<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PAINEWEBBER SERIES TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
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<PAGE>
PAINEWEBBER SERIES TRUST
1285 Avenue of the Americas
New York, New York 10019
February , 1996
Dear Shareholder:
Enclosed is a proxy statement asking you to vote in favor of several
proposals relating to the management and operation of your Portfolio of
PaineWebber Series Trust.
After we acquired the Kidder, Peabody mutual funds last February, our
enlarged menu of funds was confusing -- too many had overlapping objectives or
were too narrowly focused. We consolidated 33 long-term, open-end funds into 21
by focusing on those types of funds most investors want. This consolidation
allowed us to lower expense ratios (in most cases) and to clarify fund names.
These votes are the final phase of that fund consolidation.
A special meeting of PaineWebber Series Trust is being held on April 11,
1996 to consider these proposals and to transact any other business that may
properly come before the meeting. In the past, when we have solicited proxies
for your Portfolio, we usually have enclosed a proxy statement directed solely
to the shareholders of your Portfolio. This time, however, shareholders of each
of the PaineWebber Series Trust Portfolios are being asked to approve the same
proposals, so most of the information that must be included in a proxy statement
for your Portfolio needs to be included in a proxy statement for the other
Portfolios as well. Therefore, in order to save money, one proxy statement has
been prepared for all of the Portfolios. This proxy statement contains detailed
information about each of the proposals, and we recommend that you read it
carefully. However, we have also attached some Questions and Answers that we
hope will assist you in evaluating the proposals.
Thank you for your attention to this matter and for your continuing
investment in the Fund.
Very truly yours,
Margo N. Alexander
PRESIDENT
PROXY CARDS FOR EACH OF YOUR PORTFOLIOS ARE ENCLOSED ALONG WITH THE PROXY
STATEMENT. PLEASE VOTE YOUR SHARES TODAY BY SIGNING AND RETURNING EACH
ENCLOSED PROXY CARD IN THE POSTAGE PREPAID ENVELOPE PROVIDED. THE BOARD
RECOMMENDS THAT YOU VOTE "FOR" EACH PROPOSAL.
<PAGE>
QUESTIONS AND ANSWERS
Q: WHAT IS THE PURPOSE OF THIS PROXY SOLICITATION?
A: The purpose of this proxy is to ask you to vote on two primary issues:
-to elect eleven Board members, and
-to approve changes to your Portfolio's fundamental investment
restrictions.
In addition, you are being asked to ratify the selection of your Portfolio's
independent auditors.
Q: WHY AM I RECEIVING PROXY INFORMATION ON PORTFOLIOS THAT I DO NOT OWN?
A: In the past, when we have solicited proxies for your Portfolio, we have
usually enclosed a proxy statement directed solely to the shareholders of
one Portfolio. This time, however, shareholders of several Portfolios are
being asked to approve the same proposals, so most of the information that
must be included in a proxy statement for your Portfolio needs to be
included in a proxy statement for the other Portfolios as well. Therefore,
in order to save money, one proxy statement has been prepared for all the
Portfolios.
Q: WHY ARE YOU RECOMMENDING A UNIFIED BOARD FOR THE PAINEWEBBER FUNDS?
A: A Corporate Governance Task Force, comprised of a number of the existing
Board Members, assisted by Mitchell Hutchins representatives, recommended to
the PaineWebber Fund Boards, and they agreed, that the Funds should be
governed by larger Boards composed of the same members. The Task Force
concluded that this "unified" Board structure benefits the Funds by creating
a diverse, experienced group of Board Members who understand the operations
of the Funds and are exposed to the wide variety of issues that arise from
overseeing different types of funds.
Q: WHY HAS THE BOARD BEEN EXPANDED TO ELEVEN MEMBERS?
A: At the recommendation of the Corporate Governance Task Force, the Series
Trust and other PaineWebber Fund Boards have been expanded to include eleven
members, eight of whom would be independent. The Task Force considered
issues relating to the management and long-term welfare of the PaineWebber
Funds. It recommended, and the Boards agreed to adopt, an expanded Board as
part of an overall plan to coordinate and enhance the efficiency of the
governance of the Funds. Expanding the size of the Boards is intended to
facilitate the increased use of Board committees for different purposes,
including the periodic review of the Funds' contractual and audit
arrangements. The Fund Boards approved the Task Force recommendations and
nominated eleven individuals drawn primarily from the existing Boards.
Q: WILL THE PROPOSED CHANGES RESULT IN HIGHER ADVISORY FEES?
A: No. The advisory and administrative fees charged to each Portfolio will
remain the same.
Q: WHAT ARE "FUNDAMENTAL" INVESTMENT RESTRICTIONS, AND WHY ARE THEY BEING
CHANGED?
A: A Portfolio's "fundamental" investment restrictions are limitations placed on
a Portfolio's investment policies that can be changed only by a shareholder
vote -- EVEN IF THE CHANGES ARE MINOR. The law requires certain investment
policies to be designated as fundamental. Each Portfolio adopted a number of
fundamental investment restrictions when the Portfolio was created, and many
of those fundamental restrictions reflect regulatory, business or industry
conditions, practices or requirements that are no longer in effect. Others
reflect regulatory requirements that, while still in effect, do not need to
be classified as fundamental restrictions.
The Board believes that fundamental investment restrictions that are not
legally required should be eliminated and that the remaining fundamental
restrictions should be modernized and made more uniform. The Board believes
that the proposed changes to the Portfolios' fundamental
<PAGE>
investment restrictions will provide greater flexibility. The proposed
changes also will eliminate minor differences in wording that may give rise
to unintended differences in effect or interpretation.
Q: DO THE PROPOSED CHANGES TO FUNDAMENTAL INVESTMENT RESTRICTIONS MEAN THAT MY
PORTFOLIO'S INVESTMENT OBJECTIVE IS BEING CHANGED?
A: No. None of the proposals would change the investment objective of any
Portfolio.
Q: WHAT WILL BE THE EFFECT OF THE PROPOSED CHANGES TO MY PORTFOLIO'S FUNDAMENTAL
RESTRICTIONS?
A: The Board does not believe that the proposed changes to fundamental
investment restrictions will result at this time in a material change in the
level of investment risk for any Portfolio. However, the changes will allow
each Portfolio greater flexibility to respond to future investment
opportunities by making changes in non-fundamental investment policies that,
at a future time, the Board considers desirable. A shareholder vote will not
be necessary for future changes to non-fundamental investment policies or
restrictions.
Q: WHY ARE SHAREHOLDERS BEING ASKED TO RATIFY THE SELECTION OF THEIR PORTFOLIO'S
INDEPENDENT AUDITORS?
A: The law requires that shareholders be asked to ratify the selection of their
Portfolio's independent auditors at the meetings at which Board Members are
elected. The Portfolios do not hold regular annual meetings and, therefore,
are asking for your ratification at this time. Each year, a Portfolio's
independent auditors audit the Portfolio's financial statements and prepare
the Portfolio's federal and state income tax returns.
Q: WHAT ARE MY BOARD'S RECOMMENDATIONS?
A: The Board has recommended that you vote "FOR" the nominees for Board Member
and "FOR" each Proposal that applies to your Portfolio.
THE ATTACHED PROXY STATEMENT CONTAINS MORE DETAILED INFORMATION ABOUT EACH
OF THE PROPOSALS RELATING TO YOUR PORTFOLIO. PLEASE READ IT CAREFULLY.
<PAGE>
PAINEWEBBER SERIES TRUST
------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 11, 1996
------------------------
TO THE SHAREHOLDERS:
A special meeting of the holders of shares of beneficial interest of
PaineWebber Series Trust ("Trust") will be held at 1285 Avenue of the Americas,
38th Floor, New York, New York, on April 11, 1996 at 4:00 p.m., Eastern Time for
the purpose of considering the following proposals with respect to the Trust or
with respect to one or more of its portfolios ("Portfolios"):
(1) For the Trust, to elect eleven members of its Board of Trustees to serve
indefinite terms until their successors are duly elected and qualified;
(2) For each Portfolio, to ratify the selection of independent auditors for
its current fiscal year;
(3) For each Portfolio, to approve certain changes to its fundamental
investment restrictions;
(4) For each Portfolio, to transact such other business as may properly come
before the meetings and any adjournments thereof.
You are entitled to vote at the meeting, and at any adjournments thereof, if
you owned shares in one or more of the Portfolios at the close of business on
February [16], 1996. 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 EACH ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the Board,
Dianne E. O'Donnell
SECRETARY
February , 1996
1285 Avenue of the Americas
New York, New York 10019
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
ENCLOSED YOU WILL FIND ONE OR MORE PROXY CARDS RELATING TO EACH OF THE
PORTFOLIOS FOR WHICH YOU ARE ENTITLED TO VOTE. PLEASE INDICATE YOUR VOTING
INSTRUCTIONS ON EACH OF THE ENCLOSED PROXY CARDS, DATE AND SIGN THEM, AND
RETURN THEM IN THE ENVELOPE PROVIDED. IF YOU SIGN, DATE AND RETURN A PROXY
CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE
NOMINEES FOR TRUSTEE NAMED IN THE ATTACHED PROXY STATEMENT AND "FOR" ALL OTHER
PROPOSALS INDICATED ON THE CARDS. WE ASK YOUR COOPERATION IN MAILING IN YOUR
PROXY CARDS PROMPTLY.
<PAGE>
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Portfolio involved in validating your
vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on the
proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
- --------------------------------------------------------------------------- -------------------------------------
<S> <C>
Corporate Accounts
(1) ABC Corp........................................................... ABC Corp.
John Doe, Treasurer
(2) ABC Corp........................................................... John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer.................................. John Doe
(4) ABC Corp. Profit Sharing Plan...................................... John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership................................................ Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership............................... Jane B. Smith, General Partner
Trust Accounts
(1) ABC Trust Account.................................................. Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78................................ Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGMA/UTMA.......................................................... John B. Smith
(2) Estate of John B. Smith............................................ John B. Smith, Jr., Executor
</TABLE>
<PAGE>
PAINEWEBBER SERIES TRUST
1285 Avenue of the Americas
New York, New York 10019
------------------------
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 11, 1996
------------------------
This proxy statement is being furnished to holders of Shares of PaineWebber
Series Trust ("Trust") in connection with the solicitation by its Board of
proxies to be used at a special meeting ("Meeting") of shareholders to be held
on April 11, 1996, at 4:00 p.m., Eastern Time, or any adjournment or
adjournments thereof. This proxy statement is being first mailed to Shareholders
on or about February , 1996.
The Shares of the Portfolios within Series Trust are currently sold only to
the separate accounts ("Separate Accounts") of PaineWebber Life Insurance
Company, American Republic Insurance Company and American Benefit Life Insurance
Company (collectively, the "Insurance Companies" or the "Shareholders") to fund
the benefits under variable annuity contracts ("Contracts") issued by the
Insurance Companies. The Trust is a registered, management company under the
Investment Company Act of 1940, as amended ("1940 Act"), and is organized as a
Massachusetts business trust, composed of separate portfolios, each of which is
referred to herein as a "Portfolio." The Trust's shares of beneficial interest
are referred to as "Shares," and the owners of Contracts relating to each
Portfolio are "Contract Owners"; the Trust's board of trustees is referred to as
a "Board" and the trustees are "Board Members"; and the Trust's declaration of
trust is referred to as its "Charter." A listing of the formal name for each
Portfolio and of the shorthand name for the Portfolio that is used in this proxy
statement is set forth below.
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") is the
investment adviser and administrator for each Portfolio. Certain Portfolios have
sub-advisers other than Mitchell Hutchins, as set forth below. Mitchell Hutchins
is a wholly owned subsidiary of PaineWebber Incorporated ("PaineWebber"), which,
in turn, is a wholly owned subsidiary of Paine Webber Group Inc. ("PW Group"), a
publicly held financial services holding company. There is no principal
underwriter for the Shares of the Portfolios. The principal business address of
each of Mitchell Hutchins, PaineWebber and PW Group is 1285 Avenue of the
Americas, New York, New York 10019.
<TABLE>
<CAPTION>
NAME AS USED IN SUB-ADVISER
PORTFOLIO NAME THIS PROXY STATEMENT AND ADDRESS
- ------------------------------------- ------------------------ ----------------------------------------
<S> <C> <C>
PaineWebber Aggressive Growth Aggressive Growth Nicholas Applegate Capital
Portfolio Portfolio Management L.P.
600 West Broadway, 29th Floor
San Diego, California 92260
PaineWebber Balanced Portfolio Balanced Portfolio --
PaineWebber Global Growth Portfolio Global Growth Portfolio GE Investment Management
Incorporated
3003 Summer Street
Stamford, Connecticut 06904
PaineWebber Global Income Portfolio Global Income Portfolio --
PaineWebber Growth Portfolio Growth Portfolio --
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
NAME AS USED IN SUB-ADVISER
PORTFOLIO NAME THIS PROXY STATEMENT AND ADDRESS
- ------------------------------------- ------------------------ ----------------------------------------
<S> <C> <C>
PaineWebber Growth and Income Growth and Income --
Portfolio Portfolio
PaineWebber High Grade Fixed Income High Grade Portfolio --
Portfolio
PaineWebber Money Market Portfolio Money Market Portfolio --
PaineWebber Strategic Fixed Income Strategic Fixed Pacific Investment
Portfolio Portfolio Management Company
840 Newport Center Drive
Suite 360
Newport Beach, California 92101
</TABLE>
VOTING INFORMATION
The presence, in person or by proxy, of a majority of the Shares of the
Trust outstanding and entitled to vote will constitute a quorum for the
transaction of business at the Meeting. In accordance with their view of
applicable law, the Insurance Companies will solicit voting instructions from
the Contract Owners relating to the Portfolios with respect to the matters set
forth in this proxy statement. In connection with the solicitation of voting
instructions, the Insurance Companies will furnish a copy of this proxy
statement to Contract Owners.
In the event that a quorum is not present at a Meeting, or if a quorum is
present at that Meeting but sufficient votes to approve any of the proposals are
not received, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies. Any adjournment will
require the affirmative vote of a majority of those Shares represented at the
Meeting in person or by proxy. The persons named as proxies will vote those
proxies which they are entitled to vote FOR any proposal in favor of the
adjournment and will vote those proxies required to be voted AGAINST any
proposal against the adjournment. A Shareholder vote may be taken on one or more
of the proposals in this proxy statement prior to any such adjournment if
sufficient votes have been received and it is otherwise appropriate.
The solicitation of proxies, the cost of which will be borne by the
Portfolios (and by the other funds within the PaineWebber fund complex that
currently are soliciting proxies on substantially the same matters), will be
made primarily by mail but also may include telephone or oral communications by
regular employees of Mitchell Hutchins or PaineWebber, who will not receive any
compensation therefor from the Portfolios.
Contract Owners at the close of business on February [16], 1996 (the "Record
Date") will be entitled to be present and give voting instructions with respect
to their Shares of the Portfolios owned as of the Record Date. Information as to
the number of outstanding Shares of each Portfolio as of the Record Date and the
amount of Shares of the Portfolios owned by Separate Accounts of the Insurance
Companies is set forth in Exhibit A. The Insurance Companies will vote Shares in
accordance with voting instructions received from Contract Owners and will vote
Shares for which no instructions are received in the same proportion as Shares
for which instructions have been received.
If any nominee for the Board should withdraw or otherwise become unavailable
for election, your Shares will be voted in favor of such other nominee or
nominees as management may recommend. You may revoke any proxy card by giving
another proxy or by letter or telegram revoking the initial proxy. To be
effective, your revocation must be received by the appropriate Insurance Company
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.
2
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THE TRUST WILL FURNISH TO THE INSURANCE COMPANIES AND TO THE CONTRACT OWNERS
OF ANY PORTFOLIO, WITHOUT CHARGE, COPIES OF THE PORTFOLIO'S MOST RECENT ANNUAL
AND MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING SUCH ANNUAL REPORT, IF ANY ON
REQUEST. CONTRACT OWNERS MAY REQUEST SUCH REPORTS FROM ANNUITY ADMINISTRATION,
601 6TH AVENUE, DES MOINES, IOWA OR BY CALLING, TOLL FREE, [1-800-647-1568].
Shareholders of each Portfolio will vote together on Proposal 1.
Shareholders of each Portfolio to which each other Proposal applies will vote
separately on those Proposals. Each full Share of each Portfolio outstanding is
entitled to one vote and each fractional Share of each Portfolio outstanding is
entitled to a proportionate share of one vote with respect to each matter to be
voted upon by the Shareholders of that Portfolio. Information about the vote
necessary with respect to each proposal is discussed below in connection with
the proposal.
------------------------
PROPOSAL 1 -- ELECTION OF BOARD MEMBERS
RELEVANT PORTFOLIOS. All Portfolios.
DISCUSSION. The Board has acted to expand its membership to eleven members
and has nominated the eleven individuals identified below for election to the
Board at the Meeting. Under Proposal 1, Shareholders are being asked to vote on
those nominees. Pertinent information about each nominee is set forth in the
listing below. Each nominee has indicated a willingness to serve if elected. If
elected, each nominee will hold office for an indefinite term until his or her
successor is duly elected and qualified, or until he or she resigns or is
otherwise removed.
The nominees for the Trust's Board have also been nominated to serve on the
boards of other funds within the PaineWebber fund complex. (As used herein,
references to the "Boards" are to the Trust Board and the boards of those other
PaineWebber funds, collectively.) The increase in the size of the Boards and the
nomination of a single group of nominees to serve as the Board Members for the
PaineWebber funds reflects an overall plan to coordinate and enhance the
efficiency of the governance of the Trust and of other investment companies that
are part of the PaineWebber fund complex. This plan was developed by a Corporate
Governance Task Force comprised of a number of current Board Members who are not
"interested persons" of the Trust, as defined in the 1940 Act ("independent"
Board Members), with the advice of their counsel, and assisted by
representatives of Mitchell Hutchins and counsel to the Portfolios. The
Corporate Governance Task Force considered various matters related to the
management and long-term welfare of the Trust and made recommendations to the
Boards, including proposals concerning the size and composition of the Boards,
committee structures, fees and related matters. These proposals, the substance
of which is summarized below, were adopted by the Trust's Board at a meeting in
November, 1995. The nominees for independent Board memberships were selected by
the Board of the Trust. With the exception of the nominations for Board
membership, which are the subject of Proposal 1, no Shareholder action is
required with respect to the Corporate Governance Task Force recommendations.
The election of the nominees for the Board of the Trust is not conditioned upon
their election to the Board of any other fund within the PaineWebber fund
complex.
The Trust's Board believes that coordinated governance through a unified
group of Board Members will benefit the Trust. Despite some recent
consolidations, the PaineWebber fund complex has grown substantially in size in
the years since the current Board structures were created. This growth has been
due to the creation of new funds and Portfolios intended to serve a wide variety
of investment needs and the recent acquisition of the asset management business
of Kidder, Peabody Asset Management Inc. The PaineWebber fund complex currently
includes over 60 portfolios of open-end and closed-end funds having a wide
variety of investment objectives and policies. These include money market funds;
bond funds that invest in corporate and other bonds with varying maturities and
risk characteristics; municipal bond funds; balanced funds that invest in
combinations of debt and equity securities; growth funds that invest in a wide
variety of domestic equity securities; and global funds that invest in debt or
equity securities from around the world. The Trust's Board believes that the
3
<PAGE>
Portfolios will benefit from the experience that each nominee will gain by
serving on the Boards of such a diverse group of funds. Coordinated governance
within the PaineWebber fund complex also will reduce the possibility that the
separate Boards of the PaineWebber funds might arrive at conflicting decisions
regarding the operations and management of the funds, including the Portfolios,
and any resulting costs.
The Trust's Board also believes that the Trust will benefit from the
diversity and experience of the nominees that would comprise the expanded
Boards. These nominees have had distinguished careers in government, finance,
law, marketing and other areas and will bring a wide range of expertise to the
Boards. Eight of the eleven nominees have no affiliation or business connection
with PaineWebber or Mitchell Hutchins and would be independent Board Members.
Independent Board Members are charged with special responsibilities to provide
an independent check on management and to approve advisory, distribution and
similar agreements between the Portfolios and management. They also constitute
the members of the Boards' audit committees. In the course of their duties,
Board Members must review and understand large amounts of financial and
technical material and must be willing to devote substantial amounts of time.
Due to the demands of service on the Boards, independent nominees may need to
reject other attractive opportunities. With the exception of [ ], each
of the independent nominees already serves as an independent Board Member for
one or more funds within the PaineWebber fund complex and understands the
operations of the complex.
The proposed unified Board structure will require a greater expenditure of
time by each Board Member. Election of the eleven nominees will permit the Board
to enhance its supervision of the Portfolios by increased use of a committee
structure. Under the Board structure envisioned by the Corporate Governance Task
Force and adopted by the Boards, each Board's audit committee is being divided
into two sub-committees, each comprised of four of the independent Board
Members. Each sub-committee will function as an audit and contract review
committee that periodically will review the contractual and audit arrangements
for funds and Portfolios having similar characteristics and will report and make
recommendations to the full Boards. The sub-committee structure will enable
Board members both to develop expertise about particular Portfolios, while still
benefiting from the experience and knowledge of the full Boards. Other
committees may be used in the future. It is anticipated that the full Board will
have five regularly scheduled meetings per year.
As recommended by the Corporate Governance Task Force, the compensation paid
to independent Board Members will also change. Under the new structure, each
independent Board Member will be paid annual fees of $500 per Portfolio
(compared to a single fee of $4,000 for all Portfolios currently) and will
receive an attendance fee of $150 (compared to $250 currently) for each Board
meeting and for each committee meeting (other than committee meetings held on
the same date as a Board meeting). The chairman of the audit committee, and the
chairman of the audit and contract review subcommittee of which the chairman of
the audit committee is not a member, will receive additional annual compensation
from the PaineWebber funds of $15,000. Interested Board Members will continue to
receive no compensation from any PaineWebber fund. Board Members will continue
to be reimbursed for any expenses incurred in attending meetings. A table
setting forth information relating to the compensation paid to Board Members
during the past fiscal and calendar years is attached as Exhibit B. Pursuant to
the recommendations of the Corporate Governance Task Force, each Board Member
will be subject to mandatory retirement at the end of the year in which he or
she becomes 72 years old.
4
<PAGE>
The nominees for election as Board Members, their ages, and a description of
their principal occupations are listed in the table below. A table indicating
the stock ownership of each nominee as of January 31, 1996, is attached as
Exhibit C.
<TABLE>
<CAPTION>
NOMINEE; AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ----------------------------------------------------------------------
<S> <C>
Margo N. Alexander;* 48 Mrs. Alexander is president, chief executive officer and a director of
Mitchell Hutchins (since January, 1995). Mrs. Alexander is an
executive vice president and director of PaineWebber. Mrs. Alexander
also is a director or trustee of 3 investment companies for which
Mitchell Hutchins or PaineWebber serves as investment adviser.
Richard Q. Armstrong; 60 Mr. Armstrong is chairman and principal of RQA Enterprises (management
consulting firm) (since April 1991 and principal occupation since
March 1995). Mr. Armstrong is also a director of Hi Lo Automotive,
Inc. He was chairman of the board, chief executive officer and
co-owner of Adirondack Beverages (producer and distributor of soft
drinks and sparkling/still waters) (October 1993-March 1995). He was a
partner of the New England Consulting Group (management consulting
firm) (December 1992-September 1993). He was managing director of LVMH
U.S. Corporation (U.S. subsidiary of the French luxury goods
conglomerate, Louis Vuitton Moet Hennessey Corporation) (1987-1991)
and chairman of its wine and spirits subsidiary, Schieffelin &
Somerset Company (1987-1991). Mr. Armstrong also is a director or
trustee of 6 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
E. Garrett Bewkes, Jr.;* 69 Mr. Bewkes is a director of, and a consultant to, PW Group. Prior to
1988, he was chairman of the board, president and chief executive
officer of American Bakeries Company. Mr. Bewkes is also a director of
Interstate Bakeries Corporation and NaPro Bio-Therapeutics, Inc. Mr.
Bewkes also is a director or trustee of 24 investment companies for
which Mitchell Hutchins or PaineWebber serves as investment adviser.
Richard Burt; 47 Mr. Burt is chairman of International Equity Partners (international
investments and consulting firm) (since March 1994) and a partner of
McKinsey & Company (management consulting firm) (since 1991). He is
also a director of American Publishing Company. He was the chief
negotiator in the Strategic Arms Reduction Talks with the former
Soviet Union (1989-1991) and the U.S. Ambassador to the Federal
Republic of Germany (1985-1989). Mr. Burt also is a director or
trustee of 7 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NOMINEE; AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ----------------------------------------------------------------------
<S> <C>
Mary C. Farrell;* 46 Ms. Farrell is a managing director, senior investment strategist, and
member of the Investment Policy Committee of PaineWebber. Ms. Farrell
joined PaineWebber in 1982. She is a member of the Financial Women's
Association and Women's Economic Roundtable and is employed as a
regular panelist on Wall $treet Week with Louis Rukeyser. She serves
on the Board of Overseers of New York University's Stern School of
Business.
Meyer Feldberg; 53 Mr. Feldberg is Dean and Professor of Management of the Graduate
School of Business, Columbia University. Prior to 1989, he was
president of the Illinois Institute of Technology. Dean Feldberg is
also a director of AMSCO International Inc., Federated Department
Stores, Inc. and New World Communications Group Incorporated. Mr.
Feldberg also is a director or trustee of 19 investment companies for
which Mitchell Hutchins or PaineWebber serves as investment adviser.
George W. Gowen; 66 Mr. Gowen is a partner in the law firm of Dunnington, Bartholow &
Miller. Prior to May 1994, he was partner in the law firm of Fryer,
Ross & Gowen. Mr. Gowen is also a director of Columbia Real Estate
Investments, Inc. Mr. Gowen also is a director or trustee of 17
investment companies for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
Frederic V. Malek; 59 Mr. Malek is chairman of Thayer Capital Partners (investment bank) and
a co-chairman and director of CB Commercial Group Inc. (real estate).
From January 1992 to November 1992, he was campaign manager of
Bush-Quayle '92. From 1990 to 1992, he was vice chairman and, from
1989 to 1990, he was president of Northwest Airlines Inc., NWA Inc.
(holding company of Northwest Airlines Inc.) and Wings Holdings Inc.
(holding company of NWA Inc.). Prior to 1989, he was employed by the
Marriott Corporation (hotels, restaurants, airline catering and
contract feeding), where he most recently was an executive vice
president and president of Marriott Hotels and Resorts. Mr. Malek is
also a director of American Management Systems, Inc., Automatic Data
Processing, Inc., Avis, Inc., FPL Group, Inc., National Education Cor-
poration and Northwest Airlines Inc. Mr. Malek also is a director or
trustee of 17 investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NOMINEE; AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ----------------------------------------------------------------------
<S> <C>
Carl W. Schafer; 60 Mr. Schafer is president of the Atlantic Foundation (charitable
foundation supporting mainly oceanographic exploration and research).
He also is a director of Roadway Express, Inc. (trucking), The
Guardian Group of Mutual Funds, Evans Systems, Inc. (a motor fuels,
convenience store and diversified company), Hidden Lake Gold Mines
Ltd. (gold mining), Electronic Clearing House, Inc. (financial
transactions processing), Wainoco Oil Corporation and Nutraceutix Inc.
(biotechnology). Prior to January 1993, Mr. Schafer was chairman of
the Investment Advisory Committee of the Howard Hughes Medical
Institute. Mr. Schafer also is a director or trustee of 7 investment
companies for which Mitchell Hutchins or PaineWebber serves as
investment adviser.
[NAME, AGE AND BIOGRAPHY OF
ELEVENTH NOMINEE TO BE INSERTED]
John R. Torell III; 56 Mr. Torell is chairman of Torell Management, Inc. (financial advisory
firm), partner of Zilkha & Company (merchant banking and private
investment company) and chairman of Telesphere Corporation (electronic
provider of financial information). He is the former chairman and
chief executive officer of Fortune Bancorp (1990-1991 and 1990-1994,
respectively). He is the former chairman, president and chief
executive officer of CalFed, Inc. (savings association) (1988 to 1989)
and former president of Manufacturers Hanover Corp. (bank) (prior to
1988). Mr. Torell is also a director of American Home Products Corp.,
Volt Information Sciences Inc., and New Colt Inc. (armament
manufacturer). Mr. Torell also is a director or trustee of 7
investment companies for which Mitchell Hutchins or PaineWebber serves
as investment adviser.
</TABLE>
- ------------------------
*Indicates "interested person" of the Portfolios as defined by the 1940 Act, by
reason of his or her position with Mitchell Hutchins, PaineWebber or PW Group
or share ownership in PW Group and/or the General Electric Co. (the parent
company of the sub-adviser to Global Growth Portfolio).
Messrs. Bewkes, Feldberg, Gowen and Malek have been Members of the Board
since [ ], [ ], [ ] and 1987, respectively. The Board
met nine times during its most recently completed fiscal year. The Board has an
audit committee consisting of independent Board Members (currently, Messrs.
Feldberg, Gowen and Malek and Judith Davidson Moyers), which met one time during
the Trust's most recently completed fiscal year. The duties of the audit
committee are (a) to review reports prepared by the Trust's independent
auditors, including reports on the Trust's internal accounting control
procedures; (b) to review and recommend approval or disapproval of audit and
non-audit services and the fees charged for such services; (c) to evaluate the
independence of the independent auditors and to recommend whether to retain such
independent auditors for the next fiscal year; and (d) to report to the Board
and make such recommendations as it deems necessary. Each Board Member attended
75% or more of Board meetings and (with respect to members of the Board's audit
committee) audit committee meetings during the most recently completed fiscal
year. The Board does not have a standing nominating or compensation committee.
Information concerning officers of the Trust is provided in Exhibit D.
7
<PAGE>
REQUIRED VOTE. The candidates receiving the affirmative vote of a plurality
of the votes cast for the election of Board Members at the Meeting will be
elected, provided a quorum is present. Shares of all Portfolios of the Trust
vote together as a single class for the Members of the Trust's Board.
THE BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" EACH OF THE NOMINEES UNDER PROPOSAL 1.
------------------------
PROPOSAL 2 -- RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS OF THE PORTFOLIOS
RELEVANT PORTFOLIOS. All Portfolios.
DISCUSSION. Under Proposal 2, Shareholders of each Portfolio are asked to
ratify their Board's selection of independent auditors ("Auditors") for their
Portfolio. The Auditors for each Portfolio audit the Portfolio's financial
statements for each year and prepare the Portfolio's federal and state annual
income tax returns. During the last fiscal year, Ernst & Young LLP served as
Auditors for each of the Portfolios. The Board has selected them to continue to
serve in that capacity for the current fiscal year, subject to ratification by
Shareholders of each of the Portfolios at the Meeting.
Representatives of the Auditors are not expected to be present at the
Meeting but have been given the opportunity to make a statement if they so
desire, and will be available should any matters arise requiring their presence.
Ernst & Young LLP have informed the Portfolios that they have no material direct
or indirect financial interest in the Portfolios.
The persons named in the accompanying proxy will vote FOR ratification of
the selection of each Portfolio's Auditors unless contrary instructions are
given.
REQUIRED VOTE. For each Portfolio, approval of Proposal 2 requires a
majority of the votes cast with respect to Proposal 2 at the Meeting, provided a
quorum is present.
THE BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 2.
------------------------
PROPOSAL 3 -- APPROVAL OF CHANGES TO FUNDAMENTAL INVESTMENT
RESTRICTIONS AND POLICIES OF EACH PORTFOLIO
RELEVANT PORTFOLIOS. Changes are proposed for all Portfolios, but some of
the proposed changes apply only to certain Portfolios. See "Proposed Changes,"
below, for listings of the Portfolios to which each specific change applies.
REASONS FOR THE PROPOSED CHANGES. Pursuant to the 1940 Act, each of the
Portfolios has adopted certain fundamental investment restrictions and policies
("fundamental restrictions"), which are set forth in the Portfolio's prospectus
or statement of additional information, and which may be changed only with
Shareholder approval. Restrictions and policies that a Portfolio has not
specifically designated as being fundamental are considered to be
"non-fundamental" and may be changed by the Board without Shareholder approval.
Certain of the fundamental restrictions that the Portfolios have adopted in
the past reflect regulatory, business or industry conditions, practices or
requirements that are no longer in effect. Other fundamental restrictions
reflect regulatory requirements which remain in effect but which are not
required to be stated as fundamental, or in some cases even as non-fundamental,
restrictions. Also, as new funds have been created within the PaineWebber fund
complex over a period of years, substantially similar fundamental restrictions
often have been phrased in slightly different ways, sometimes resulting in minor
but unintended differences in effect or potentially giving rise to unintended
differences in interpretation.
8
<PAGE>
Accordingly, the Board has approved revisions to the Portfolios' fundamental
restrictions in order to simplify, modernize and make more uniform within the
PaineWebber fund complex those investment restrictions that are required to be
fundamental, and to eliminate those fundamental restrictions that are not
legally required. In most cases, existing fundamental restrictions that are
eliminated because they are not required to be fundamental would be
re-classified as non-fundamental restrictions.
The Board believes that the proposed changes to the Portfolios' fundamental
restrictions will enhance management's ability efficiently and effectively to
manage the Portfolios' assets in changing regulatory and investment
environments. In addition, by reducing to a minimum those policies that can be
changed only by Shareholder vote, each Portfolio will more often be able to
avoid the costs and delays associated with a Shareholder meeting when making
changes to its investment policies that, at a future time, the Board considers
desirable. Although the proposed changes in fundamental restrictions will allow
the Portfolios greater investment flexibility to respond to future investment
opportunities, the Board does not anticipate that the changes, individually or
in the aggregate, will result at this time in a material change in the level of
investment risk associated with an investment in any Portfolio.
The text and a summary description of each proposed change to the
Portfolios' fundamental restrictions are set forth below. Shareholders should
refer to Exhibit FR to this proxy statement for the text of the Portfolios'
existing fundamental restrictions. The text below also describes those non-
fundamental restrictions that would be adopted by the Board in conjunction with
the elimination of fundamental restrictions under Proposal 3. Any
non-fundamental restriction may be modified or eliminated by the Board at any
future date without any further approval of Shareholders.
If the proposed changes are approved by Shareholders of the respective
Portfolios at the Meeting, the Portfolios' statements of additional information
will be revised to reflect those changes. This will occur as soon as practicable
following the Meeting.
If approved by the Shareholders, these revisions must be filed with the
Securities and Exchange Commission ("SEC") and are subject to a comment and
review process. To the extent necessary to comply with regulatory comments or to
conform with the definitions and other terminology used in a Portfolio's
prospectus or statement of additional information, the language of these
provisions may be subject to further modification. However, any material change
would require Shareholder approval.
PROPOSED CHANGES. The following is the text and a summary description of
the proposed changes to the Portfolios' fundamental restrictions, together with
the text of those non-fundamental restrictions that would be adopted in
connection with the elimination of certain of the Portfolios' current
fundamental restrictions. With respect to each Portfolio and each proposed
fundamental restriction, if a percentage restriction is adhered to at the time
of an investment or transaction, a later increase or decrease in percentage
resulting from a change in the values of the Portfolio's portfolio securities or
the amount of its total assets will not be considered a violation of the
fundamental restriction.
1.A. MODIFICATION OF FUNDAMENTAL RESTRICTION ON PORTFOLIO DIVERSIFICATION
FOR DIVERSIFIED PORTFOLIOS.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios other than Global Income Portfolio.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Portfolio will not purchase securities of any one issuer if, as a
result, more than 5% of the Portfolio's total assets would be invested in
securities of that issuer or the Portfolio would own or hold more than 10%
of the outstanding voting securities of that issuer, except that up to 25%
of the Portfolio's total assets may be invested without regard to this
limitation, and except that this limitation does not apply to securities
issued or guaranteed by the U.S. government, its agencies and
instrumentalities or to securities issued by other investment companies."
9
<PAGE>
With respect to Portfolios that may invest in mortgage- and asset-backed
securities, the following interpretation applies to, but is not a part of, this
fundamental restriction: "Mortgage- and asset-backed securities will not be
considered to have been issued by the same issuer by reason of the securities
having the same sponsor, and mortgage- and asset-backed securities issued by a
finance or other special purpose subsidiary that are not guaranteed by the
parent company will be considered to be issued by a separate issuer from the
parent company."
DISCUSSION: All of the above referenced Portfolios are "diversified" funds
under the 1940 Act and, accordingly, must have fundamental restrictions or
policies establishing the percentage limitations with respect to investments in
individual issuers that they will follow in order to qualify as "diversified"
for that purpose. These Portfolios' current restrictions are somewhat more
limiting than is necessary in order to qualify as "diversified" funds. For
example, the restrictions do not reflect exceptions to the legally required
restriction for investments in securities of government agencies or of other
investment companies. The proposed language would conform to language being
proposed for use by other funds within the PaineWebber fund complex.
1.B. ELIMINATION OF FUNDAMENTAL RESTRICTION ON PORTFOLIO DIVERSIFICATION FOR
NON-DIVERSIFIED FUNDS.
PORTFOLIO TO WHICH THIS CHANGE APPLIES:
Global Income Portfolio.
DISCUSSION: For the Global Income Portfolio, the fundamental restriction on
diversification would be eliminated. This Portfolio is "non-diversified" for
purposes of the 1940 Act and, accordingly, is not required to establish any
fundamental investment restriction with respect to diversification. Unlike other
non-diversified funds in the PaineWebber fund complex, however, this Portfolio
currently has a fundamental restriction that, in substance, sets forth the
separate diversification requirements that even non-diversified funds must
satisfy in order to qualify for advantageous treatment as a regulated investment
company under the federal tax laws. While the Global Income Portfolio intends to
continue to qualify for this tax treatment, there is no legal necessity for it
to have a fundamental restriction that effectively restates the legal
requirements for doing so. Elimination of the fundamental restriction will
provide flexibility in the event that the applicable federal tax rules change in
the future.
2. MODIFICATION OF FUNDAMENTAL RESTRICTION ON CONCENTRATION.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
Except as specified below, the following text will apply to all
Portfolios:
"The Portfolio will not purchase any security if, as a result of that
purchase, 25% or more of the Portfolio's total assets would be invested in
securities of issuers having their principal business activities in the same
industry, except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities or to
municipal securities."
With respect to Money Market Portfolio, the following will be added at the
end of the foregoing fundamental restriction:
"or to certificates of deposit and bankers' acceptances of domestic
branches of U.S. banks."
Additionally, with respect to Money Market Portfolio, the following
interpretation applies to, but is not a part of, the fundamental restriction on
concentration proposed under Proposal 3:
"With respect to this limitation, domestic and foreign banking will be
considered to be different industries."
10
<PAGE>
DISCUSSION: The proposed changes would conform the language of the
Portfolios' fundamental restriction on concentration to language being proposed
for use by other funds within the PaineWebber fund complex. The Board believes
that conforming the language in this manner will help avoid unintended
differences in interpretation or effect. With respect to Money Market Portfolio,
the proposal continues a special exception that is available under SEC rules for
money market funds, but it reflects a change in the Portfolio's interpretation
as to the separateness of certain industry groups.
3. MODIFICATION OF FUNDAMENTAL RESTRICTION ON SENIOR SECURITIES AND
BORROWING.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Portfolio will not issue senior securities or borrow money, except
as permitted under the 1940 Act and then not in excess of 33 1/3% of the
Portfolio's total assets (including the amount of the senior securities
issued but reduced by any liabilities not constituting senior securities) at
the time of the issuance or borrowing, except that the Portfolio may borrow
up to an additional 5% of its total assets (not including the amount
borrowed) for temporary or emergency purposes."
DISCUSSION: The 1940 Act establishes limits on the ability of the
Portfolios to engage in leverage through borrowings or the issuance of other
"senior securities," a term that is defined, generally, to refer to Portfolio
obligations that have a priority over the Portfolio's Shares with respect to the
distribution of Portfolio assets or the payment of dividends. Currently, the
fundamental restrictions for each of the Portfolios, other than Strategic Fixed
Portfolio, are significantly more limiting than the restrictions imposed by the
1940 Act. These current fundamental restrictions provide that a Portfolio's
borrowings are limited to those that are for temporary or emergency purposes or
the issuance of repurchase agreements, and even then borrowings are generally
limited to 10% (33 1/3% in the case of High Grade Portfolio and 20% in the case
of Aggressive Growth Portfolio) of the Portfolio's assets. Moreover, each of
these Portfolios' fundamental borrowing restrictions also provide that the
Portfolio may not purchase additional portfolio securities at a time when
borrowings exceed 5% of total assets. The current fundamental restriction on
this subject for Strategic Fixed Portfolio is substantively very similar to the
restriction proposed under Proposal 3. Shareholders should refer to Exhibit FR
for a statement of their Portfolio's current fundamental borrowing restriction.
The proposed changes would relax the fundamental restrictions for most of
the Portfolios to make them no more limiting than the limitations that are
imposed under the 1940 Act. The Board believes that changing the Portfolios'
fundamental restrictions in this manner will provide flexibility for future
contingencies. However, the Board is not at this time making any change to the
Portfolios' operating policies with respect to borrowings. Accordingly, each
Portfolio that currently has a fundamental restriction that establishes a limit
on borrowings or senior securities that is less than the limit that would be
established under Proposal 3 or that imposes a limit on the Portfolio's ability
to purchase portfolio securities when borrowings exceed 5% of total assets, will
continue to be subject to those limitations as a matter of non-fundamental,
operating policy. These non-fundamental operating policies for any Portfolio may
be changed by its Board without further Shareholder approval.
4. MODIFICATION OF FUNDAMENTAL RESTRICTION ON MAKING LOANS.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Portfolio will not make loans, except through loans of portfolio
securities or through repurchase agreements, provided that for purposes of
this restriction, the acquisition of bonds, debentures or other debt
securities and investments in government obligations, commercial paper,
certificates of deposit, bankers' acceptances or similar instruments will
not be considered the making of a loan."
11
<PAGE>
DISCUSSION: The proposed change would conform the language of the
Portfolios' fundamental restriction on this subject to language being proposed
for use by other funds within the PaineWebber fund complex. The Board believes
that conforming the language in this manner will help avoid unintended
differences in interpretation or effect.
The proposed change also clarifies that loans of portfolio securities will
be excluded from the general fundamental restriction on making loans. The
Portfolios' current fundamental restrictions already permit securities lending,
but for each Portfolio other than Strategic Fixed Portfolio, the proposed change
would eliminate language in the current fundamental restriction that limits
securities lending to 10% of the Portfolio's assets. The Board believes that the
Portfolios should not be subject to a fundamental restriction on securities
lending and that the Board should be able to govern the extent of securities
lending through a non-fundamental policy.
Subject (except in the case of Strategic Fixed Portfolio) to approval of
this Proposal 3 by the Shareholders, the Board has authorized the adoption of
non-fundamental policies that would allow each Portfolio to lend portfolio
securities in an amount up to 33 1/3% of its total assets, which is the maximum
level permitted under the 1940 Act. None of the Portfolios currently lends any
portfolio securities, and the Portfolios will not do so unless and until
specific securities lending programs are considered and approved by the Board.
Mitchell Hutchins currently is considering proposals for securities lending
programs for the Portfolios, and it anticipates presenting a recommendation for
such a program to the Board in the near future.
Lending securities would enable a Portfolio to earn additional income but
could result in a loss or delay in recovering the securities. Under any
securities lending program that may be approved by the Board, a Portfolio would
lend portfolio securities to broker-dealers or institutional investors that
Mitchell Hutchins (or, where applicable, a Portfolio's sub-adviser) deems
qualified, but only when the borrower maintains acceptable collateral with the
Portfolio's custodian in an amount at least equal to the market value of the
securities loaned, plus accrued interest and dividends. The Portfolio would pay
reasonable administrative and custodial fees in connection with any loan and
might pay a negotiated portion of the interest earned on the cash or instruments
held as collateral to the borrower or to the placing broker. The Portfolio would
retain the authority to terminate any loans at any time. A Portfolio would
regain record ownership of loaned securities to exercise beneficial rights, such
as voting rights, when doing so is considered to be in the Portfolio's interest.
5. MODIFICATION OF FUNDAMENTAL RESTRICTION ON UNDERWRITING SECURITIES.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Fund will not engage in the business of underwriting securities of
other issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities."
DISCUSSION: The 1940 Act contemplates that the Portfolios establish a
fundamental restriction on this subject, but none is set forth in the
Portfolios' statement of additional information. The proposed language would
conform to language being proposed for use by other funds within the PaineWebber
fund complex.
6. MODIFICATION OF FUNDAMENTAL RESTRICTION ON REAL ESTATE INVESTMENTS.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios.
12
<PAGE>
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Portfolio will not purchase or sell real estate, except that
investments in securities of issuers that invest in real estate and
investments in mortgage-backed securities, mortgage participations or other
instruments supported by interests in real estate are not subject to this
limitation, and except that the Portfolio may exercise rights under
agreements relating to such securities, including the right to enforce
security interests and to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in an orderly manner."
DISCUSSION: The proposed changes to this investment restriction more
completely describe the types of real estate-related securities that are
permissible and conform the language of the Portfolios' fundamental restriction
on this subject to language being proposed for use by other funds within the
PaineWebber fund complex. The Board believes that conforming the language in
this manner will help avoid unintended differences in interpretation or effect.
7. MODIFICATION OF FUNDAMENTAL RESTRICTION ON INVESTING IN COMMODITIES.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios.
PROPOSED TEXT OF FUNDAMENTAL RESTRICTION:
"The Portfolio will not purchase or sell physical commodities unless
acquired as a result of owning securities or other instruments, but the
Portfolio may purchase, sell or enter into financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments."
DISCUSSION: The proposed changes to this investment restriction are
intended to ensure that each Portfolio will have the maximum flexibility to
enter into hedging or other transactions utilizing financial contracts and
derivative products when doing so is permitted by operating policies established
for the Portfolio by the Board. The Board believes that this flexibility is
necessary for the Portfolios to respond to the rapid and continuing development
of derivative products. The proposed changes also allow flexibility in the event
of changes in regulatory standards or limitations. The existing fundamental
restrictions for most of the Portfolios already permit the use of most or all of
these types of financial contracts.
8. ELIMINATION OF FUNDAMENTAL RESTRICTION ON PLEDGING PORTFOLIO SECURITIES.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios.
PROPOSED CHANGE; TEXT OF RELATED NON-FUNDAMENTAL RESTRICTION:
Upon the approval of Proposal 3, the existing fundamental restrictions
on pledging securities would be eliminated, and those Portfolios that
currently have them would become subject to the following non-fundamental
restriction:
"The Portfolio will not mortgage, pledge or hypothecate any assets
except in connection with permitted borrowings or the issuance of senior
securities."
DISCUSSION: The Portfolios are not required to have a fundamental
restriction on their ability to pledge securities. In order to maximize the
Portfolios' flexibility, the Board believes that the Portfolios' restrictions on
pledging securities should be made non-fundamental. The non-fundamental
restrictions will allow a Portfolio to pledge assets to the same extent that it
can borrow or issue senior securities. The Portfolios current fundamental
restrictions on this subject limit each Portfolio to pledging only up to 5% of
its total assets.
13
<PAGE>
9. ELIMINATION OF FUNDAMENTAL RESTRICTION ON MARGIN TRANSACTIONS.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios.
PROPOSED CHANGE; TEXT OF RELATED NON-FUNDAMENTAL RESTRICTION:
Upon the approval of Proposal 3, the existing fundamental restrictions
on engaging in margin transactions would be eliminated, and the Portfolios
would become subject to the following non-fundamental restriction:
"The Portfolio will not purchase securities on margin, except for
short-term credit necessary for clearance of portfolio transactions and
except that the Portfolio may make margin deposits in connection with its
use of financial options and futures, forward and spot currency contracts,
swap transactions and other financial contracts or derivative instruments."
DISCUSSION: The Portfolios are not required to have a fundamental
restriction on a Portfolio's ability to engage in margin transactions. In order
to maximize the Portfolios' flexibility, the Board believes that the Portfolios'
restrictions on margin transactions should be made non-fundamental.
The non-fundamental restriction will conform to language being proposed for
use by other funds within the PaineWebber fund complex. The language includes an
exception for margin deposits in connection with financial contracts or
derivative instruments that conforms with the exception contained in the
proposed change to the Portfolios' fundamental restriction on investing in
commodities.
10. ELIMINATION OF FUNDAMENTAL RESTRICTION ON SHORT SALES.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios.
PROPOSED CHANGE; TEXT OF RELATED NON-FUNDAMENTAL RESTRICTION:
Upon the approval of Proposal 3, the existing fundamental restrictions
on engaging in short sales would be eliminated, and the Portfolios would
become subject to the following non-fundamental restriction:
"The Portfolio will not engage in short sales of securities or maintain
a short position, except that the Portfolio may (a) sell short "against the
box" and (b) maintain short positions in connection with its use of
financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments."
DISCUSSION: Under the 1940 Act, the SEC is authorized to limit the ability
of the Portfolios to engage in short sales, except in connection with an
underwriting in which the Portfolio is a participant. One type of short sale
transaction that is permitted under SEC policies is a short sale "against the
box," in which a Portfolio engages in a short sale of a security that it already
owns or has the right to own. These transactions generally are entered into in
order to defer realization of gains or losses for tax or other purposes.
Although the Portfolios may be limited in their ability to engage in short
sales, the Portfolios are not required to establish a fundamental restriction on
short sales. Consistent with the Board determination to promote flexibility and
efficiency in the event of future changes in the law, the Board believes that
the Portfolios' fundamental restriction on this subject should be removed and
replaced by a non-fundamental restriction. That non-fundamental restriction will
conform to language being proposed for use by other funds within the PaineWebber
fund complex. The language will contain an exception for short positions in
connection with financial contracts or derivative instruments that conforms with
the exception contained in the proposed change to the Portfolios' fundamental
restriction on investing in commodities. Each non-fundamental restriction will
clarify that a Portfolio may engage in
14
<PAGE>
short sales "against the box," which, under the Portfolios' current fundamental
restrictions, is permitted only for High Grade Portfolio, Growth and Income
Portfolio and Aggressive Growth Portfolio.
11. ELIMINATION OF FUNDAMENTAL RESTRICTION ON INVESTMENTS IN OIL, GAS AND
MINERAL LEASES AND PROGRAMS.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios.
PROPOSED CHANGE; TEXT OF RELATED NON-FUNDAMENTAL RESTRICTION:
Upon the approval of Proposal 3, the existing fundamental restrictions
on investments in oil, gas or minerals would be eliminated, and the
Portfolios would become subject to the following non-fundamental
restriction:
"The Portfolio will not invest in oil, gas or mineral exploration or
development programs or leases, except that investments in securities of
issuers that invest in such programs or leases and investments in
asset-backed securities supported by receivables generated from such
programs or leases are not subject to this prohibition."
DISCUSSION: The Portfolios are not required to have a fundamental
restriction with respect to oil, gas or mineral investments. In order to
maximize the Portfolios' flexibility, the Board believes that the Portfolios'
restrictions on oil, gas and mineral investments should be made non-fundamental.
The non-fundamental restriction adopted by the Board will conform to
language being proposed for use by other funds within the PaineWebber fund
complex and will establish uniform exceptions that serve to clarify the limited
scope of the restriction. The non-fundamental restriction applies only to oil,
gas and mineral leases and development programs and not to other investments
relating to oil, gas or minerals.
12. ELIMINATION OF FUNDAMENTAL RESTRICTION ON INVESTMENTS IN OTHER
INVESTMENT COMPANIES.
PORTFOLIOS TO WHICH THIS CHANGE APPLIES:
All Portfolios.
PROPOSED CHANGE; TEXT OF RELATED NON-FUNDAMENTAL RESTRICTION:
Upon the approval of Proposal 3, the existing fundamental restrictions
on investments in other investment companies would be eliminated, and the
Portfolios would become subject to the following non-fundamental
restriction:
"The Portfolio will not purchase securities of other investment
companies, except to the extent permitted by the 1940 Act and except that
this limitation does not apply to securities received or acquired as
dividends, through offers of exchange, or as a result of reorganization,
consolidation, or merger."
DISCUSSION: The ability of the Portfolios to invest in other investment
companies is limited under the 1940 Act, but the Portfolios are not required to
have a fundamental restriction on this subject. In order to maximize the
Portfolios' flexibility in the event of future changes in federal rules or
policies, the Board believes that the Portfolios' restrictions on investments in
other investment companies should be made non-fundamental.
The non-fundamental restriction adopted by the Board will allow investments
in other investment companies to the full extent permitted under the 1940 Act.
The Portfolios' fundamental restrictions are more limiting in that they
generally prohibit any investments in investment companies except for shares
acquired in reorganizations, consolidations, or mergers or except through open
market purchases in transactions where no commission or profit, other than a
customary broker's commission, is earned by any sponsor or dealer associated
with the investment company whose shares are acquired. The current restrictions
limit such open market purchases to 10% of the Portfolio's
15
<PAGE>
assets. The Board believes that investments in other investment companies may be
desirable under certain circumstances. For example, temporary investments of
cash reserves in money market funds or other pooled investment vehicles may
provide a combination of diversification and return that otherwise would not be
available. Also, for Portfolios that invest outside the United States, certain
equity securities are available to foreign investors only through investments in
local investment companies. The non-fundamental restriction also will eliminate
minor differences in wording among existing fundamental restrictions.
REQUIRED VOTE. Approval of Proposal 3 with respect to a Portfolio requires
the affirmative vote of a "majority of the outstanding voting securities" of
that Portfolio, which for this purpose means the affirmative vote of the lesser
of (1) more than 50% of the outstanding Shares of the Portfolio or (2) 67% or
more of the Shares of the Portfolio present at the Meeting if more than 50% of
the outstanding Shares of the Portfolio are represented at the Meeting in person
or by proxy.
IF PROPOSAL 3 IS NOT APPROVED BY SHAREHOLDERS OF A PORTFOLIO, THE EXISTING
FUNDAMENTAL RESTRICTIONS OF THE PORTFOLIO WILL CONTINUE IN EFFECT FOR THAT
PORTFOLIO, BUT DISAPPROVAL OF PROPOSAL 3 BY THE SHAREHOLDERS OF ONE PORTFOLIO
WILL NOT AFFECT ANY APPROVALS OF PROPOSAL 3 THAT ARE OBTAINED WITH RESPECT TO
ANY OTHER PORTFOLIO.
THE BOARD, INCLUDING ITS INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 3.
------------------------
SHAREHOLDER PROPOSALS
As a general matter, the Trust does not hold regular annual or other
meetings of Shareholders. Any Shareholder who wishes to submit proposals to be
considered at a special meeting of the Trust's Shareholders should send the
proposals to the Trust at 1285 Avenue of the Americas, New York, New York 10019,
so as to be received a reasonable time before the proxy solicitation for that
meeting is made. Shareholder proposals that are submitted in a timely manner
will not necessarily be included in the Trust's proxy materials. Inclusion of
such proposals is subject to limitations under the federal securities laws.
OTHER BUSINESS
Management knows of no business to be presented at the Meeting other than
the matters set forth in this proxy statement, but should any other matter
requiring a vote of Shareholders arise, the proxies will vote thereon according
to their best judgment in the interest of the Trust and the Portfolios.
By order of the Board,
Dianne E. O'Donnell
SECRETARY
February , 1996
IT IS IMPORTANT THAT YOU EXECUTE AND RETURN ALL OF YOUR PROXIES
PROMPTLY.
16
<PAGE>
INDEX TO EXHIBITS TO PROXY STATEMENT
<TABLE>
<S> <C> <C>
Exhibit A -- Shares Ownership of Series Trust Portfolios as of the Record Date....... A-1
Exhibit B -- Compensation Table...................................................... B-1
Exhibit C -- Stock Ownership of Nominees and Current Board Members................... C-1
Exhibit D -- Officer Information..................................................... D-1
Exhibit FR -- Existing Fundamental Restrictions....................................... FR-1
</TABLE>
17
<PAGE>
EXHIBIT A
SHARE OWNERSHIP OF SERIES TRUST PORTFOLIOS AS OF RECORD DATE
<TABLE>
<CAPTION>
OWNERSHIP OF SEPARATE ACCOUNTS
------------------------------------------------------
AMERICAN REPUBLIC AMERICAN BENEFIT
NUMBER OF PAINEWEBBER LIFE LIFE INSURANCE LIFE INSURANCE
FUND NAME SHARES OUTSTANDING INSURANCE CO. CO. CO.
- ------------------------------------ ------------------ ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Aggressive Growth Portfolio.........
Balanced Portfolio..................
Global Growth Portfolio.............
Global Income Portfolio.............
Growth Portfolio....................
Growth and Income Portfolio.........
High Grade Portfolio................
Money Market Portfolio..............
Strategic Fixed Portfolio...........
</TABLE>
A-1
<PAGE>
EXHIBIT B
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL COMPENSATION
SERIES TRUST FROM TRUST AND FUND
COMPENSATION PAID COMPLEX PAID TO
TO BOARD MEMBERS BOARD MEMBERS FOR THE
FOR MOST RECENT YEAR ENDED DECEMBER
NAME OF INDEPENDENT BOARD MEMBER (1) FISCAL YEAR 31, 1995 (2)
- ----------------------------------------------------------------------- ------------------ ---------------------
<S> <C> <C>
Richard Q. Armstrong................................................... -- $ 9,000
Richard R. Burt........................................................ -- $ 7,750
Meyer Feldberg......................................................... $ 6,750 $ 106,375
George W. Gowen........................................................ $ 6,750 $ 99,750
Frederic V. Malek...................................................... $ 6,750 $ 99,750
Judith Davidson Moyers*................................................ $ 6,250 $ 98,500
Carl W. Schafer........................................................ -- $ 118,175
John R. Torell III..................................................... -- $ 28,125
</TABLE>
- ------------------------
* Mrs. Moyers is a current Board Member who is not standing for re-election.
(1) Board Members who were not independent did not receive compensation from the
PaineWebber funds.
(2) The Company does not have a bonus, pension, profit sharing or retirement
plan.
B-1
<PAGE>
EXHIBIT C
STOCK OWNERSHIP OF NOMINEES AND BOARD MEMBERS
<TABLE>
<CAPTION>
NO. OF SHARES HELD
AS OF JANUARY 31,
NOMINEE PORTFOLIO 1996
- ------------------------------------------------------- ---------------------------------- --------------------
<S> <C> <C>
Margo N. Alexander.....................................
Richard Q. Armstrong...................................
E. Garrett Bewkes, Jr..................................
Richard Burt...........................................
Mary C. Farrell........................................
Meyer Feldberg.........................................
George W. Gowen........................................
Frederic V. Malek......................................
Carl W. Schafer........................................
John R. Torell III.....................................
</TABLE>
<TABLE>
<CAPTION>
NO. OF SHARES HELD
BOARD MEMBER WHO IS NOT AS OF JANUARY 31,
STANDING FOR REELECTION PORTFOLIO 1996
- ------------------------------------------------------- ---------------------------------- --------------------
<S> <C> <C>
Judith Davidson Moyers.................................
</TABLE>
C-1
<PAGE>
EXHIBIT D
OFFICER INFORMATION
<TABLE>
<CAPTION>
NO. OF INVESTMENT
COMPANIES ON WHICH
NAME; PRINCIPAL BUSINESS OCCUPATION SERVES AS AN OFFICER
FOR THE PAST FIVE YEARS AGE OFFICE OFFICER (1) SINCE
- ----------------------------------------------------------- --- ---------------- -------------------- ------------
<S> <C> <C> <C> <C>
Margo N. Alexander; Mrs. Alexander is president, chief 48 President 30 5/95
executive officer and a director of Mitchell Hutchins
(since January 1995). Mrs. Alexander is an executive vice
president and director of PaineWebber
T. Kirkham Barneby; Mr. Barneby is a managing director and 49 Vice President 5 9/95
chief investment officer -- quantitative investment of
Mitchell Hutchins. Prior to September 1994, he was a
senior vice president at Vantage Global Management. Prior
to June 1993, he was a senior vice president at Mitchell
Hutchins Institutional Investors, Inc.
Teresa M. Boyle; Ms. Boyle is a first vice president and 37 Vice President 30 12/93
manager -- advisory administration of Mitchell Hutchins.
Prior to November 1993, she was compliance manager of
Hyperion Capital Management, Inc., an investment advisory
firm. Prior to April 1993, Ms. Boyle was a vice president
and manager -- legal administration of Mitchell Hutchins
Gigi Capes; Ms. Capes is a vice president and the tax 31 Vice President 30 11/95
manager of the mutual fund finance division of Mitchell and Assistant
Hutchins. Prior to 1992, she was a tax senior consultant Treasurer
with KPMG Peat Marwick
Joan L. Cohen; Ms. Cohen is a vice president and attorney 31 Vice President [25] 2/94
of Mitchell Hutchins. Prior to December 1993, she was an and Assistant
associate at the law firm of Seward & Kissel Secretary
Ellen R. Harris; Ms. Harris is a managing director of 49 Vice President 2 1/87
Mitchell Hutchins
C. William Maher; Mr. Maher is a first vice president and a 34 Vice President 30 6/95
senior manager of the mutual fund finance division of and Assistant
Mitchell Hutchins Treasurer
Dennis McCauley; Mr. McCauley is a managing director and 49 Vice President 18 9/95
Chief Investment Officer -- Fixed Income of Mitchell
Hutchins. Prior to December 1994, he was Director of Fixed
Income Investments of IBM Corporation
Susan P. Messina; Ms. Messina is a senior vice president 35 Vice President 5 9/95
and portfolio manager for Mitchell Hutchins
Ann E. Moran; Ms. Moran is a vice president of Mitchell 38 Vice President 30 6/93
Hutchins and Assistant
Treasurer
Dianne E. O'Donnell; Ms. O'Donnell is a senior vice 43 Vice President 30 11/86
president and deputy general counsel of Mitchell Hutchins and Secretary
Victoria E. Schonfeld; Ms. Schonfeld is a managing director 45 Vice President 30 5/94
and general counsel of Mitchell Hutchins. From April 1990
to May 1994, she was a partner in the law firm of Arnold &
Porter. Prior to April 1990, she was a partner in the law
firm of Shereff, Friedman, Hoffman & Goodman
</TABLE>
D-1
<PAGE>
<TABLE>
<CAPTION>
NO. OF INVESTMENT
COMPANIES ON WHICH
NAME; PRINCIPAL BUSINESS OCCUPATION SERVES AS AN OFFICER
FOR THE PAST FIVE YEARS AGE OFFICE OFFICER (1) SINCE
- ----------------------------------------------------------- --- ---------------- -------------------- ------------
<S> <C> <C> <C> <C>
Paul H. Schubert; Mr. Schubert is a first vice president 33 Vice President 30 9/94
and a senior manager of the mutual fund finance division and Assistant
of Mitchell Hutchins. From August 1992 to August 1994, he Treasurer
was a vice president at BlackRock Financial Management,
L.P. Prior to August 1992, he was an audit manager with
Ernst & Young LLP
Nirmal Singh; Mr. Singh is a first vice president of 39 Vice President 5 9/95
Mitchell Hutchins. Prior to September 1993, he was a
member of the portfolio management term at Merrill Lynch
Asset Management, Inc.
Julian F. Sluyters; Mr. Sluyters is a senior vice president 35 Vice President 30 2/92
and the director of the mutual fund finance division of and Treasurer
Mitchell Hutchins. Prior to 1991, he was an audit senior
manager with Ernst & Young LLP
Mark A. Tincher; Mr. Tincher is a managing director and 40 Vice President 11 9/95
chief investment officer -- U.S. equity investments of
Mitchell Hutchins. Prior to March 1995, he was a vice
president and directed the U.S. funds management and
equity research areas of Chase Manhattan Private Bank
Gregory K. Todd; Mr. Todd is a first vice president and 39 Vice President 30 6/93
associate general counsel of Mitchell Hutchins. Prior to and Assistant
1993, he was a partner in the law firm of Shereff, Secretary
Friedman, Hoffman & Goodman
Craig M. Varrelman; Mr. Varrelman is a first vice president 37 Vice President 4 9/95
of Mitchell Hutchins
Stuart Waugh; Mr. Waugh is a managing director and a 40 Vice President 5 9/92
portfolio manager of Mitchell Hutchins responsible for
global fixed income investments and currency trading
Keith A. Weller; Mr. Weller is a first vice president and 34 Vice President [24] 9/95
associate general counsel of Mitchell Hutchins. From and Assistant
September 1987 to May 1995, he was an attorney in private Secretary
practice
</TABLE>
- ------------------------------
(1) includes only investment companies for which Mitchell Hutchins or
PaineWebber serves as investment adviser; each officer serves in the same
capacity for each separate investment company.
D-2
<PAGE>
EXHIBIT FR
EXISTING FUNDAMENTAL RESTRICTIONS
PAINEWEBBER SERIES TRUST
EXCEPT AS INDICATED OTHERWISE, EACH PORTFOLIO MAY NOT:
(1) purchase securities (except U.S. government securities) of any one
issuer, if as a result at the time of purchase more than 5% of the Portfolio's
total assets would be invested in such issuer, or the Portfolio would own or
hold 10% or more of the outstanding voting securities of that issuer, except
that 25% of the total assets of the Portfolio (50% in the case of the Global
Income Portfolio) may be invested without regard to this limitation;
(2) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that a Portfolio that may use
options or futures strategies may make margin deposits in connection with its
use of options, futures contracts and options on futures contracts;
(3) mortgage, pledge, hypothecate or in any manner transfer, as security
for indebtedness, any securities owned or held by the Portfolio, except as may
be necessary in connection with permitted borrowings and then not in excess of
5% of the Portfolio's total assets taken at cost, provided that this does not
prohibit escrow, collateral or margin arrangements in connection with the use of
options, futures contracts and options on futures contracts by a Portfolio that
may use options or futures strategies;
(4) make short sales of securities or maintain a short position, except
that a Portfolio that may use options or futures strategies may make short sales
and may maintain short positions in connection with its use of options, futures
contracts and options on futures contracts and the High Grade Fixed Income,
Growth and Income, and Aggressive Growth Portfolios may sell short "against the
box";
(5) purchase or sell real estate, provided that a Portfolio may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein;
(6) purchase or sell commodities or commodity contracts, except that a
Portfolio that may use options or futures strategies may purchase or sell stock
index futures and interest rate futures and options thereon and the Strategic
Fixed Income, Global Income and Global Growth Portfolios may purchase or sell
foreign currency futures and options thereon;
(7) invest in oil, gas or mineral-related programs or leases;
(8) make loans, except through loans of portfolio securities of up to 10%
of the value of the Portfolio's securities (33 1/3)% for the Strategic Fixed
Income Portfolio) and through repurchase agreements, provided that for purposes
of this restriction the acquisition of bonds, debentures or other corporate debt
securities and investment in government obligations, short-term commercial
paper, certificates of deposit and bankers' acceptances shall not be deemed to
be the making of a loan;
(9) purchase any securities issued by any other investment company except
by purchase in the open market where no commission or profit, other than a
customary broker's commission, is earned by any sponsor or dealer associated
with the investment company whose shares are acquired as a result of such
purchase, provided that such securities in the aggregate do not represent more
than 10% of the total assets of the Portfolio, and except in connection with the
merger, consolidation or acquisition of all the securities or assets of another
investment company; or
(10) (for Portfolios other than Strategic Fixed Income Portfolio) issue
senior securities or borrow money, except from banks for temporary purposes and
except for reverse repurchase agreements and provided that the aggregate amount
of all such borrowing does not exceed 10% (33 1/3)% for
FR-1
<PAGE>
the High Grade Fixed Income Portfolio and 20% for the Aggressive Growth
Portfolio) of the total asset value of the Portfolio at the time of such
borrowing; provided further that the Portfolio will not purchase securities
while borrowings (including reverse repurchase agreements) in excess of 5% of
the total asset value of the Portfolio are outstanding.
(11) Strategic Fixed Income Portfolio may not issue senior securities or
borrow money, except from banks or through reverse repurchase agreements and
dollar rolls, and then in an aggregate amount not in excess of 33 1/3% of the
Portfolio's total assets (including the amount of the borrowing but reduced by
any liabilities not constituting senior securities) at the time of such
borrowings; except that the Portfolio may borrow up to an additional 5% of its
total assets (not including the amount borrowed) for temporary or emergency
purposes.
Additionally, the Portfolios has the following fundamental policy with
respect to concentration:
The Portfolios will not make an investment in any one industry if the
investment would cause the aggregate value of the Portfolio's investment in such
industry to exceed 25% of the Portfolio's total assets, except that this policy
does not apply to obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities, certificates of deposit and bankers' acceptances.
FR-2
<PAGE>
ANNUITANT OWNER CONTRACT
PROXY
PAINEWEBBER SERIES TRUST
Special Meeting of Shareholders - ____________, 1996
The undersigned hereby appoints as proxies______________and______________and
each of them (with power of substitution), to represent and direct the voting
interest represented by the undersigned held as of the record date at the
aforesaid meeting any adjournment thereof with all the power the undersigned
would have if personally present. The shares represented by this proxy will be
voted as instructed. Unless indicated to the contrary, this proxy shall be
deemed to grant authority to vote "FOR" all proposals. This proxy is solicited
on behalf of the Board of Trustees of PaineWebber Series Trust.
YOUR VOTE IS IMPORTANT
Please date and sign this proxy and return it in the enclosed envelope to
PaineWebber Life Insurance Company, Annuity Administration, P.O. Box 10, Des
Moines, IA 50301-9440
Please indicate your vote by an "X" in the appropriate box below. THE BOARD OF
TRUSTEES RECOMMENDS A VOTE "FOR"
1. To elect eleven members of its Board of trustees to serve indefinite terms
until their successors are duly elected and qualified;
FOR all nominees listed below (except WITHHOLD AUTHORITY to vote
----- as marked to the contrary below) ---- for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
through the nominee's name in the list below.)
Margo N. Alexander, Richard Q. Armstrong, E. Garrett Bewkes, Jr., Richard Burt,
Mary C. Farrell, Meyer Feldberg, George W. Gowen, Frederic V. Malek,
Carl W. Schafer, John R. Torell III, [____________]
FOR AGAINST ABSTAIN
2. Ratify the selection of independent auditors
for its current fiscal year ___ ___ ___
(Name of Portfolio)
3. Approval of certain changes to the Portfolio's
fundamental investment restrictions ___ ___ ___
Continued and to be signed on reverse side
<PAGE>
This proxy will not be voted unless it is dated and signed exactly
as instructed below.
If Shares are held by an individual, sign your name exactly as it appears on
this proxy card. If shares are held jointly, either party may sign, but the
name of the party signing should conform exactly to the name shown on this
proxy card. If Shares are held by a corporation, partnership or similar
account, the name and the capacity of the individual signing the proxy card
should be indicated -- for example: "ABC Corp., John Doe, Treasurer."
Sign exactly as name appears hereon.
______________________ (L.S.)
______________________ (L.S.)
Date__________________, 1996
