $ 20.38 $ 16.75 $17.04
Income (loss) from investment
operations:
Net investment income (loss)........ (0.06) (0.08) (0.06) (0.01)
Net realized and unrealized gains
(losses) from investment
transactions...................... (0.80) 0.44 4.31 0.28
-------- ------- ------- -------
Total income (loss) from investment
operations.......................... (0.86) 0.36 4.25 (0.29)
-------- ------- ------- -------
Less dividends and other distributions
from:
Net investment income............... -- -- -- --
Net realized gains on investments... (0.03) (1.07) (0.62) --
-------- ------- ------- -------
Total dividends and other
distributions..................... (0.03) (1.07) (0.62) --
-------- ------- ------- -------
Net asset value, end of period...... $ 18.78 $ 19.67 $ 20.38 $16.75
-------- ------- ------- -------
-------- ------- ------- -------
Total return (1)...................... (4.39)% 1.59% 25.86% (2.95)%
-------- ------- ------- -------
-------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's)... $ 22,936 $28,561 $16,474 $2,275
Ratio of expenses to average net
assets............................ 1.99%* 1.98% 2.06% 1.98%*
Ratio of net investment loss to
average net assets................ (0.34)%* (0.65)% (0.69)% (0.65)%*
Portfolio turnover.................. 12.44% 24.41% 35.81% 32.49%
</TABLE>
- ------------
<TABLE>
<C> <S>
* Annualized
+ Commencement of offering of shares.
(1) Total return is calculated assuming a $1,000 investment on the first day of each period
reported, reinvestment of all dividends and capital gain distributions at NAV on the
payable date, and a sale at NAV on the last day of each period reported. The figures do
not include sales charges; results of Class A and Class B shares would be lower if
sales charges were included. Total return information for periods less than one year is
not annualized.
</TABLE>
23
<PAGE>
MISCELLANEOUS
AVAILABLE INFORMATION
The Trust and the Corporation are each subject to the informational
requirements of the Securities Exchange Act of 1934 and the 1940 Act and in
accordance therewith file reports, proxy material and other information with the
SEC. Such reports, proxy material and other information can be inspected and
copied at the Public Reference Room maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such material can also be obtained from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, D.C. 20549, at
prescribed rates.
LEGAL MATTERS
Certain legal matters in connection with the issuance of Growth Fund shares
will be passed upon by Kirkpatrick & Lockhart LLP, counsel to the Trust.
EXPERTS
The audited financial statements of Growth Fund and ComTech Growth Fund
incorporated by reference herein and in their respective Statements of
Additional Information have been audited by Ernst & Young LLP, independent
auditors, whose reports thereon are included in those Funds' respective Annual
Reports to Shareholders for the fiscal year and fiscal period, respectively,
ended August 31, 1994. The audited financial statements of Blue Chip Growth Fund
incorporated by reference herein and in its Statement of Additional Information
have been audited by Price Waterhouse LLP, independent accountants, whose report
thereon is included in that Fund's Annual Report to Shareholders for the fiscal
year ended February 28, 1995. The financial statements audited by Ernst & Young
LLP and Price Waterhouse LLP have been incorporated herein by reference in
reliance on their reports given on their authority as experts in auditing and
accounting.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of June 1, 1995, between PaineWebber Olympus Fund, a Massachusetts
business trust ("Trust"), on behalf of PaineWebber Growth Fund, a segregated
portfolio of assets ("series") thereof ("Acquiring Fund"), and PaineWebber
Master Series, Inc., a Maryland corporation ("Corporation"), on behalf of its
PaineWebber Blue Chip Growth Fund series ("Target"). (Acquiring Fund and Target
are sometimes referred to herein individually as a "Fund" and collectively as
the "Funds," and Trust and Corporation are sometimes referred to herein
collectively as the "Investment Companies.")
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization will involve the transfer to
Acquiring Fund of Target's assets solely in exchange for voting shares of
beneficial interest in Acquiring Fund ("Acquiring Fund Shares") and the
assumption by Acquiring Fund of Target's liabilities, followed by the
constructive distribution of the Acquiring Fund Shares to the holders of shares
of common stock in Target ("Target Shares") in exchange therefor, all upon the
terms and conditions set forth herein. The foregoing transactions are referred
to herein as the "Reorganization." All agreements, representations, actions, and
obligations described herein made or to be taken or undertaken by either Fund
are made and shall be taken or undertaken by Trust on behalf of Acquiring Fund
and by Corporation on behalf of Target.
Acquiring Fund's shares are divided into four classes, designated Class A,
Class B, Class C, and Class D shares ("Class A Acquiring Fund Shares," "Class B
Acquiring Fund Shares," "Class C Acquiring Fund Shares," and "Class D Acquiring
Fund Shares," respectively). Except as noted in the following sentence, these
classes differ only with respect to the sales charges imposed on the purchase of
shares and the fees ("12b-1 fees") payable by each class pursuant to plans
adopted under Rule 12b-1 promulgated under the Investment Company Act of 1940
("1940 Act"), as follows: (1) Class A Acquiring Fund Shares are offered at net
asset value ("NAV") plus a sales charge, if applicable, and are subject to a
12b-1 service fee at the annual rate of 0.21% of the average daily net assets
attributable to the class ("class assets"); (2) Class B Acquiring Fund Shares
are offered at NAV without imposition of any sales charge and are subject to a
contingent deferred sales charge and 12b-1 service and distribution fees at the
respective annual rates of 0.25% and 0.75% of class assets; (3) Class C
Acquiring Fund Shares are offered, currently only to the trustee of the
PaineWebber Savings Investment Plan on behalf of that plan, at NAV without
imposition of any sales charge and are not subject to any 12b-1 fee; and (4)
Class D Acquiring Fund Shares are offered at NAV without imposition of any sales
charge and are subject to 12b-1 service and distribution fees at the respective
annual rates of 0.25% and 0.50% of class assets. These classes also may differ
from one another with respect to the allocation of certain class-specific
expenses other than 12b-1 fees. Only Classes A, B, and D Acquiring Fund Shares
are involved in the Reorganization.
Target's shares are divided into three classes, designated Class A, Class B,
and Class D shares ("Class A Target Shares," "Class B Target Shares," and "Class
D Target Shares," respectively). These classes are identical to the
correspondingly lettered classes of Acquiring Fund Shares, except that the Class
A Target Shares are subject to a 12b-1 service fee at the annual rate of 0.25%,
rather than 0.21%, of class assets.
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In consideration of the mutual promises herein, the parties covenant and
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION OF TARGET
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of its
assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring Fund
agrees in exchange therefor--
(a) to issue and deliver to Target the number of full and fractional (i)
Class A Acquiring Fund Shares determined by dividing the net value of Target
(computed as set forth in paragraph 2.1) ("Target Value") attributable to
the Class A Target Shares by the NAV (computed as set forth in paragraph
2.2) of a Class A Acquiring Fund Share, (ii) Class B Acquiring Fund Shares
determined by dividing the Target Value attributable to the Class B Target
Shares by the NAV (as so computed) of a Class B Acquiring Fund Share, and
(iii) Class D Acquiring Fund Shares determined by dividing the Target Value
attributable to the Class D Target Shares by the NAV (as so computed) of a
Class D Acquiring Fund Share; and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein) all
of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement,
including without limitation Target's share of the expenses described in
paragraph 7.2. Notwithstanding the foregoing, Target agrees to use its best
efforts to discharge all of its known Liabilities prior to the Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and realized net capital gain, if any, for
the current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiring Fund Shares
received by it pursuant to paragraph 1.1 to Target's shareholders of record,
determined as of the Effective Time (collectively "Shareholders" and
individually a "Shareholder"), in exchange for their Target Shares. Such
distribution shall be accomplished by the Funds' transfer agent ("Transfer
Agent") opening accounts on Acquiring Fund's share transfer books in the
Shareholders' names and transferring such Acquiring Fund Shares thereto. Each
Shareholder's account shall be credited with the respective pro rata number of
full and fractional (rounded to the third decimal place) Acquiring Fund Shares
due that Shareholder, by class (i.e., the account for a Shareholder of Class A
Target Shares shall be credited with the respective pro rata number of Class A
Acquiring Fund Shares due that Shareholder, the account for a Shareholder of
Class B Target Shares shall be credited with the respective pro rata number of
Class B Acquiring Fund Shares due that Shareholder, and the account for a
Shareholder of Class D Target Shares shall be credited with the respective pro
rata number of Class D Acquiring Fund Shares due that Shareholder). All
outstanding Target Shares, including any represented by certificates, shall
simultaneously be canceled on Target's share transfer records. Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with the Reorganization.
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1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, Target shall be terminated as a series of
Corporation and any further actions shall be taken in connection therewith as
required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange, Inc. ("NYSE") on the date of the Closing ("Valuation Time"),
using the valuation procedures set forth in Target's then-current prospectus and
statement of additional information less (b) the amount of the Liabilities as of
the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of a Class A Acquiring Fund
Share, a Class B Acquiring Fund Share, and a Class D Acquiring Fund Share shall
be computed as of the Valuation Time, using the valuation procedures set forth
in Acquiring Fund's then-current prospectus and statement of additional
information.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by or
under the direction of Mitchell Hutchins Asset Management Inc.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on August 18,
1995, or at such other place and/or on such other date as the parties may agree.
All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the date thereof or at such other
time as the parties may agree ("Effective Time"). If, immediately before the
Valuation Time, (a) the NYSE is closed to trading or trading thereon is
restricted or (b) trading or the reporting of trading on the NYSE or elsewhere
is disrupted, so that accurate appraisal of the net value of Target and the NAV
per Acquiring Fund Share is impracticable, the Effective Time shall be postponed
until the first business day after the day when such trading shall have been
fully resumed and such reporting shall have been restored.
3.2. Corporation shall deliver to Trust at the Closing a schedule of the
Assets as of the Effective Time, which shall set forth for all portfolio
securities included therein their adjusted tax basis and holding period by lot.
Target's custodian shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets held by the custodian will be transferred to
Acquiring Fund at the Effective Time and (b) all necessary taxes in conjunction
with the delivery of the Assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has been
made.
3.3. Corporation shall deliver to Trust at the Closing a list of the names
and addresses of the Shareholders and the number (by class) of outstanding
Target Shares owned by each Shareholder, all as of the Effective Time, certified
by Corporation's Secretary or Assistant Secretary. The Transfer Agent shall
deliver at the Closing a certificate as to the opening on Acquiring Fund's share
transfer books of accounts in the Shareholders' names. Trust shall issue and
deliver a confirmation to Corporation evidencing the Acquiring Fund Shares (by
class) to be credited to Target at the Effective Time or provide evidence
satisfactory to Corporation that such Acquiring Fund Shares have been credited
to Target's account on Acquiring Fund's books. At the Closing, each party shall
deliver to the other such
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bills of sale, checks, assignments, stock certificates, receipts, or other
documents as the other party or its counsel may reasonably request.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. Corporation is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Maryland, and a copy of
its Articles of Incorporation is on file with the Department of Assessments
and Collections of Maryland;
4.1.2. Corporation is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in full
force and effect at the Effective Time;
4.1.3. Target is a duly established and designated series of
Corporation;
4.1.4. At the Closing, Target will have good and marketable title to the
Assets and full right, power, and authority to sell, assign, transfer, and
deliver the Assets free of any liens or other encumbrances; and upon
delivery and payment for the Assets, Acquiring Fund will acquire good and
marketable title thereto;
4.1.5. Target's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the Securities Act of 1933 ("1933 Act") and the 1940 Act and the rules
and regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.1.6. Target is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated hereby will
not conflict with or violate, Maryland law or any provision of Corporation's
Articles of Incorporation or By-Laws or of any agreement, instrument, lease,
or other undertaking to which Target is a party or by which it is bound or
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Target is a party
or by which it is bound, except as previously disclosed in writing to and
accepted by Trust;
4.1.7. Except as disclosed in writing to and accepted by Trust, all
material contracts and other commitments of or applicable to Target (other
than this Agreement and investment contracts, including options, futures,
and forward contracts) will be terminated, or provision for discharge of any
liabilities of Target thereunder will be made, at or prior to the Effective
Time, without either Fund's incurring any liability or penalty with respect
thereto and without diminishing or releasing any rights Target may have had
with respect to actions taken or omitted to be taken by any other party
thereto prior to the Closing;
4.1.8. Except as otherwise disclosed in writing to and accepted by
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Target's
knowledge) threatened against Corporation with respect to Target or any of
its properties or assets that, if adversely determined, would materially and
adversely affect Target's financial condition or the conduct of its
business; Target knows of no facts that might form the basis for the
institution of any such litigation, proceeding, or investigation and is not
a party to or subject
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to the provisions of any order, decree, or judgment of any court or
governmental body that materially or adversely affects its business or its
ability to consummate the transactions contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action on the
part of Corporation's board of directors, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders and receipt of any necessary exemptive relief or
no-action assurances requested from the Securities and Exchange Commission
("SEC") or its staff with respect to sections 17(a) and 17(d) of the 1940
Act, this Agreement will constitute a valid and legally binding obligation
of Target, enforceable in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights and
by general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
4.1.11. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the Securities Exchange Act of 1934 ("1934
Act"), or the 1940 Act for the execution or performance of this Agreement by
Corporation, except for (a) the filing with the SEC of a registration
statement by Trust on Form N-14 relating to the Acquiring Fund Shares
issuable hereunder, and any supplement or amendment thereto ("Registration
Statement"), including therein a prospectus/proxy statement ("Proxy
Statement"), (b) receipt of the exemptive relief referenced in subparagraph
4.1.9, and (c) such consents, approvals, authorizations, and filings as have
been made or received or as may be required subsequent to the Effective
Time;
4.1.12. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material respects
with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940
Act and the regulations thereunder and (b) not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by Trust for use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary course
of its business;
4.1.14. Target is a "fund" (within the meaning of section 851(h)(2) of
the Code); it qualified for treatment as a regulated investment company
("RIC") under Subchapter M of the Code for each past taxable year since it
commenced operations and will continue to meet all the requirements for such
qualification for its current taxable year; and it has no earnings and
profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it. The Assets shall be invested at all times
through the Effective Time in a manner that ensures compliance with the
foregoing;
4.1.15. Target is not under the jurisdiction of a court in a "title 11
or similar case" (within the meaning of section 368(a)(3)(A) of the Code);
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock or securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock or securities of five or fewer
issuers; and
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4.1.17. Target will be terminated as soon as reasonably practicable
after the Reorganization, but in all events within six months after the
Effective Time.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. Trust is an unincorporated voluntary association with
transferable shares organized as a business trust under a written instrument
("Business Trust"); it is duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts; and a copy of
its Declaration of Trust is on file with the Secretary of the Commonwealth
of Massachusetts;
4.2.2. Trust is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full force and
effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and Acquiring
Fund's assumption of the Liabilities) will be issued in exchange for the
Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued and
outstanding shares of Acquiring Fund, fully paid and non-assessable, except
to the extent that under Massachusetts law shareholders of a Business Trust
may, under certain circumstances, be held personally liable for its
obligations. Except as contemplated by this Agreement, Acquiring Fund does
not have outstanding any options, warrants, or other rights to subscribe for
or purchase any of its shares, nor is there outstanding any security
convertible into any of its shares;
4.2.6. Acquiring Fund's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations thereunder
and do not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby will not conflict with or violate, Massachusetts law or any provision
of Trust's Declaration of Trust or By-Laws or of any provision of any
agreement, instrument, lease, or other undertaking to which Acquiring Fund
is a party or by which it is bound or result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement, judgment,
or decree to which Acquiring Fund is a party or by which it is bound, except
as previously disclosed in writing to and accepted by Corporation;
4.2.8. Except as otherwise disclosed in writing to and accepted by
Corporation, no litigation, administrative proceeding, or investigation of
or before any court or governmental body is presently pending or (to
Acquiring Fund's knowledge) threatened against Trust with respect to
Acquiring Fund or any of its properties or assets that, if adversely
determined, would materially and adversely affect Acquiring Fund's financial
condition or the conduct of its business; Acquiring Fund knows of no facts
that might form the basis for the institution of any such litigation,
proceeding, or investigation and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially or adversely affects its business or its ability to
consummate the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action on the
part of Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to receipt of any
necessary exemptive relief or no-action assurances requested from the SEC or
its staff with
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respect to sections 17(a) and 17(d) of the 1940 Act, this Agreement will
constitute a valid and legally binding obligation of Acquiring Fund,
enforceable in accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium,
and similar laws relating to or affecting creditors' rights and by general
principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the 1934 Act, or the 1940 Act for the
execution or performance of this Agreement by Trust, except for (a) the
filing with the SEC of the Registration Statement, (b) receipt of the
exemptive relief referenced in subparagraph 4.2.9, and (c) such consents,
approvals, authorizations, and filings as have been made or received or as
may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material respects
with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940
Act and the regulations thereunder and (b) not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by Corporation for use therein;
4.2.12. Acquiring Fund is a "fund" (within the meaning of section
851(h)(2) of the Code); it qualified for treatment as a RIC under Subchapter
M of the Code for each past taxable year since it commenced operations and
will continue to meet all the requirements for such qualification for its
current taxable year; Acquiring Fund intends to continue to meet all such
requirements for the next taxable year; and it has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M did
not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end investment
company; nor does Acquiring Fund have any plan or intention to redeem or
otherwise reacquire any Acquiring Fund Shares issued to the Shareholders
pursuant to the Reorganization, other than through redemptions arising in
the ordinary course of that business;
4.2.14. Acquiring Fund (a) will actively continue Target's business in
substantially the same manner that Target conducted that business
immediately before the Reorganization, (b) has no plan or intention to sell
or otherwise dispose of any of the Assets, except for dispositions made in
the ordinary course of that business and dispositions necessary to maintain
its status as a RIC under Subchapter M of the Code, and (c) expects to
retain substantially all the Assets in the same form as it receives them in
the Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
4.2.15. There is no plan or intention for Acquiring Fund to be dissolved
or merged into another corporation or business trust or any "fund" thereof
(within the meaning of section 851(h)(2) of the Code) following the
Reorganization;
4.2.16. Acquiring Fund is not under the jurisdiction of a court in a
"title 11 or similar case" (within the meaning of section 368(a)(3)(A) of
the Code);
4.2.17. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be
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invested in the stock or securities of any one issuer and (b) not more than
50% of the value of such assets will be invested in the stock or securities
of five or fewer issuers; and
4.2.18. Acquiring Fund does not own, directly or indirectly, nor will it
acquire, directly or indirectly, at any time through the Effective Time, nor
has it owned, directly or indirectly, at any time during the past five
years, any shares of Target.
4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares, when received
by the Shareholders, will be approximately equal to the fair market value of
their Target Shares constructively surrendered in exchange therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem or otherwise dispose of any portion of the Acquiring
Fund Shares to be received by them in the Reorganization and (b) does not
anticipate dispositions of those Acquiring Fund Shares at the time of or
soon after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Target as a series of an open-end investment
company. Consequently, its management expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of or at
the time of the Reorganization will be de minimis. Nor does its management
anticipate that there will be extraordinary redemptions of Acquiring Fund
Shares immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto, plus any liabilities and expenses of the parties
incurred in connection with the Reorganization;
4.3.5. The fair market value on a going concern basis of the Assets will
equal or exceed the Liabilities to be assumed by Acquiring Fund and those to
which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market value
of the net assets, and at least 70% of the fair market value of the gross
assets, held by Target immediately before the Reorganization. For the
purposes of this representation, any amounts used by Target to pay its
Reorganization expenses and redemptions and distributions made by it
immediately before the Reorganization (except for (a) distributions made to
conform to its policy of distributing all or substantially all of its income
and gains to avoid the obligation to pay federal income tax and/or the
excise tax under section 4982 of the Code and (b) redemptions not made as
part of the Reorganization) will be included as assets thereof held
immediately before the Reorganization;
4.3.8. None of the compensation received by any Shareholder who is an
employee of Target will be separate consideration for, or allocable to, any
of the Target Shares held by such Shareholder-employee; none of the
Acquiring Fund Shares received by any such Shareholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
the consideration paid to any such Shareholder-employee will be for services
actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services; and
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4.3.9. Immediately after the Reorganization, the Shareholders will not
own shares constituting "control" of Acquiring Fund within the meaning of
section 304(c) of the Code.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that (a)
such ordinary course will include declaring and paying customary dividends and
other distributions and such changes in operations as are contemplated by each
Fund's normal business activities and (b) each Fund will retain exclusive
control of the composition of its portfolio until the Closing; provided that
Target shall not dispose of more than an insignificant portion of its historic
business assets during such period without Acquiring Fund's prior consent.
5.2. Target covenants to call a shareholders' meeting to consider and act
upon this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist Trust in obtaining such
information as Trust reasonably requests concerning the beneficial ownership of
Target Shares.
5.5. Target covenants that Target's books and records (including all books
and records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to Trust at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or cause to
be taken such further action, as the other Fund may deem necessary or desirable
in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession
of all the Assets, and (b) Target, title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.
5.8. Trust covenants to use all reasonable efforts to obtain the approvals
and authorizations required by the 1933 Act, the 1940 Act, and such state
securities laws it may deem appropriate in order to continue its operations
after the Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by the
other Fund of all the obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the
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Effective Time, with the same force and effect as if made at and as of the
Effective Time, and (c) the following further conditions that, at or before the
Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have been
duly adopted and approved by Corporation's board of directors and shall have
been approved by Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either Fund may for
itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. Corporation shall have received an opinion of Kirkpatrick & Lockhart
LLP, counsel to Trust, substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of Trust, a Business
Trust duly organized and validly existing under the laws of the Commonwealth
of Massachusetts with power under its Declaration of Trust to own all of its
properties and assets and, to the knowledge of such counsel, to carry on its
business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by Corporation on
behalf of Target, is a valid and legally binding obligation of Trust with
respect to Acquiring Fund, enforceable in accordance with its terms, except
as the same may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly issued
and outstanding and fully paid and non-assessable, except to the extent that
under Massachusetts law shareholders of a Business Trust may, under certain
circumstances, be held personally liable for its obligations, and no
shareholder of Acquiring Fund has any preemptive right to subscribe for or
purchase such shares;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Trust's Declaration of Trust or By-Laws or any provision of any
agreement (known to such counsel) to which Trust (with respect to Acquiring
Fund) is a party or by which it is bound or, to the knowledge of such
counsel, result in the acceleration of any obligation, or the imposition of
any penalty, under any agreement, judgment, or decree to which Trust (with
respect to Acquiring Fund) is a party or by which it is bound, except as set
forth in such opinion or as previously disclosed in writing to and accepted
by Corporation;
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6.4.5. To the knowledge of such counsel, no consent, approval,
authorization, or order of any court or governmental authority is required
for the consummation by Trust on behalf of Acquiring Fund of the
transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act, and the 1940 Act and such as may be required
under state securities laws;
6.4.6. Trust is registered with the SEC as an investment company, and to
the knowledge of such counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel, (a) no litigation,
administrative proceeding, or investigation of or before any court or
governmental body is pending or threatened as to Trust (with respect to
Acquiring Fund) or any of its properties or assets attributable or allocable
to Acquiring Fund and (b) Trust (with respect to Acquiring Fund) is not a
party to or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially and adversely affects
Acquiring Fund's business, except as set forth in such opinion or as
otherwise disclosed in writing to and accepted by Corporation.
In rendering such opinion, such counsel may rely, as to matters governed by the
laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel.
6.5. Trust shall have received an opinion of Kirkpatrick & Lockhart LLP,
counsel to Corporation, substantially to the effect that:
6.5.1. Target is a duly established series of Corporation, a corporation
duly organized and validly existing under the laws of the State of Maryland
with power under its Articles of Incorporation to own all of its properties
and assets and, to the knowledge of such counsel, to carry on its business
as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Corporation on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by Trust on behalf
of Acquiring Fund, is a valid and legally binding obligation of Corporation
with respect to Target, enforceable in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Corporation's Articles of Incorporation or By-Laws or any provision
of any agreement (known to such counsel) to which Corporation (with respect
to Target) is a party or by which it is bound or, to the knowledge of such
counsel, result in the acceleration of any obligation, or the imposition of
any penalty, under any agreement, judgment, or decree to which Corporation
(with respect to Target) is a party or by which it is bound, except as set
forth in such opinion or as previously disclosed in writing to and accepted
by Trust;
6.5.4. To the knowledge of such counsel, no consent, approval,
authorization, or order of any court or governmental authority is required
for the consummation by Corporation on behalf of Target of the transactions
contemplated herein, except such as have been obtained under the 1933 Act,
the 1934 Act, and the 1940 Act and such as may be required under state
securities laws;
6.5.5. Corporation is registered with the SEC as an investment company,
and to the knowledge of such counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel, (a) no litigation,
administrative proceeding, or investigation of or before any court or
governmental body is pending or threatened as to Corporation (with respect
to Target) or any of its properties or assets attributable or allocable to
Target and
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(b) Corporation (with respect to Target) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects its business, except as set forth
in such opinion or as otherwise disclosed in writing to and accepted by
Trust.
In rendering such opinion, such counsel may rely, as to matters governed by the
laws of the State of Maryland, on an opinion of competent Maryland counsel.
6.6. Each Investment Company shall have received an opinion of Kirkpatrick &
Lockhart LLP, its counsel, addressed to and in form and substance satisfactory
to it, as to the federal income tax consequences mentioned below ("Tax
Opinion"). In rendering the Tax Opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations made in this Agreement (and/or in separate letters addressed to
such counsel) and the certificates delivered pursuant to paragraph 3.4. The Tax
Opinion shall be substantially to the effect that, based on the facts and
assumptions stated therein, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely for
Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities,
followed by Target's distribution of those shares to the Shareholders
constructively in exchange for the Shareholders' Target Shares, will
constitute a reorganization within the meaning of section 368(a)(1)(C) of
the Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
6.6.2. No gain or loss will be recognized to Target on the transfer to
Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. No gain or loss will be recognized to Acquiring Fund on its
receipt of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same as the
basis thereof in Target's hands immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's holding
period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares pursuant
to the Reorganization; and
6.6.6. A Shareholder's basis for the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the basis for its
Target Shares to be constructively surrendered in exchange for those
Acquiring Fund Shares, and its holding period for those Acquiring Fund
Shares will include its holding period for those Target Shares, provided
they are held as capital assets by the Shareholder at the Effective Time.
Notwithstanding paragraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder (regarding the recognition of gain or loss and/or the determination
of the basis or holding period) with respect to any asset (including certain
options, futures, and forward contracts included in the Assets) as to which any
unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting.
At any time before the Closing, (a) Acquiring Fund may waive any of the
foregoing conditions if, in the judgment of Trust's board of trustees, such
waiver will not have a material adverse effect on its shareholders' interests,
and (b) Target may waive any of the foregoing conditions if, in the judgment of
Corporation's board of directors, such waiver will not have a material adverse
effect on the Shareholders' interests.
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7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the other that there
are no brokers or finders entitled to receive any payments in connection with
the transactions provided for herein.
7.2. Except as otherwise provided herein, all expenses incurred in
connection with the transactions contemplated by this Agreement (whether or not
they are consummated) will be borne by the Funds proportionately, as follows:
each such expense will be borne by the Funds in proportion to their respective
net assets as of the close of business on the last business day of the month in
which such expense was incurred. Such expenses include: (a) expenses incurred in
connection with entering into and carrying out the provisions of this Agreement;
(b) expenses associated with the preparation and filing of the Registration
Statement; (c) registration or qualification fees and expenses of preparing and
filing such forms as are necessary under applicable state securities laws to
qualify the Acquiring Fund Shares to be issued in connection herewith in each
state in which Target's shareholders are resident as of the date of the mailing
of the Proxy Statement to such shareholders; (d) printing and postage expenses;
(e) legal and accounting fees; and (f) solicitation costs.
8. ENTIRE AGREEMENT; SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall survive
the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
prior to the Effective Time, (b) if a condition to its obligations has not been
met and it reasonably appears that such condition will not or cannot be met, or
(c) if the Closing has not occurred on or before December 31, 1995; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the trustees/directors or
officers of either Investment Company, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Massachusetts; provided that, in the
case of any conflict between such laws and the federal securities laws, the
latter shall govern.
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
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11.3. The parties acknowledge that Trust is a Business Trust. Notice is
hereby given that this instrument is executed on behalf of Trust's trustees
solely in their capacity as trustees, and not individually, and that Trust's
obligations under this instrument are not binding on or enforceable against any
of its trustees, officers, or shareholders, but are only binding on and
enforceable against Acquiring Fund's assets and property. Target agrees that, in
asserting any rights or claims under this Agreement, it shall look only to
Acquiring Fund's assets and property in settlement of such rights or claims and
not to such trustees or shareholders.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its duly authorized officer.
ATTEST:
PAINEWEBBER OLYMPUS FUND,
on behalf of its series,
PAINEWEBBER GROWTH FUND
By: /s/ GREGORY K. TODD /s/ DIANE E. O'DONNELL
............................... .................................
Assistant Secretary Vice President
ATTEST:
PAINEWEBBER MASTER SERIES, INC.
on behalf of its series,
PAINEWEBBER BLUE CHIP
GROWTH FUND
By: /s/ GREGORY K. TODD /s/ JOAN L. COHEN
................................... .................................
Assistant Secretary Vice President
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APPENDIX B
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of June 1, 1995, between PaineWebber Olympus Fund, a Massachusetts
business trust ("Trust"), on behalf of PaineWebber Growth Fund, a segregated
portfolio of assets ("series") thereof ("Acquiring Fund"), and Trust, on behalf
of its PaineWebber Communications & Technology Growth Fund series ("Target").
(Acquiring Fund and Target are sometimes referred to herein individually as a
"Fund" and collectively as the "Funds.")
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization will involve the transfer to
Acquiring Fund of Target's assets solely in exchange for voting shares of
beneficial interest in Acquiring Fund ("Acquiring Fund Shares") and the
assumption by Acquiring Fund of Target's liabilities, followed by the
constructive distribution of the Acquiring Fund Shares to the holders of shares
of beneficial interest in Target ("Target Shares") in exchange therefor, all
upon the terms and conditions set forth herein. The foregoing transactions are
referred to herein as the "Reorganization." All agreements, representations,
actions, and obligations described herein made or to be taken or undertaken by
either Fund are made and shall be taken or undertaken by Trust on its behalf.
Acquiring Fund's shares are divided into four classes, designated Class A,
Class B, Class C, and Class D shares ("Class A Acquiring Fund Shares," "Class B
Acquiring Fund Shares," "Class C Acquiring Fund Shares," and "Class D Acquiring
Fund Shares," respectively). Except as noted in the following sentence, these
classes differ only with respect to the sales charges imposed on the purchase of
shares and the fees ("12b-1 fees") payable by each class pursuant to plans
adopted under Rule 12b-1 promulgated under the Investment Company Act of 1940
("1940 Act"), as follows: (1) Class A Acquiring Fund Shares are offered at net
asset value ("NAV") plus a sales charge, if applicable, and are subject to a
12b-1 service fee at the annual rate of 0.21% of the average daily net assets
attributable to the class ("class assets"); (2) Class B Acquiring Fund Shares
are offered at NAV without imposition of any sales charge and are subject to a
contingent deferred sales charge and 12b-1 service and distribution fees at the
respective annual rates of 0.25% and 0.75% of class assets; (3) Class C
Acquiring Fund Shares are offered, currently only to the trustee of the
PaineWebber Savings Investment Plan on behalf of that plan, at NAV without
imposition of any sales charge and are not subject to any 12b-1 fee; and (4)
Class D Acquiring Fund Shares are offered at NAV without imposition of any sales
charge and are subject to 12b-1 service and distribution fees at the respective
annual rates of 0.25% and 0.50% of class assets. These classes also may differ
from one another with respect to the allocation of certain class-specific
expenses other than 12b-1 fees. Only Classes A, B, and D Acquiring Fund Shares
are involved in the Reorganization.
Target's shares are divided into three classes, designated Class A, Class B,
and Class D shares ("Class A Target Shares," "Class B Target Shares," and "Class
D Target Shares," respectively). These classes are identical to the
correspondingly lettered classes of Acquiring Fund Shares, except that the Class
A Target Shares are subject to a 12b-1 service fee at the annual rate of 0.25%,
rather than 0.21%, of class assets.
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In consideration of the mutual promises herein, the parties covenant and
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION OF TARGET
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of its
assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring Fund
agrees in exchange therefor--
(a) to issue and deliver to Target the number of full and fractional (i)
Class A Acquiring Fund Shares determined by dividing the net value of Target
(computed as set forth in paragraph 2.1) ("Target Value") attributable to
the Class A Target Shares by the NAV (computed as set forth in paragraph
2.2) of a Class A Acquiring Fund Share, (ii) Class B Acquiring Fund Shares
determined by dividing the Target Value attributable to the Class B Target
Shares by the NAV (as so computed) of a Class B Acquiring Fund Share, and
(iii) Class D Acquiring Fund Shares determined by dividing the Target Value
attributable to the Class D Target Shares by the NAV (as so computed) of a
Class D Acquiring Fund Share; and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein) all
of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement,
including without limitation Target's share of the expenses described in
paragraph 7.2. Notwithstanding the foregoing, Target agrees to use its best
efforts to discharge all of its known Liabilities prior to the Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and realized net capital gain, if any, for
the current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiring Fund Shares
received by it pursuant to paragraph 1.1 to Target's shareholders of record,
determined as of the Effective Time (collectively "Shareholders" and
individually a "Shareholder"), in exchange for their Target Shares. Such
distribution shall be accomplished by the Funds' transfer agent ("Transfer
Agent") opening accounts on Acquiring Fund's share transfer books in the
Shareholders' names and transferring such Acquiring Fund Shares thereto. Each
Shareholder's account shall be credited with the respective pro rata number of
full and fractional (rounded to the third decimal place) Acquiring Fund Shares
due that Shareholder, by class (i.e., the account for a Shareholder of Class A
Target Shares shall be credited with the respective pro rata number of Class A
Acquiring Fund Shares due that Shareholder, the account for a Shareholder of
Class B Target Shares shall be credited with the respective pro rata number of
Class B Acquiring Fund Shares due that Shareholder, and the account for a
Shareholder of Class D Target Shares shall be credited with the respective pro
rata number of Class D Acquiring Fund Shares due that Shareholder). All
outstanding Target Shares, including any represented by certificates, shall
simultaneously be canceled on Target's share transfer records. Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with the Reorganization.
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1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, Target shall be terminated as a series of
Trust and any further actions shall be taken in connection therewith as required
by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange, Inc. ("NYSE") on the date of the Closing ("Valuation Time"),
using the valuation procedures set forth in Target's then-current prospectus and
statement of additional information less (b) the amount of the Liabilities as of
the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of a Class A Acquiring Fund
Share, a Class B Acquiring Fund Share, and a Class D Acquiring Fund Share shall
be computed as of the Valuation Time, using the valuation procedures set forth
in Acquiring Fund's then-current prospectus and statement of additional
information.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by or
under the direction of Mitchell Hutchins Asset Management Inc.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on August 18,
1995, or at such other place and/or on such other date as the parties may agree.
All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the date thereof or at such other
time as the parties may agree ("Effective Time"). If, immediately before the
Valuation Time, (a) the NYSE is closed to trading or trading thereon is
restricted or (b) trading or the reporting of trading on the NYSE or elsewhere
is disrupted, so that accurate appraisal of the net value of Target and the NAV
per Acquiring Fund Share is impracticable, the Effective Time shall be postponed
until the first business day after the day when such trading shall have been
fully resumed and such reporting shall have been restored.
3.2. Trust shall deliver at the Closing a schedule of the Assets as of the
Effective Time, which shall set forth for all portfolio securities included
therein their adjusted tax basis and holding period by lot. Target's custodian
shall deliver at the Closing a certificate of an authorized officer stating that
(a) the Assets held by the custodian will be transferred to Acquiring Fund at
the Effective Time and (b) all necessary taxes in conjunction with the delivery
of the Assets, including all applicable federal and state stock transfer stamps,
if any, have been paid or provision for payment has been made.
3.3. Trust shall deliver at the Closing a list of the names and addresses of
the Shareholders and the number (by class) of outstanding Target Shares owned by
each Shareholder, all as of the Effective Time, certified by Trust's Secretary
or Assistant Secretary. The Transfer Agent shall deliver at the Closing a
certificate as to the opening on Acquiring Fund's share transfer books of
accounts in the Shareholders' names.
3.4. Trust shall deliver at the Closing a certificate executed in its name
by its President or a Vice President dated the Effective Time, to the effect
that the representations and warranties it made in this
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Agreement are true and correct at the Effective Time except as they may be
affected by the transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. Trust is an unincorporated voluntary association with
transferable shares organized as a business trust under a written instrument
("Business Trust"); it is duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts; and a copy of
its Declaration of Trust is on file with the Secretary of the Commonwealth
of Massachusetts;
4.1.2. Trust is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full force and
effect at the Effective Time;
4.1.3. Target is a duly established and designated series of Trust;
4.1.4. At the Closing, Target will have good and marketable title to the
Assets and full right, power, and authority to sell, assign, transfer, and
deliver the Assets free of any liens or other encumbrances; and upon
delivery and payment for the Assets, Acquiring Fund will acquire good and
marketable title thereto;
4.1.5. Target's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the Securities Act of 1933 ("1933 Act") and the 1940 Act and the rules
and regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.1.6. Target is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated hereby will
not conflict with or violate, Massachusetts law or any provision of Trust's
Declaration of Trust or By-Laws or of any agreement, instrument, lease, or
other undertaking to which Target is a party or by which it is bound or
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Target is a party
or by which it is bound;
4.1.7. All material contracts and other commitments of or applicable to
Target (other than this Agreement and investment contracts, including
options, futures, and forward contracts) will be terminated, or provision
for discharge of any liabilities of Target thereunder will be made, at or
prior to the Effective Time, without either Fund's incurring any liability
or penalty with respect thereto and without diminishing or releasing any
rights Target may have had with respect to actions taken or omitted to be
taken by any other party thereto prior to the Closing;
4.1.8. No litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Target's
knowledge) threatened against Trust with respect to Target or any of its
properties or assets that, if adversely determined, would materially and
adversely affect Target's financial condition or the conduct of its
business; Target knows of no facts that might form the basis for the
institution of any such litigation, proceeding, or investigation and is not
a party to or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially or adversely affects its
business or its ability to consummate the transactions contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action on the
part of Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders and receipt of any necessary exemptive relief or
no-action assurances
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requested from the Securities and Exchange Commission ("SEC") or its staff
with respect to sections 17(a) and 17(d) of the 1940 Act, this Agreement
will constitute a valid and legally binding obligation of Target,
enforceable in accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium,
and similar laws relating to or affecting creditors' rights and by general
principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
4.1.11. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the Securities Exchange Act of 1934 ("1934
Act"), or the 1940 Act for the execution or performance of this Agreement by
Trust, except for (a) the filing with the SEC of a registration statement by
Trust on Form N-14 relating to the Acquiring Fund Shares issuable hereunder,
and any supplement or amendment thereto ("Registration Statement"),
including therein a prospectus/proxy statement ("Proxy Statement"), (b)
receipt of the exemptive relief referenced in subparagraph 4.1.9, and (c)
such consents, approvals, authorizations, and filings as have been made or
received or as may be required subsequent to the Effective Time;
4.1.12. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material respects
with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940
Act and the regulations thereunder and (b) not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by Trust with respect to Acquiring Fund for use
therein;
4.1.13. The Liabilities were incurred by Target in the ordinary course
of its business;
4.1.14. Target is a "fund" (within the meaning of section 851(h)(2) of
the Code); it qualified for treatment as a regulated investment company
("RIC") under Subchapter M of the Code for each past taxable year since it
commenced operations and will continue to meet all the requirements for such
qualification for its current taxable year; and it has no earnings and
profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it. The Assets shall be invested at all times
through the Effective Time in a manner that ensures compliance with the
foregoing;
4.1.15. Target is not under the jurisdiction of a court in a "title 11
or similar case" (within the meaning of section 368(a)(3)(A) of the Code);
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock or securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock or securities of five or fewer
issuers; and
4.1.17. Target will be terminated as soon as reasonably practicable
after the Reorganization, but in all events within six months after the
Effective Time.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. Trust is a Business Trust; it is duly organized, validly
existing, and in good standing under the laws of the Commonwealth of
Massachusetts; and a copy of its Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts;
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4.2.2. Trust is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full force and
effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and Acquiring
Fund's assumption of the Liabilities) will be issued in exchange for the
Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued and
outstanding shares of Acquiring Fund, fully paid and non-assessable, except
to the extent that under Massachusetts law shareholders of a Business Trust
may, under certain circumstances, be held personally liable for its
obligations. Except as contemplated by this Agreement, Acquiring Fund does
not have outstanding any options, warrants, or other rights to subscribe for
or purchase any of its shares, nor is there outstanding any security
convertible into any of its shares;
4.2.6. Acquiring Fund's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations thereunder
and do not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby will not conflict with or violate, Massachusetts law or any provision
of Trust's Declaration of Trust or By-Laws or of any provision of any
agreement, instrument, lease, or other undertaking to which Acquiring Fund
is a party or by which it is bound or result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement, judgment,
or decree to which Acquiring Fund is a party or by which it is bound;
4.2.8. No litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Acquiring
Fund's knowledge) threatened against Trust with respect to Acquiring Fund or
any of its properties or assets that, if adversely determined, would
materially and adversely affect Acquiring Fund's financial condition or the
conduct of its business; Acquiring Fund knows of no facts that might form
the basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially
or adversely affects its business or its ability to consummate the
transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action on the
part of Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to receipt of any
necessary exemptive relief or no-action assurances requested from the SEC or
its staff with respect to sections 17(a) and 17(d) of the 1940 Act, this
Agreement will constitute a valid and legally binding obligation of
Acquiring Fund, enforceable in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the 1934 Act, or the 1940 Act for the
execution or performance of this Agreement by Trust, except for (a) the
filing with the SEC of the Registration Statement, (b) receipt of the
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exemptive relief referenced in subparagraph 4.2.9, and (c) such consents,
approvals, authorizations, and filings as have been made or received or as
may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material respects
with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940
Act and the regulations thereunder and (b) not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by Trust with respect to Target for use therein;
4.2.12. Acquiring Fund is a "fund" (within the meaning of section
851(h)(2) of the Code); it qualified for treatment as a RIC under Subchapter
M of the Code for each past taxable year since it commenced operations and
will continue to meet all the requirements for such qualification for its
current taxable year; Acquiring Fund intends to continue to meet all such
requirements for the next taxable year; and it has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M did
not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end investment
company; nor does Acquiring Fund have any plan or intention to redeem or
otherwise reacquire any Acquiring Fund Shares issued to the Shareholders
pursuant to the Reorganization, other than through redemptions arising in
the ordinary course of that business;
4.2.14. Acquiring Fund (a) will actively continue Target's business in
substantially the same manner that Target conducted that business
immediately before the Reorganization, (b) has no plan or intention to sell
or otherwise dispose of any of the Assets, except for dispositions made in
the ordinary course of that business and dispositions necessary to maintain
its status as a RIC under Subchapter M of the Code, and (c) expects to
retain substantially all the Assets in the same form as it receives them in
the Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
4.2.15. There is no plan or intention for Acquiring Fund to be dissolved
or merged into another corporation or business trust or any "fund" thereof
(within the meaning of section 851(h)(2) of the Code) following the
Reorganization;
4.2.16. Acquiring Fund is not under the jurisdiction of a court in a
"title 11 or similar case" (within the meaning of section 368(a)(3)(A) of
the Code);
4.2.17. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock or securities of
any one issuer and (b) not more than 50% of the value of such assets will be
invested in the stock or securities of five or fewer issuers; and
4.2.18. Acquiring Fund does not own, directly or indirectly, nor will it
acquire, directly or indirectly, at any time through the Effective Time, nor
has it owned, directly or indirectly, at any time during the past five
years, any shares of Target.
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4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares, when received
by the Shareholders, will be approximately equal to the fair market value of
their Target Shares constructively surrendered in exchange therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem or otherwise dispose of any portion of the Acquiring
Fund Shares to be received by them in the Reorganization and (b) does not
anticipate dispositions of those Acquiring Fund Shares at the time of or
soon after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Target as a series of an open-end investment
company. Consequently, its management expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of or at
the time of the Reorganization will be de minimis. Nor does its management
anticipate that there will be extraordinary redemptions of Acquiring Fund
Shares immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto, plus any liabilities and expenses of the parties
incurred in connection with the Reorganization;
4.3.5. The fair market value on a going concern basis of the Assets will
equal or exceed the Liabilities to be assumed by Acquiring Fund and those to
which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market value
of the net assets, and at least 70% of the fair market value of the gross
assets, held by Target immediately before the Reorganization. For the
purposes of this representation, any amounts used by Target to pay its
Reorganization expenses and redemptions and distributions made by it
immediately before the Reorganization (except for (a) distributions made to
conform to its policy of distributing all or substantially all of its income
and gains to avoid the obligation to pay federal income tax and/or the
excise tax under section 4982 of the Code and (b) redemptions not made as
part of the Reorganization) will be included as assets thereof held
immediately before the Reorganization;
4.3.8. None of the compensation received by any Shareholder who is an
employee of Target will be separate consideration for, or allocable to, any
of the Target Shares held by such Shareholder-employee; none of the
Acquiring Fund Shares received by any such Shareholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
the consideration paid to any such Shareholder-employee will be for services
actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services; and
4.3.9. Immediately after the Reorganization, the Shareholders will not
own shares constituting "control" of Acquiring Fund within the meaning of
section 304(c) of the Code.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that (a)
such ordinary course will include declaring and
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paying customary dividends and other distributions and such changes in
operations as are contemplated by each Fund's normal business activities and (b)
each Fund will retain exclusive control of the composition of its portfolio
until the Closing; provided that Target shall not dispose of more than an
insignificant portion of its historic business assets during such period without
Acquiring Fund's prior consent.
5.2. Target covenants to call a shareholders' meeting to consider and act
upon this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Trust covenants to use all reasonable efforts to obtain the approvals
and authorizations required by the 1933 Act, the 1940 Act, and such state
securities laws it may deem appropriate in order to continue its operations
after the Effective Time.
5.5. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by the
other Fund of all the obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have been
duly adopted and approved by Trust's board of trustees and shall have been
approved by Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either Fund may for
itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
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6.4. Trust (on behalf of Target) shall have received an opinion of
Kirkpatrick & Lockhart LLP, its counsel, substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of Trust, a Business
Trust duly organized and validly existing under the laws of the Commonwealth
of Massachusetts with power under its Declaration of Trust to own all of its
properties and assets and, to the knowledge of such counsel, to carry on its
business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by Trust on behalf
of Target, is a valid and legally binding obligation of Trust with respect
to Acquiring Fund, enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly issued
and outstanding and fully paid and non-assessable, except to the extent that
under Massachusetts law shareholders of a Business Trust may, under certain
circumstances, be held personally liable for its obligations, and no
shareholder of Acquiring Fund has any preemptive right to subscribe for or
purchase such shares;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Trust's Declaration of Trust or By-Laws or any provision of any
agreement (known to such counsel) to which Trust (with respect to Acquiring
Fund) is a party or by which it is bound or, to the knowledge of such
counsel, result in the acceleration of any obligation, or the imposition of
any penalty, under any agreement, judgment, or decree to which Trust (with
respect to Acquiring Fund) is a party or by which it is bound, except as set
forth in such opinion;
6.4.5. To the knowledge of such counsel, no consent, approval,
authorization, or order of any court or governmental authority is required
for the consummation by Trust on behalf of Acquiring Fund of the
transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act, and the 1940 Act and such as may be required
under state securities laws;
6.4.6. Trust is registered with the SEC as an investment company, and to
the knowledge of such counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel, (a) no litigation,
administrative proceeding, or investigation of or before any court or
governmental body is pending or threatened as to Trust (with respect to
Acquiring Fund) or any of its properties or assets attributable or allocable
to Acquiring Fund and (b) Trust (with respect to Acquiring Fund) is not a
party to or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially and adversely affects
Acquiring Fund's business, except as set forth in such opinion.
In rendering such opinion, such counsel may rely, as to matters governed by the
laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel.
6.5. Trust (on behalf of Acquiring Fund) shall have received an opinion of
Kirkpatrick & Lockhart LLP, its counsel, substantially to the effect that:
6.5.1. Target is a duly established series of Trust, a Business Trust
duly organized and validly existing under the laws of the Commonwealth of
Massachusetts with power under its Declaration of Trust to own all of its
properties and assets and, to the knowledge of such counsel, to carry on its
business as presently conducted;
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6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Trust on behalf of Target and (b) assuming due authorization,
execution, and delivery of this Agreement by Trust on behalf of Acquiring
Fund, is a valid and legally binding obligation of Trust with respect to
Target, enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights and
by general principles of equity;
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Trust's Declaration of Trust or By-Laws or any provision of any
agreement (known to such counsel) to which Trust (with respect to Target) is
a party or by which it is bound or, to the knowledge of such counsel, result
in the acceleration of any obligation, or the imposition of any penalty,
under any agreement, judgment, or decree to which Trust (with respect to
Target) is a party or by which it is bound, except as set forth in such
opinion;
6.5.4. To the knowledge of such counsel, no consent, approval,
authorization, or order of any court or governmental authority is required
for the consummation by Trust on behalf of Target of the transactions
contemplated herein, except such as have been obtained under the 1933 Act,
the 1934 Act, and the 1940 Act and such as may be required under state
securities laws;
6.5.5. Trust is registered with the SEC as an investment company, and to
the knowledge of such counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel, (a) no litigation,
administrative proceeding, or investigation of or before any court or
governmental body is pending or threatened as to Trust (with respect to
Target) or any of its properties or assets attributable or allocable to
Target and (b) Trust (with respect to Target) is not a party to or subject
to the provisions of any order, decree, or judgment of any court or
governmental body that materially and adversely affects its business, except
as set forth in such opinion.
In rendering such opinion, such counsel may rely, as to matters governed by the
laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel.
6.6. Trust shall have received an opinion of Kirkpatrick & Lockhart LLP, its
counsel, as to the federal income tax consequences mentioned below ("Tax
Opinion"). In rendering the Tax Opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations made in this Agreement (and/or in separate letters addressed to
such counsel) and the certificate delivered pursuant to paragraph 3.4. The Tax
Opinion shall be substantially to the effect that, based on the facts and
assumptions stated therein, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely for
Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities,
followed by Target's distribution of those shares to the Shareholders
constructively in exchange for the Shareholders' Target Shares, will
constitute a reorganization within the meaning of section 368(a)(1)(C) of
the Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
6.6.2. No gain or loss will be recognized to Target on the transfer to
Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. No gain or loss will be recognized to Acquiring Fund on its
receipt of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
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6.6.4. Acquiring Fund's basis for the Assets will be the same as the
basis thereof in Target's hands immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's holding
period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares pursuant
to the Reorganization; and
6.6.6. A Shareholder's basis for the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the basis for its
Target Shares to be constructively surrendered in exchange for those
Acquiring Fund Shares, and its holding period for those Acquiring Fund
Shares will include its holding period for those Target Shares, provided
they are held as capital assets by the Shareholder at the Effective Time.
Notwithstanding paragraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder (regarding the recognition of gain or loss and/or the determination
of the basis or holding period) with respect to any asset (including certain
options, futures, and forward contracts included in the Assets) as to which any
unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting.
At any time before the Closing, either Fund may waive any of the foregoing
conditions if, in the judgment of Trust's board of trustees, such waiver will
not have a material adverse effect on its shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. There are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
7.2. Except as otherwise provided herein, all expenses incurred in
connection with the transactions contemplated by this Agreement (whether or not
they are consummated) will be borne by the Funds proportionately, as follows:
each such expense will be borne by the Funds in proportion to their respective
net assets as of the close of business on the last business day of the month in
which such expense was incurred. Such expenses include: (a) expenses incurred in
connection with entering into and carrying out the provisions of this Agreement;
(b) expenses associated with the preparation and filing of the Registration
Statement; (c) registration or qualification fees and expenses of preparing and
filing such forms as are necessary under applicable state securities laws to
qualify the Acquiring Fund Shares to be issued in connection herewith in each
state in which Target's shareholders are resident as of the date of the mailing
of the Proxy Statement to such shareholders; (d) printing and postage expenses;
(e) legal and accounting fees; and (f) solicitation costs.
8. ENTIRE AGREEMENT; SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall survive
the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
prior to the Effective Time, (b) if a
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condition to its obligations has not been met and it reasonably appears that
such condition will not or cannot be met, or (c) if the Closing has not occurred
on or before December 31, 1995; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or Trust's trustees or
officers, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Massachusetts; provided that, in the
case of any conflict between such laws and the federal securities laws, the
latter shall govern.
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3. The parties acknowledge that Trust is a Business Trust. Notice is
hereby given that this instrument is executed on behalf of Trust's trustees
solely in their capacity as trustees, and not individually, and that Trust's
obligations under this instrument are not binding on or enforceable against any
of its trustees, officers, or shareholders, but are only binding on and
enforceable against each Fund's assets and property. Each Fund agrees that, in
asserting any rights or claims under this Agreement, it shall look only to the
other Fund's assets and property in settlement of such rights or claims and not
to such trustees or shareholders.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its duly authorized officer.
ATTEST:
PAINEWEBBER OLYMPUS FUND,
on behalf of its series,
PAINEWEBBER GROWTH FUND
By: /s/ GREGORY K. TODD /s/ DIANNE E. O'DONNELL
.................................... ..............................
Assistant Secretary Vice President
ATTEST:
PAINEWEBBER OLYMPUS FUND,
on behalf of its series,
PAINEWEBBER COMMUNICATIONS
& TECHNOLOGY GROWTH FUND
By: /s/ GREGORY K. TODD /s/ JOAN L. COHEN
..................................... .................................
Assistant Secretary Vice President
B-13
